Top-up fees 'will put off the poor'

June 9, 2000

Top-up fees represent a risky investment that will deter students from poorer backgrounds, says a report from economists at the University of Warwick.

The salaries of graduates from elite universities depend strongly on the class of degree attained, the economists found. Less-wealthy students would be less able to take the risk of getting a third, which would leave them on a lower salary for the same outlay.

"The introduction of differential fees is likely to have particularly strong disincentive effects on the participation of students from poorer families," said Robin Naylor of Warwick.

Dr Naylor and colleagues Jeremy Smith and Abigail McKnight analysed the earnings of 100,000 people who graduated from all the old universities in 1993. They found large differences in graduate earnings according to university attended, the subject studied and the class of degree attained.

"The decision to invest in a degree is a risky one. One element of this risk is uncertainty over the degree class outcomes, which, our analysis shows, is a statistically significant influence on graduate occupational earnings," said Dr Naylor.

Nick Barr of the London School of Economics, who co-wrote a report on differential fees that last week went to the Russell Group of research-led institutions, said: "The question is whether a graduate would be better off getting a 2:2 from the LSE rather than a 2:1 from somewhere like the University of Luton."

One option favoured by Dr Barr would be student loans for differential tuition fees and living expenses. Repayment would be based on earnings.

But a National Union of Students spokesman said: "There is already an element of risk in going to university - a gamble in the cost of taking three years out of work and getting into debt."

The Warwick economists found graduates of elite universities such as Oxford and Cambridge earned more than graduates of less prestigious institutions. The mean earnings of graduates from the university ranked lowest were less than three-quarters of the level of the highest-ranked university.

Those who studied law and politics, computing, business and subjects allied to medicine also earned significantly more than their fellow graduates. Those who gained firsts earned more than those with third-class degrees.

The economists identified a set of elite universities and degree subjects for which top-up fees would most likely be charged if differential fees were permitted. They looked at the effect that different classes of degree had on earnings for these graduates.

"The premium for a first-class over a third-class degree is greater for universities and subjects associated with relatively high earnings," said Dr Naylor.

"We conclude that the element of risk attached to investments in higher education is greater at those universities and for those degree subjects associated with relatively high graduate occupational earnings: that is, at the universities and courses that are the most likely candidates to charge top-up fees," he added.

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