University students in England are being ripped off by the
current tuition fee system. On average students are leaving
university with £45,000 in debt - nearly 50% more than the median
graduate salary in the US. This debt is a millstone that
stays with them for decades. Yet the Government is only able
to recover 46% of the value of their loan to students, as many
graduates never earn enough to make repayments.
In a new report for the
Centre for Policy Studies think tank, Conor Walsh argues that
while the university sector has expanded hugely in recent
decades, increasing student numbers has been prioritised at the
expense of quality of courses and employment outcomes.
The report, ‘The Value of
University’, looks at the economic returns of a range of
university courses, and finds huge discrepancies in the amount of
taxpayer money being spent on those courses which do not improve
the lifetime earnings of the students.
For example, Creative Arts has zero impact on earnings for the
average female graduate and a negative impact for the average
male graduate, yet receives the largest subsidy of any subject,
at £1.2 billion. This works out as £37,000 per student, compared
to £11,000 for engineers.
'The Value of
University’ proposes a change to the way fees are paid.
This would ensure high-productivity and rewarding courses receive
more investment from universities - leading to greater investment
in the country’s future.
The current system incentivises universities to keep increasing
student numbers, as they will receive more government funding in
the form of student loans. While students are encouraged to load
up on debt that stays with them - often throughout their working
life - it is the taxpayer that ends up paying much of this
off.
Instead of the Government handing loans to the student, the
Centre for Policy Studies proposes that the Government loans
directly to the university, who then lends to their students. The
students then repay the university who in turn repay the
government an agreed fee. There should also be a cap on the
amount the university can expect a student to repay in order to
prevent a small number of high-earners subsidising the rest of
the cohort.
This would make the system self-financing by pruning the courses
which are offering students the worst returns. It also
incentivises students towards high-productivity courses that make
both them and the country better off in the long run and saves
the Treasury money without increasing the amount of debt that
students have to repay.
This could eventually result in £7 billion of savings, much of
which could be invested in technical education, offering
school-leavers a productive alternative to university.
The CPS also proposes that £1 billion of these savings be used
for bursaries which could go on to fund various socially and
economically valuable courses like Engineering and Medicine -
both of which are currently significantly underfunded. Any
remaining funds could be invested in research and development in
order to bolster the UK’s position as global leader in high-end
innovation.
Robert Colvile, Director of the Centre for Policy
Studies, said:
'We must find ways to incentivise universities to do the best
for their students, rather than for themselves. These changes
will encourage more students to take up courses that leave both
them and the country better off. As well as adding to the
workforce of engineers and scientists, it will reduce the number
of students who default on their loans, potentially saving the
Treasury billions of pounds that can be reinvested into the
education system of the future.’
Notes to Editors
