Perverse effects of latest university fees shift

02 Dec 2011

 25 universities and colleges are being allowed to reduce their average net tuition fees for undergraduates, bringing them below the £7,500 threshold required to bid for extra student numbers.

According to figures just released by the Office for Fair Access, most universities have achieved this by either reducing their fees or by offering fee waivers to groups of students.  

However, at the same time, the universities have reduced the amount they were planning to spend on bursaries and scholarships. They have also reduced their planned spending on measures to improve outreach and student retention. 

In other words, in order to comply with the new government rules on the student numbers market, most of the universities have made changes that will benefit graduates once they reach middle-age at the cost of cash support for undergraduates while they are still studying.

Who's cutting fees?

The 24 universities and 1 FE college that have received approval to reduce their fees are:

Anglia Ruskin University, Aston University, Canterbury Christ Church University, University of Chester, University of Chichester, University of Cumbria, University of Gloucestershire, University of Hertfordshire, University of Huddersfield, Institute of Education, Leeds Trinity University College, London South Bank University, Nottingham Trent University, Roehampton University, Southampton Solent University, University College Plymouth St Mark and St John, St Mary's University College, University Campus Suffolk, Teesside University, University of West London, University of Winchester, University of Wolverhampton, University of Worcester and York St John University.  Sparsholt College, Hampshire (FE college)

Overall figures show that these institutions will now charge £16.3 million less in their headline fees. In addition they will increase their fee waivers by a further £37.4 million.

Bursaries cut

At the same time, though, they plan to spend £13.8 million less on bursaries and scholarships and to reduce spending by £2.1 million on measures to improve outreach to schools and to reduce student drop-out.

The fee reductions range from just £50 to as much as £2,900. Most reductions are targeted at foundation degrees or foundation courses, although 5 institutions have reduced fees for some or all of their full degree courses.    

The overall effect on average fees across the sector is not great, reducing the average fee for 2012-13 from £8,393 to £8354. When fee waivers are included, the average fee is £8,071.

Perverse effect hits students

The perverse aspect of these last-minute changes is that while some will see this as good news for prospective students, the real savings will come for the government. That is because students do not pay their fees up-front. Instead government effectively pays the fees for them and then collects the money back once they start working through the student loan scheme.

So the amount the government will have to pay out  will reduce. This does mean that graduates will have slightly less to pay back but - since all pay back at the same rate irrespective of the amount of their debt - they will only receive the benefit once they reach middle-age. Lower fees mean they will clear their debt more quickly.

By contrast, bursaries - which have been cut to release money for fee reductions and waivers - benefit current students as they give them extra, non-repayable cash while they are studying. 

One of the reasons why universities are willing to cut their planned bursaries is that evidence suggest that they have little impact on student choices.

Student choice

However it remains to be seen whether small variations in fees (or fee waivers) will have much impact on student choice either.

Either way, the rather bizarre  (and shifting) nature of the student market means less help for undergraduates when they most need it and a lower burden on gradates when, arguably, they are most able to afford it.

Bidders will be disappointed

Meanwhile, despite the efforts to reduce their net average fee, many universities will find they do not get much advantage from the new 'core and margin' system. All universities will lose around 9% of places from the allocated 'core' student numbers and only those with fees below £7,500 can bid for the 'margin'.

There will be 20,000 places avaialble under the 'margin' but so far bids have been received for almot 36,000 places. So, on average universities will only get about half the number of extra places they are bidding for.

Some may wonder of it was worth the effort of reducing their fees and cutting their bursaries.

Full details at Offa:


User Comments

Peter Millen - 02 Dec 2011

perverse effect of...fee shift

A devastating analysis. I spend time attempting to help advisers see that it is still worth trying to encourage young people to go for university, but the Fees Fiasco knocks another hole in the argument each time it lurches haplessly forward.
Celebrations in Breweries come to mind.

Mary Tapper - 03 Dec 2011

Agree with you completely Mike....the loan to be paid off in the future is not so much of a worry to genuinely poor students - they need money up front to pay for living costs.

Just got the UCAS email for younger daughter through...she has already applied and had offers from all her University choices and they say she can change all or some of her choices with a lovely complicated grid to say how to go about it! Needless to say there is nowhere where you can find the information on the new fees.....
Luckily it won't affect her as she is applying to top places that all charge £9000 a year and with a 4 year course it is highly likely she will never pay off her loan...welcome to the world of "graduate tax" and pity the people in 30 years time when all these horrendous debts get "written off" leaving the government with a black hole!

I object to the new system but at least they could have designed a system that actually works!

And what is it with charging inflation + 3% from the moment they start until the end of their course - it is only after they finish that the interest rate takes account of their low income! What a swizz.

Whole thing is so badly organised and thought through it is difficult to believe it is true.

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