Debt warning as university tuition fees tipped to rise to £10,000 a year

University graduation procession ENGEMN00120120927193324

University graduation procession ENGEMN00120120927193324

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Tuition fees at some universities could reach £10,000 a year by 2020, a new study has been suggested.

The Independent Commission on Fees warns that the Government should be “extremely wary” of major increases or lifting the fee cap entirely, citing concerns about the impact on students and the taxpayer.

It comes as new polling published by the panel suggests that many teenagers are worried about how much they will have to pay out to gain a degree, with 78% of the more than 1,000 UK sixth-formers surveyed saying they are very or fairly concerned about living costs as a student, 68% concerned about tuition fees and 58% worried about repaying loans after graduation.

In its final report, the Commission, which was set up in 2011 to monitor the impact of the new fee system on English universities, calls for the Office for Budget Responsibility (OBR) to launch an investigation into the current student loan system to examine whether it is providing value for money for undergraduates and the public purse.

Tuition fees were trebled to a maximum of £9,000 a year in 2012, with students starting to repay government loans once they are earning £21,000.

In his budget earlier this month, Chancellor George Osborne announced further reforms to the system, including allowing universities offering high quality teaching to increase their fees in line with inflation from 2017/18.

The Commission calculates that, based on compound interest at 3% from 2017/18, this move could mean that fees at some institutions reach £10,000 in five years time (by 2020/21)

In its report, it says: “The Government should be extremely wary of substantive increases in fees or removing the cap on fees completely.”

“Our concerns about the impact on students and the taxpayer (through loans) suggest extreme caution should be taken in placing any further strain on the loan system by any substantive increase in fees, or lifting the cap completely as some have suggested,” the report adds.

“Evidence to date shows that there has been no move to a real market in fees, but rather a clustering at the top end of allowable charges, with insufficient understanding of the long term effects of the debts incurred in this process.”

The report does note that there has been “no obvious detrimental change” in the numbers of school leavers going on to university.

But it goes on to say that there is still an “unacceptably high” gap between the numbers of disadvantaged sixth-formers going into higher education, especially selective institutions, and a widening gender gap between poorer students, with 14.7% of boys from the poorest neighbourhoods studying for a degree in 2014, compared to 21.8% of girls - a gulf of seven points, compared to five in 2010.

It also raises concerns about significant drops in part-time and mature students, saying it believes that the new fee system is a major factor in the decline

Commission chair Will Hutton said it is good news that the number of young people going to university does not appear to have been affected by the 2012 fee hike, but added that there are still problems in the new system.

“Debt is likely to become a bigger issue,” he said.

“Under the current system, nearly three-quarters of students will fail to clear their student loans before they are written off after 30 years, and the large majority will still be paying off their loans well into their 40s, figures that will increase with the abolition of grants and increase in fees. It is not clear that students will continue to disregard debt.

“At the same time, it looks increasingly likely that any anticipated gains to the Treasury will be largely wiped out by these non-payments. It’s absolutely vital that the OBR establishes what the knock-on effects of the student loan system will be in the future on both students and the national finances so we know whether the current system is offering us value for money and economic security.”

Nicola Dandridge, chief executive of Universities UK, said: “As the Commission demonstrates, higher tuition fees in 2012 have not deterred young people from applying to university. This important and welcome finding is consistent with the conclusions of the independent Student Funding Panel, which reported in June 2015.

“The Student Funding Panel reviewed the current student fees and loan system in England and concluded that the system was broadly fit for purpose and needed to be given time to work.

“During the course of its work, the Panel took evidence from over 3,000 students. This evidence showed that students were more concerned about the level of maintenance support they receive while studying, than they were about the longer-term repayment of their student loans.

“Allowing the value of the fee to be maintained in real terms is essential to allow universities to continue to deliver a high-quality learning experience for students.”

A Business Department spokeswoman said the Government is committed to giving everyone the opportunity to gain a degree. “Students will get more money in their pockets to help with living costs and lifting the cap on student numbers means that more people will be able to benefit from higher education than ever before,” she said.

“The Budget was clear that only institutions offering high quality teaching will be able to increase tuition fees in line with inflation from 2017-18.”

Professor Anne West, director of the Education Research Group, at the London School of Economics, said: “The research published by the Independent Commission on Fees raises serious concerns about the current student loans system. Moreover, the planned changes to fees and to student financial support are likely to have far-reaching negative effects on students from disadvantaged backgrounds, who have been beneficiaries of maintenance grants, which reduce later indebtedness.”