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May 24, 2012

Although the shock and anger over the tripling of tuition fees in England may not have dissipated, many students now seem resigned to the fact that university will land them with debts amounting to tens of thousands of pounds.

However, in a recent post for the London School of Economics' British Politics and Policy at LSE blog, John Hills, director of the Centre for Analysis of Social Exclusion, paints an alarming picture of the efficacy of measures designed to help students from poorer backgrounds in the higher fees era.

"Universities are putting in place elaborate systems...but have been left to their own devices to design the means tests that these involve," he writes, referring to a recent paper from the centre that analyses means-tested bursaries and fee-waiver schemes at 50 of the UK's 52 largest universities.

"What we found was a confusingly complex system, involving dramatic 'cliff edges' where help for the marginally better-off suddenly disappears."

He says that because each university has its own system of means testing - and applies a wide range of conditions for eligibility - it is hard for students to make the "informed choice".

"Cliff edges in support mean that a small difference in parental income can mean several thousand pounds' less support - much greater than the falls that caused such controversy around the coalition government's original proposals for sharply withdrawing child benefit from higher-rate taxpayers last year," he adds.

He points out that the decrease in the value of bursaries as parental income rises comes on top of income tax, national insurance and tax credit changes that can exacerbate existing marginal problems.

"Together this can mean that families face what amount to retrospective tax rates of well over 100 per cent if their income had changed by £1,000 around particular thresholds," he continues.

For Professor Hills, some people may have a strong incentive to decrease their household income by working less.

"If you are in a family with earnings around £44,000 and in the - maybe over-optimistic - position of thinking that your sixth-form daughter or son will go to Oxford in a couple of years' time, maybe (if you could afford it) you could cut your hours or take a few months off? In the long run, as a family, you might be no worse off," he suggests.

However, he adds that in reality people are unlikely to understand the rules of the system well enough to change their behaviour in advance. But they "may well be aggrieved" if they later discover that by working overtime to raise extra money to pay for university costs, their family is no better - or even worse - off.

"This is an illustration of a more general problem," he adds. "As cuts have collided with attempts to protect the poorest, combined with a move to more 'localised' decision-making, we are seeing a move back towards lower-level institutions designing their own means tests.

"But this case study suggests that the end result can be overlapping systems that are complex, very hard to compare and have undesirable side-effects."

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