The post-18 funding review: what Hallam said

Responses to the government’s consultation on the post-18 funding review have now been sent in. At Sheffield Hallam, we took the opportunity to draw together a comprehensive statement on our views of higher education funding. I’ve written about this issue several times, and the need to solve an obvious, but awkward problem: higher education costs money to run, but the principal direct beneficiaries – students – have no money with which to pay.

Our response to the so-called Augur review tried to set out the issues. We argued that the current system has many strengths. It has widened participation by permitting the abolition of student number controls, allowed universities to plan coherently for the future and broadly established a relationship between gains from higher education participation and subsequent contributions. These are all positive features, and have, essentially, produced a broadly progressive and fair funding system. But we also set out concerns. First, the system was designed principally as a vehicle for the payment of university fees. Its extension in 2015 to cover maintenance costs means that the poorest fifth of students now graduate with higher levels of debt than the richest fifth. This regressive element has undermined the progressive elements in the system. Secondly, the focus of the debate remains disproportionately weighted towards the headline fee and the level of student loan, rather than in-year affordability for students. National research has highlighted that students are significantly concerned about meeting their living costs while studying. Evidence from our own research shows that living costs are the principle concern with 41% of students expressing worry about this compared to 29% for tuition fees. Thirdly, the funding system lacks public confidence and thus legitimacy. In the long term this is not good for universities, their students or the nation. Whatever its economic logic, the system is difficult for the layperson to understand. Fourthly, whilst the level of interest charges on the fee loan are technically not relevant to repayment levels, save for the highest-earning graduates, the rate of interest is seen as unattractive; it is perceived to be unfair that interest accumulates from the first day of the loan rather than from the point of graduation. Fifth, the system is solely geared around the assumed needs of full-time 18-year-old undergraduate students, to the extent that since its introduction in 2012, all universities have seen a steep decline in part-time and mature student registrations. This has reduced diversity in the system.

Based on our mission and track record we argued that the post-18 education and funding system has at its heart two key principles. It should promote opportunity by supporting learners from all backgrounds to reach their maximum potential; and it should support regional and national economic growth through the provision of a skills base with sufficient dynamism and diversity to satisfy current and future needs. This would include subject coverage across STEM subjects, the arts, humanities and social sciences.

Our consultation response is thorough and detailed, but we also try to sketch out some parameters for improvements. Post-18 education generates rewards for individuals, through better jobs, salaries, and health, and for society, through improved economic growth, lower healthcare costs and higher levels of civic participation. The current higher education funding regime, by and large, recognises this and the consequence of the October 2017 repayment reforms are that approximately 53% of the fee costs of participation are met by the graduate and approximately 47% by the state. Arguably, the current system has a reasonable balance between the taxpayer and the student. However, this is not the perception because the speed of transition from a publicly-funded to privately loan-funded regime has fuelled perceptions of intergenerational unfairness, and because the public contribution is secured through the ‘unpaid’ student debt. The language of default as a planned basis for public subsidy is difficult to convey.

Our consultation response is thorough and detailed, but we also try to sketch out some parameters for improvements.

Changes need to continue to recognise the public and private interests in the success of higher education, and to allow providers to plan for their own distinctive development. Elements of the current system need to be retained, but fundamentally recast such that:

• Adequate funding is available so that students’ choices are not determined by the availability of funding sources.
• Students have access to a means-tested maintenance grant or to private (state-backed) loans to cover day-to-day living costs. We would anticipate FE participation to be supported by grants.
• There is a stronger recognition of the public interest in participation and a strong, vibrant and diverse system of post-18 education. The most transparent way to do this is through an element of public funding to meet some of the costs of provision. This should be banded by subject cost-group.
• Higher education students should be able to access a national university bursary scheme to fund their fees above the level of public funding, funded by a newly titled Student Bursary Company.
• Participation on the national fee bursary scheme would trigger an obligation to make a Graduate Contribution Payment over a time-limited period once studies are completed, either through graduation or at the point of withdrawal.
• The Graduate Contribution Payment should be at the Government’s borrowing rate of interest.

These redesign principles allow for the recasting of the higher education scheme in terms of contribution, return and support, rather than loans and defaults. It would offer assurance that students/graduates are not carrying large debt repayment costs over long amounts of time, providers are able to cover the cost of course delivery, employers are encouraged to support training/upskilling for their staff and that there is no major long-term burden on public finances.

Then there is a need to change the language of student financing away from debt and fees to one of contribution. While the income-contingent loan system operates much the same as a time-limited graduate tax, with payments collected through the tax system, student loans are widely regarded as conventional debt. Evidence from the Diamond Review in Wales found that the ‘fear of debt’ is a key element influencing the decision to study with a disproportionate effect on those from lower-income families.

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