Keir Starmer has been warned that he has “no easy options” over student loans and higher education financing, after the Labour leader’s decision to scrap an earlier policy of abolishing tuition fees in England.
Experts and education leaders who have advised or been consulted by Labour have told the party that universities face greater financial difficulties than before the 2017 or 2019 elections, while the country’s economic difficulties leave it with less fiscal room to help students.
Radical changes, such as replacing the current system of student loans and tuition fees with a graduate tax, appear to be off the table but sector leaders are advising that a Labour government could revive teaching and maintenance grants to fill the most immediate budget gaps for students and universities.
In the longer term, university leaders say they want an independent review to address the financial problems facing higher and further education, similar to the Dearing review in 1997 and the Browne review in 2010 that preceded fundamental reforms.
Minouche Shafik, the president of the London School of Economics, and other vice-chancellors are among those pressing for a bipartisan commission, “rather than make it up on the hoof”, in the words of one.
Recent changes by the Conservatives have greatly increased loan repayments by future middle- and lower-earning graduates, by bringing down the starting point for repayments and extending repayment terms from 30 to 40 years. Meanwhile, the government’s freezing of undergraduate tuition fees since 2016 has squeezed the funding for institutions.
The result is that the £9,250 tuition fee has shrunk to be worth just £6,500 after adjusting for inflation. Universities in England say they are losing money on teaching British undergraduates, who in turn are having to pay more for less, while part-time students have been largely forced out by the funding system.
Diana Beech, the chief executive of London Higher, representing universities in the capital, and a former ministerial adviser, said Starmer’s policy reversal was inevitable given the state of the economy and Labour’s other priorities.
“Maintaining the status quo on fees and finance is not going to be an option for a future Labour government, however, and the party is going to have to produce detailed policies soon about how it will make higher education in England more sustainable, both for institutions and future students,” Beech said.
But Labour could still achieve “quick wins” by lowering interest rates on student loans, reversing the graduate repayment period back to 30 years and reinstating maintenance grants for those in most need, according to Beech.
Andrew McGettigan, an expert on higher education financing who has previously advised Labour, said more fundamental reforms would need to wait but an incoming Labour government still had “a lot of room for creativity” under the current system to improve the student experience, such as more support for mental health or capping rents for student accommodation.
“It would probably make sense to review maintenance support – restoration of grants would be popular, restoring bursaries for nursing and paramedic students, even a one-off [rebate] for those who worked during the pandemic and paid tuition fees for the privilege – particularly disgusting in my book,” McGettigan said.
“All good, popular measures that would show you are approaching the problems with a clear set of priorities.”
Other possibilities include restoring teaching block grants to increase resources while continuing to freeze tuition fees, and a temporary loan repayment moratorium, which would have an immediate impact on the cost of living for new graduates.
David Kernohan, the deputy editor of the higher education news service Wonkhe, said Labour needed to think beyond the “sticker price” of £9,250 tuition fees and look at how to improve support for students whose parents were not able to support them at university.
“If we like what universities can do for us, we need to fund universities sustainably. There’s scope for Labour to explore the balance of contributions made by everyone who benefits from universities,” Kernohan said.
“The scope of what universities are expected to do needs to be reexamined. Should universities be running health services, or local transport, or reinvigorating the high street, simply because nobody else can afford to do it? Should universities be focusing on training the immediate workforce, or do employers also have a role to play?”
