We need a better system of student finance

20 Nov 2009 The Guardian

The student finance review must devise a fairer system

After the student finance review students will undoubtedly be paying more for their degrees, but will the system be fairer?

So at last we have it in black and white: the student finance review, led by Lord Browne, will report in autumn 2010, safely beyond the general election. As that means we will be putting our crosses on ballot papers without knowing the intentions of either Labour or the Conservatives, who have both signed up to this fix, we must resort to poring over the small print of the review's terms of reference to deduce its direction.

Let's get the foregone conclusion out of the way: from 2012, students will pay more towards the cost of their university courses. The business secretary, Lord Mandelson, spelled out the bottom line when he reminded Browne that variable fees bring in £1.3bn a year for universities.

Whoever forms the next government will want a system that further shifts the cost of higher education from the taxpayer to the student and employer. So the question is not whether students will pay more, but rather how will they pay it?

So far, the most common assumption has been that the review is about how high to lift the ceiling on variable fees, with speculation favouring somewhere between £5,000 and £7,000 a year.

But the good news from the review's terms of reference is that Lord Browne has been given a clear run to devise a new, fairer and more effective system. Mandelson has made no strictures about methods of payment, stating only that the new system should avoid "barriers to wider access" and should "promote fair access to all institutions".

Almost as interesting as this was what he did not say. There was nothing about creating a market in university places, even though that was a specific intention when variable fees were introduced in 2004.

Yet almost all universities took their fees to the maximum allowed. Those that did not, like Leeds Metropolitan, came a cropper. So, instead of a market in differential university fees, we had a market in bursaries, which have varied from £300 to over £5,000. And, while some universities diverted little more than 10% of their fee income to bursaries, others spent almost 80%. But I suspect relatively few students are really aware of this market in bursaries. So we have ended up with a complex system that still fails to create a market.

Perhaps that is why Mandelson has urged "simplification of the system of support". Browne's team could interpret that even more widely and abandon England's current format of variable fees.

After all, they are not really fees at all. Most people perceive a fee as something you pay at the point of receiving a service, like attending a football match. But the current system is more like a football fan being offered a loan outside the stadium just so he can then hand over that money at the turnstile. He only starts to repay the loan long after he has left the stadium.

Moreover, as Sir David Watson has pointed out, the current system is so inefficient that 30% of the investment that comes from fee income is in effect lost on subsidies, transaction costs and likely non-recovery of loans. The current difficulties at the Student Loans Company underline the bureaucratic and costly complexity of the system, and the hardship for students when loans are delayed.

Is there a simpler way of doing this? If only politicians were not so terrified of the word "tax", they might have come up with the more transparent system of a graduate tax.

Another anachronism that needs to be addressed is part-time students. Unlike others, they do have to pay up-front fees, yet get little in the way of grants or bursaries.

Mandelson's terms of reference explicitly mention the desirability of more provision for "modular and part-time study and the availability of support for such courses". It is high time part-time students were treated fairly.

If Browne can find a simpler, less wasteful system that avoids a deterrent effect for low-income students, and creates parity for those studying part-time, the next government might even win public support for the idea that graduates (not students) should pay more.

Post a comment

After posting your comment you will need to confirm it by checking your email and clicking the confirmation that will be sent to you.

Comments will appear once reviewed for appropriate content.