Participation would fall if fees rise without extra aid

First submissions to review of fees and finance describe how costs affect applications. Melanie Newman reports

January 28, 2010

A £1,000 increase in tuition fees would result in a drop in university participation of 4.4 percentage points, according to the Institute for Fiscal Studies (IFS).

This would outweigh the positive impact of a comparable increase in loans, which would boost participation by only 3.2 percentage points.

The IFS, which presents the analysis in its submission to the independent review of fees, adds that a £1,000 increase in grants would raise participation by 2.1 percentage points.

“Increasing fees without increasing loans and/or grants by the same value or more will result in a negative impact on participation,” it concludes.

The analysis is among a number of written submissions to the Independent Review of Higher Education Funding and Student Finance, which is being led by Lord Browne of Madingley and is holding its first public hearing in Manchester today.

Lorraine Dearden, IFS programme director, is among those giving evidence.

The IFS submission adds that when variable tuition fees were introduced in 2006, their effect on participation was “close to zero” because their negative impact was countered by the introduction of fee loans and the reintroduction of grants.

The institute’s research is part of a growing body of evidence suggesting that higher fees would deter some applicants.

Earlier this month, a report by Million+, which represents new universities, suggested that raising the tuition fee cap by £4,000 would deter about 17,000 people a year from entering higher education.

The IFS also found that students from families with an annual income below £39,000 paid less for tuition in 2008-09 than they did in 2003-04 when grants and loans were factored in. However, taxpayers contributed more and graduates paid more in the form of loan repayments.

In another submission to Lord Browne’s review, the University Alliance also says that students were better off in 2008-09 than in 2003-04, a finding that it says runs counter to public understanding of the system of fees and loans.

“The 2006 reforms successfully transferred contributions from the student to the graduate,” its report says.

Despite this, the media continue to propagate “myths” about variable fees, including that they have harmed access to higher education, that they are “upfront” fees and that graduate debt is a major burden and financial risk, it says.

The group argues that the current system is unaffordable chiefly because all graduates benefit from a zero per cent interest rate on their loans.

If the repayment system was reformed to impose a higher interest rate on some high-earning graduates, the student loan book could be sold, the cost to the Government would be reduced, and student support could be distributed more widely, it argues.

“Any new student finance system must maintain the key features of the existing system, including no upfront cost, student support for living costs, income-contingent repayment and protection of low earners, but it needs to achieve them through more effective mechanisms,” the University Alliance concludes.

In a joint submission to the review, Birkbeck, University of London and The Open University describe how universities with large numbers of part-time undergraduates have lost out since the introduction of variable fees.

Since 2006, only a minority of universities have raised their fees for part-timers to the maximum pro rata full-time fee because of concerns about harming participation and restricting access, they say.

“Yet the current Higher Education Funding Council for England funding methodology assumes the same fee income per full-time equivalent student for both full- and part-time students in the calculation of the assumed resource,” their report says.

“Nearly all universities actually obtain this assumed fee income for their full-time undergraduates. This is not the case for all part-time undergraduates.”

This puts universities with a large proportion of part-time undergraduates at a financial disadvantage, the report explains.

Martin Bean, vice-chancellor of The Open University, said: “The disparity in funding between part-time and full-time students runs counter to three key national policy objectives: creating flexibility in higher education, raising skill levels and widening participation. Our submission highlights these issues.”

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