Analysis: Poorer students pay the price for funding expansion

January 3, 2003

What must the government address in its upcoming strategy paper? Alan Thomson opens a series on the vital issues by asking whether ministers' aims to get half the population into HE are achievable or desirable, while Phil Baty (below) looks at the prospects for a return to student grants

In July 2001, prime minister Tony Blair spoke what his ministers had understood to have been the unsayable, and admitted after years of prevarication that one of his government's boldest policies was a failure.

The flagship 1997 decision to end the principle of free higher education by introducing a means-tested tuition fee and replacing the ever-diminishing student grant with an extended loans scheme had given the Labour Party one of its worst electoral headaches during the 2001 election, he said.

Speaking first at a private meeting of Labour's national executive and at a national policy forum two days later, he admitted that the cost of higher education to students and their parents had become the biggest issue facing Labour on the doorstep. He also conceded that the fees and loans system was putting off potential students from lower-income backgrounds - the very people Labour wanted to attract to higher education. It was time for a rethink.

But that was 18 months ago. Since then the review of student support and funding has morphed into a fundamental strategic review of higher education and has been delayed three times. Education secretary Charles Clarke is reportedly still ironing out the final details of the new student funding system, so delicate are the options.

One of the few areas of consensus is that the current system is not working.

While much heat and light has focused on the introduction of tuition fees, the loss of the grant had a more detrimental effect on students and was more damaging to the government's aim to widen participation. The grant is a key component of the student-support package certain to be restored in some form in the review this month.

As the National Audit Office explained last year, the fees and loans system amounts to a government subsidy for richer students at the expense of the poor. "Support for the poorest students has switched from a non-repayable grant to an income-contingent loan," the NAO says in its report into widening participation. "At the same time, the richest full-time students have moved from no grant to (a) subsidised loan."

While fees leave those who have to pay them £1,100 a year worse off (or more, when an increase is confirmed in the review), the loss of the £2,000 grant leaves poorer students £2,000 worse off, irrespective of their fee waiver.

The 1997 student package is clearly hitting students in their pockets. A survey by Barclays last summer showed that the average student debt had risen by more than 40 per cent in two years, to £6,228. It found that 39 per cent of students took jobs during term time - an average of 13 hours a week - to pay their way. NatWest Bank said that the average student was £10,000 in the red, with only 15 per cent leaving university without debt.

The evidence is clear: the prospect of debt is putting off those from less affluent backgrounds. According to the Office for National Statistics, just 13 per cent of those from social class five, compared with 75 per cent from social class one, go to university. The proportions have remained all but the same since the introduction of tuition fees.

The Aldwych Group of students from the elite Russell Group of universities said that since the introduction of the fees and loans system, there had been a 9.5 per cent decrease in the number of university applications from those from lower socioeconomic groups. A study by Universities UK last month found that at least one in four people from disadvantaged backgrounds who qualified to go to university would not do so because of the debt involved.

Ministers are clear: if they want to hit their flagship target of getting 50 per cent of under 30s into higher education by 2010, without simply soaking up more of the middle classes, they are going to have to increase the financial support available to those would-be students who cannot afford to go or who are being turned off by debt.

So glaring is this need that even vice-chancellors broached the hitherto taboo subject and risked distracting attention from their own demands for money when they called for the reintroduction of grants last year. Their call was especially brave in the context of the £15 billion they said was needed to expand as demanded while avoiding a collapse into international mediocrity, or worse.

This gaping hole in universities' finances sits at the heart of the review and creates the circle that needs to be squared.

In June 2001, Mr Blair said he would look at "the balance of contributions between the student and the state". But it soon became clear that the state was not keen to increase its own contributions too much. The Dearing report lays down the principle that students who enjoy the many benefits gained from having a higher education, not least the reputed additional £400,000 in lifetime earnings, ought to pay something towards it. And that principle was here to stay - not only were tuition fees non-negotiable, they were going to be increased.

Ministers' biggest problem with fees, it seemed, was public perception. Initially they repeated the mantra that with a means-tested fee those from families with lower incomes - currently less than £20,480 a year - did not pay anything. Many more paid only partial fees, meaning that only 50 per cent of students paid full fees.

But the message did not get through. And parents have been bombarded in recent months with horror stories of £10,000-a-year universities. No wonder the debate over how to deliver the sting of higher fees has taken 18 months, has divided the cabinet and has been linked to the departure of an education secretary and a renewed schism between the prime minister and the chancellor.

Many have proffered their own solutions. Student leaders have half-heartedly demanded the return to free education but that is not going to happen. Others have called for a graduate tax as the perfect way to alleviate fears of heavy debt and to secure the fairest pay-back system - but that will mean a 17 or 18-year gap before the money comes through.

The Institute of Public Policy Research thought the public could stomach a doubling of the flat-rate tuition fee to more than £2,000 combined with commercial rates for loans, ending the subsidy for interest-free loans. That option met with rather more ministerial approval - the report's author, Wendy Piatt, has been seconded to the Department for Education and Employment.

But it looks likely that a delicate hybrid system that eases the pain of higher fees by combining a postgraduation payment system with a return to grants to help the worst off has found favour.

The devil will be in the detail. As the minister said at the start of the review: "If we do not get it right, we will pay a heavy price."

Who should pay, when and how

James Taylor, 20, third-year BA broadcasting student, University of Leeds
"The only sensible thing the government can do is to bring back grants, especially for those from the poorest families, and abandon the idea of tuition fees. It's only fair that if you benefit from a university education, you should pay towards it, but not while you're studying."

Sarah Lund, 23, first-year postgraduate, Chester College of Law
"Postgraduates need more support through grants. At the moment, people can't even afford their first three years as an undergraduate. Students want vocational postgraduate courses, as these help them get a good job. Hardly anyone's doing research because it doesn't pay."

Mandy Telford, president of National Union of Students
"The review has to deliver for students so the brightest and the best go to university regardless of their background. The government mustn't force greater debt and hardship on students through the back door by making them pay after graduation."

Will Straw, president of Oxford Students' Union
"Oxford students want to see more money going towards student support and all funding for universities to be paid for through progressive tax. There should also be an end to means testing because, regardless of how the system intends to work, at least one in five students gets no support from their parents. It's a very middle-class value to assume parents will automatically subsidise their son's or daughter's time at university."

John Smithard, investment manager from Carshalton, Surrey, has two sons at university
"It has been expensive to send my children to university, but I've always felt that spending money on their education is an investment. We've been lucky because I've got a well-paid job. I agree that parents who can afford to finance their child's time in higher education should be made to contribute, but if the funds are unavailable, the government should step in."

Teresa Rees, lecturer in social sciences at Cardiff University. She presented the Rees report on student support to the Welsh Assembly
"It's a mistake to make students pay upfront through fees, but it's reasonable to make them contribute after graduation. More has to be available in the way of grants for students from the poorest backgrounds. In Wales, the assembly learning grants were introduced this year, and we've seen a 5 per cent increase in applications."

Nigel Dudley, assistant head, Blessed William Howard RC High School, Stafford
"Every year, I see pupils who are unsure which career path to follow put off from going to university because they can't take the financial risk. Parents also think twice about encouraging their children to go into higher education as nobody wants to see their child get into debt."

Ian Gibson, MP for Norwich North
"Top-up fees are dead in the water. Higher education should be funded by increased income tax. That way those who actually benefit financially from their degrees will pay their way."

Research by Kathryn Edwards

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