Cutting tuition fees to £6,000 a year could cost English universities up to £3.3 billion annually and would only benefit wealthier graduates, according to a new study.
Assessing the impact of reducing annual tuition fees from £9,250 to £6,000, the consultancy firm London Economics found that it would reduce the average student debt on graduation by £9,400 to £36,600 in total, down from £46,000.
However, it finds that “loan repayments by students in the bottom five deciles are unchanged” and that the “potential £6,000 fee only benefits wealthier graduates”.
The conclusions come amid speculation that the “major review of university funding” promised by Theresa May in October could lead to a dramatic cut in tuition fee levels.
However, the report warns that this would do little to ease the debt repayments of poorer students. “Despite appearances and the reduction in debt on graduation, the cut in fees would have no impact on the repayments of graduates in the lower half of the earnings distribution and only benefit wealthier graduates,” says the report, which was published on 13 February.
That is because, according to London Economics’ modelling, many lower-earning graduates will currently pay nothing in loan repayments over their lifetime because they will not earn above £25,000 – the income level that triggers loan repayments.
Thirty years after graduation, all loan repayments are forgiven regardless of how much has been repaid.
Cutting tuition fees to £6,000 would potentially wreak havoc with university finances unless replacement funds were assured by the government, the report adds. This cut would see an annual £3.3 billion drop in income for universities – equivalent to £2,700 per student – reducing total income from about £11 billion to almost £7.8 billion.
While the Treasury would recoup £2.15 billion in reduced maintenance and fee loan write-offs, even if every penny of this cash were passed on to universities, it would still mean a £1.17 billion drop in funding unless extra funding were found, the report says.
The report also models the cost of reintroducing student maintenance grants, which were abolished in September 2016 in favour of maintenance loans.
Reintroducing grants at 2015-16 levels would cost about £1.6 billion a year, but the Treasury would recoup almost £1.3 billion in loan write-offs – resulting in a total cost of £360 million a year.
“Maintenance grants are approximately 70 per cent cheaper than cutting fees,” the report says. However, this step would still not benefit the lowest-earning half of graduates, though it would reduce average student debt on graduation by £6,200, it adds.
