Research to measure the earnings of graduates according to the university they attended has taken a step forward, prompting suggestions that it could pave the way to unlimited fees for some institutions or even the sale of student loans to banks.
Some in the sector warn that the project - led by Neil Shephard, professor of economics at the University of Oxford, and Anna Vignoles, professor of education at the University of Cambridge - could have “dangerous” policy implications if it is interpreted to mean that universities with the highest-earning graduates are the best institutions.
The project has now gathered data from HM Revenue & Customs’ PAYE database and linked them to individuals’ Student Loans Company information, giving an initial sample of 170,000 graduates.
For the first time, the project will measure graduate earnings in the long term and plot them against the institution attended and subject studied. It aims to estimate for each institution the proportion of loans never repaid by graduates - the resource accounting and budgeting (RAB) charge.
David Willetts, the universities and science minister, is taking a close interest in the project. And the data are viewed by senior figures in the sector as having enormous potential significance for the higher education funding policies of the three main political parties.
In a 2010 co-authored paper, Professor Shephard argued that universities could be allowed to charge above a £7,000 threshold if they pay an insurance premium to the government reflecting the earnings of their graduates, suggesting one potential policy use for the project.
Professor Vignoles said the study would provide information on graduates “who have been in the labour market for a number of years (unlike existing data, which really only go a few years after graduation)” and allow comparisons between peers from different universities.
She added: “We will, for example, be able to determine how the earnings of graduates from a particular institution compare with the earnings of students who are similar but who attended a different institution.”
The project is being undertaken independently of the Department for Business, Innovation and Skills, “though BIS is keen on the work”, Professor Vignoles said. She added that the publication date had yet to be determined - although some results are expected “by the end of the year”.
Senior sources in the sector suggest that the research could be used by Labour and the Liberal Democrats if they opt for policies to lower fees to £6,000 a year.
To avoid a catastrophic cut in income, institutions could be allowed to charge above that threshold if they fund their own loan write-offs on fees above £6,000, the sources suggest.
For the Conservatives, individual RAB charges for universities could offer a way to force institutions perceived to have poor graduate employability records to keep fees below a threshold such as £6,000, creating the sort of differentiation in charges that has failed to emerge under the present system.
And the data on loan repayment rates by institution are seen as being of interest to banks that may wish to provide student loans for particular universities or groups.
Baroness Garden of Frognal, BIS spokeswoman in the House of Lords, told peers on 3 June that the coalition continues to “explore options for monetising student loans”.
She added: “Any future sale of income-contingent repayment student loans would take place only if it reduced the government’s risk exposure to the loan book, represented value for money for the taxpayer and ensured protection of borrowers.”
Libby Hackett, chief executive of the University Alliance, said the research project on graduate earnings was “really interesting”. But she added: “I do think the policy implications are potentially quite dangerous, because the research has an underlying implication, which is that those graduates with high earnings have undertaken the ‘best’ degrees.
“The implied logic is that those universities or courses with the highest earnings are the best, and therefore should be allowed to charge higher fees.”
Ms Hackett continued: “If you are from a wealthy family, do very well in your exams, go to an elite university, do very well and get a high-paid job, how much of that [success] is [a result of] added value from your degree or university and how much is just social capital?”