International and postgraduate fee survey, 2015

Postgraduate loans are around the corner; will they drive fees up?

August 13, 2015
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Download the full 2015 international and postgraduate fee survey data

Walk into any shop, pick out a product and examine its price. Now turn to the more advanced, feature-packed version beside it – you would expect to pay more for that than you would for the standard version.

So it remains a little surprising, at first glance, to find that the average cost of a taught postgraduate degree course for a student from the UK or elsewhere in the European Union is a third less than the annual typical fee for an undergraduate qualification.

A survey of tuition fees for the coming academic year, compiled by The Complete University Guide and published this week by Times Higher Education, puts the average annual home fee for a taught postgraduate degree at £5,901.

This compares with the average of £8,891 for undergraduate courses in England calculated by the Office for Fair Access.

So what is the likelihood that fees for postgraduate courses will rise from 2016‑17, when loans of £10,000 are offered to taught postgraduate students in England under the age of 30? In the undergraduate sector, tuition fees climbed quickly when the cap was increased to £9,000, and universities are free to charge whatever they please at postgraduate level.

The survey indicates that home and EU postgraduate fees are already on the way up, climbing by 4.2 per cent from 2014-15, compared with a 1.2 per cent increase in the preceding year.

Among 62 institutions that provided comparable data, 42 have increased their average postgraduate taught fees for the coming year, 10 of them by more than £500. Only seven have reduced their fees, while 13 left them unchanged.

Not everyone in the sector believes that postgraduate fees will race towards £10,000 when loans are rolled out. Among other factors to consider are demographics, demand and the appetite (or otherwise) of students to take on more debt. So what impact might those elements have on fees?

On the question of why postgraduate fees remain lower than undergraduate charges, the most recent research that points to the apparent irrationality of this situation is a study by accountants KPMG for the Higher Education Funding Council for England. Published in December, it put the average annual cost of teaching each taught postgraduate student at £11,315 – a figure much higher than the average fee charged for a taught postgraduate course.

In contrast, the average cost of teaching each undergraduate was estimated to be £7,694 – £1,306 below the £9,000 price tag of most undergraduate degrees.

At undergraduate level, part of the apparent discrepancy between costs and fees might be explained by the fact that universities must fund some widening participation initiatives out of their undergraduate fees. At postgraduate level, the discrepancy is arguably harder to explain. Postgraduate teaching is likely to take place in smaller classes and to be led by more experienced academics, both of which add to the price tags. Many courses at this level run over a full calendar year, rather than the nine months or so of term-time.

All this suggests that universities cross-subsidise their postgraduate provision from other sources. The findings of the KPMG study suggest that some undergraduate courses may generate a surplus that can be invested elsewhere, and researchers have also highlighted the key role that fees from international students can play.

In a recent discussion paper for the London School of Economics’ Centre for Economic Performance, Stephen Machin, professor of economics at University College London, and Richard Murphy, assistant professor of economics at the University of Texas at Austin, found that the fees paid by growing numbers of overseas postgraduates studying in the UK have helped to subsidise additional places for domestic learners. In the report, Paying Out and Crowding Out? The Globalisation of Higher Education, they estimated that every additional non-EU postgraduate on a course at a UK university creates an additional place for one domestic student.

Our fees survey highlights the central role of international recruitment in institutions’ income, with overseas fees for postgraduate taught classroom courses increasing by 4 per cent year-on-year, to £12,892. For laboratory courses, there is a 6.8 per cent rise, to £15,213.

Fees for many international undergraduates have gone up at a similar rate and are now only marginally below international postgraduate fees. The average classroom course fee increased by 6.5 per cent year-on-year to reach £12,719, while laboratory programme fees rose 6.4 per cent to £14,655.

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Although some postgraduate fees might fail to cover course costs, there are also some very expensive master’s programmes for domestic students: the LSE charges up to £30,384 for some of its courses, and at the University of Warwick course costs can reach £32,300.

When MBAs are added to the equation, fees can go even higher: the priciest course in our survey is the MBA offered by the University of Oxford’s Saïd Business School, which comes in at £47,925, including a £3,150 college fee.

Dana Brown, director of the MBA programme, says Oxford’s fees “compare favourably” with other elite MBAs in the US and continental Europe. When measured against the two-year programmes in those regions, Saïd’s one-year option “has an additional financial advantage for students, who spend less time out of employment”, Brown says.

Elsewhere, however, most commentators agree that a lack of attractive finance options for postgraduate students has held back demand and has kept fee levels comparatively low. In addition, universities compete to recruit the best postgraduate students, who are vital to maintaining a university’s reputation and guaranteeing a stream of future researchers.

“The reason why fees are at that level is because people are thinking about what the market will bear and what people are prepared to pay,” says Paul Wakeling, senior lecturer in the department of education at the University of York. “In a situation where, for most people, there isn’t a ready funding source available, students are relying on their own resources, family income or employment income, and they have to pay up front.”

It is quite possible, therefore, that the introduction of loans could unleash more demand and give universities the opportunity to recoup more of the costs of postgraduate teaching.

Data from the Higher Education Statistics Agency show that 72,150 UK-domiciled students started full-time taught postgraduate courses in 2013-14, up 3.9 per cent on the previous year but down 5.4 per cent on 2009‑10.

Wakeling certainly believes that loans will boost enrolments, pointing to the “really quite high” take-up at some universities of the £10,000 scholarships that have been offered with support from Hefce during 2015‑16, ahead of the introduction of the loan scheme.

To him, this suggests that there is “latent demand” for postgraduate study, even if people may be nervous about taking on more debt.

“All the evidence suggests it is the upfront cost that is the barrier for most people, rather than debt,” Wakeling says. “You will find different attitudes around debt,” he continues, but the overall message from people is: “What’s stopping me is the upfront cost; it’s something I would like to do but, in a situation where I can’t get hold of credit, there is a barrier in my way to stop me pursuing a master’s degree.”

Nick Hillman, director of the Higher Education Policy Institute, argues that postgraduate fees would probably drift up even in the absence of loans as institutions find the differential between undergraduate and master’s fees “quite hard to justify”.

He says that the introduction of loans is likely to coincide with a number of additional financial pressures that could conspire to drive up postgraduate fees.

“If you are a finance director of a university and you are seeing £9,000 [undergraduate] fees held down (albeit that they might be allowed to go up in line with inflation), [home secretary] Theresa May getting ever tougher on international students, plus your pension and wage costs going up, you have various cost pressures,” Hillman says. “You could see a world in which the postgraduate area is an area where fees go up, particularly if universities feel they have been slightly subsidising it.

“Loans coming on stream could make that easier for universities,” he concludes.

Another factor in English universities’ decisions about fee levels is whether Hefce continues to provide funding to support taught postgraduate teaching.

In 2014-15, this aid totalled £44 million across the sector prior to last month’s announcement that teaching grants would be cut by 2.4 per cent. Hefce has said that it hopes to continue the support into 2015‑16. However, the full impact of the spending cuts ordered by George Osborne, the chancellor, is not yet clear.

At the moment, the Hefce money is presented as funding to help institutions meet the cost of providing postgraduate tuition and on the assumption that, in the absence of publicly funded loans, universities are “less likely” to charge postgraduate fees at the same level as undergraduate ones. With postgraduate loans on the way, a review of this funding stream would seem likely.

Hefce also provides funds to support “intensive” postgraduate courses that run for 45 weeks or more within one academic year, and these totalled £35 million in 2014‑15.

Of course, the popularity of the loans remains to be seen, and key to this will be students’ attitude to debt.

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Poorer undergraduates will soon have larger debts at the end of their courses as a result of the government’s decision to replace maintenance grants with loans from 2016‑17 onwards for new students, a measure announced in last month’s Budget. According to a study by the Institute for Fiscal Studies, the change means that the poorest 40 per cent of students in England will leave university with debts of up to £53,000, rather than the previous sum of up to £40,500.

In such circumstances, many observers fear that some would-be learners from poor backgrounds will remain in effect priced out of advanced study despite the introduction of postgraduate loans. And with the new loans intended to go towards course and living costs, it seems unlikely that students will have much appetite for fee increases.

Joel Mullan, a researcher who worked on reports about postgraduate funding for the 1994 Group and for the Higher Education Commission, says that universities “should not overestimate the capacity of students to absorb any increase in fees”, particularly if they also consider their responsibilities to help improve social mobility and to develop a pipeline of future researchers.

On the other hand, Mullan points out, postgraduate students have different priorities from undergraduate students and study for different reasons, which may make them see debt differently.

Postgraduates are older and are often returning to study after some years in the workplace. They may have realised that they need a higher qualification to advance in their career or to pursue a new one. With a growing proportion of the workforce holding an undergraduate qualification, some people may find a master’s degree to be a sine qua non for the job that they had hoped to get after completing their bachelor’s course. “I think postgraduates are making a far more informed decision, and I think they would be willing to take on this debt to achieve their aim,” Mullan concludes.

There is no consensus that the introduction of postgraduate loans will automatically lead to increases in tuition fees for home and EU students.

For Tony Strike, director of strategy, planning and change at the University of Sheffield, the most significant factor affecting the viability of postgraduate courses is not the fees paid by individual students but rather cohort sizes.

Universities are vying to recruit a limited number of students, and that competitive drive “isn’t going to go away”, Strike points out. As such, the need to attract the numbers necessary to make classes viable may restrain fee rises. “The way you affect the contribution of postgraduate education to a university’s economy is by cohort size – that has a much bigger bearing than fee level,” Strike says. “I’m not convinced that the availability of finance by itself will drive up fees.”

If the availability of finance does lead to significantly increased demand and larger cohorts, then fees might rise, but Strike sees this occurring over the longer term.

Rosemary Deem, vice-principal for education at Royal Holloway, University of London and chair of the UK Council for Graduate Education, argues that postgraduate courses may not be as heavily cross-subsidised as first appears. Some academics already volunteer to undertake postgraduate teaching on top of their undergraduate teaching workloads because they consider it to be important, and this helps to reduce costs, she says.

Like Strike, Deem argues that any changes to fee levels are likely to be a longer-term process because the take-up of postgraduate loans is difficult to forecast. In the first year of postgraduate loans, she predicts: “I guess people will be cautious about putting fees up…We have got to wait and see what happens to demand.”

Behind the figures: notes to the table

Data are based on a survey of higher education institutions conducted by The Complete University Guide. The survey results have been published annually since 2002, when Mike Reddin first presented them.

Higher education institutions were asked to provide a typical fee, although some institutions chose to provide a range. Figures are for guidance only. Fees for specific courses may vary from those shown. The averages exclude institutions that provided a range.

Some figures for MBA courses have been updated by Times Higher Education using information from universities’ websites.

A dash (–) indicates that a figure was not supplied or that the university does not run the course. Universities providing no data have been omitted.

In Wales in 2015-16, Welsh-domiciled students will be charged £3,810 a year wherever they study in the UK. Students domiciled in Northern Ireland will pay £3,805 a year if they study there, but will pay up to £9,000 if they study elsewhere in the UK. Scottish students pay no tuition fees in Scotland, but up to £9,000 elsewhere in the UK.


Print headline: Unknown variables

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