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The future of higher education: What it means to students and parents

WHY CHANGE IS NEEDED

Our universities do a good job. Higher education is no longer restricted to a tiny and wealthy elite. Our top universities are among the best in the world. More overseas students are coming to the UK for their education. University research drives our hi-tech industries. 

But we face real challenges. Other countries already send more young people into higher education, boosting their economies. Here, while an increasing number of people from all backgrounds go to university, the proportion coming from lower income families has not increased. 

Universities warn that lack of resources is preventing them employing the best and brightest academics, or funding the cutting-edge research our economy needs to prosper. College facilities need upgrading and the size of lecture and tutorial groups is increasing.

There is no easy way to meet these challenges. But if we duck them, the country will pay a heavy price. 

A BETTER DEAL FOR STUDENTS

Quality Teaching
Teaching and learning are central to the quality of higher education, and all students deserve to be taught well. Government funding will reward excellence in teaching, and every university teacher will have to get a teaching qualification. 

More Choice and Better Information
We want students to be able to make informed choices when they apply for university, and so help drive up quality. A comprehensive survey of student views, as well as published external examiners reports and other information about teaching standards, will be pulled together in an easy to use Guide to Universities, overseen by the National Union of Students.

Better Facilities
Government will be funding universities to the tune of almost £10 billion a year by 2006, a rise of over 6% a year in real terms over the next three years. These extra resources will help them begin to upgrade buildings, and recruit and retain the best academics to improve and expand teaching and research. The changes we are planning from 2006 will also ensure that universities have the money needed to maintain and strengthen standards and improve teaching. 

New Sorts of Courses
We want to make sure that there are enough people with degrees to keep our economy healthy and skilled. But we must make sure that courses really fit with what employers want, so that students know that they can get good jobs with their degrees. We will encourage more people to study for two-year, work-focused foundation degrees which are designed in partnership with employers. This will be better for employers, better for the economy, and better for students. 

Fair Access 
We will make sure that more people have the qualifications to go to university by raising standards in schools and colleges, and, through our AimHigher programme, that young people from all backgrounds aspire to go to university. We will work with universities to make sure admissions to university are fair, and our new student finance package – with grants, and help with fees – will target support on those who need it most.

Each University Doing what It’s Best At
We will encourage all universities to focus on what they are good at. This could be research, teaching or making links with business (to turn ideas into inventions). Universities that focus on good teaching will serve students better; but our whole economy is also driven by universities that focus on excellent research, and on innovating in partnership with business.

STUDENT FINANCE: THE IMPLICATIONS

Grants
We have listened to the worry that the abolition of maintenance grants might have deterred students from less well-off homes. We will introduce new grants of £1,000 a year for students from lower-income families, starting in autumn 2004. 

What does this mean in practice? Almost 30% of all students will qualify for the full grant. Those whose family income is below £10,000 will be eligible for a full grant, while those below £20,000 will qualify for a partial grant on a sliding scale. This will be in addition to other grants for students with children or with disabilities. 

Abolition of Up-front Fees
Many have argued that up-front tuition fees place an unfair burden on families. So we will enable all students to defer paying fees until they graduate and are earning after university. The fees will be paid back through the tax system, in the same way as the current student loans. Like them, they will rise by inflation so that they keep their real value. 

What does this mean in practice? From 2006 you can go to university without having to pay any money up-front, or while you are studying. Payments will be collected through the tax system after you graduate, and once you are earning a certain amount. How much you pay each month will be linked to what you earn. You pay 9% of any income you earn above the threshold where repayment starts.

Different Fees for Different Courses
University courses cost far more than the present annual tuition fees of £1,100. But we have rejected calls for students to contribute as much as £15,000 a year to the cost of their higher education. Instead, we propose that universities be allowed to set their own fees between £0 and £3000 – so some fees might go down. We will keep the cap on fees at £3000 throughout the next Parliament, only raising it to take account of inflation. The Government will continue to fund most of the cost of a student’s higher education. 

What does this mean in practice? No one knows how universities and colleges will react to this new freedom. Some will, undoubtedly, raise tuition fees for popular or more costly courses. But we expect other course fees to stay at their present level while others may be reduced or even abolished. At present, 40% of all students get their £1,100 standard fee paid for them, and around 60% get some of it paid, on a sliding scale. This will continue, but any costs above the £1,100 level will have to be paid by the student, either up-front or after they graduate – whichever they choose. 

Safeguards for Students
To make sure that access to university stays fair once universities are allowed to change their fees, there will be tough safeguards to protect students:
· There will be a cap of £3,000 per year, set for the whole of the next Parliament;
· Universities will only be permitted to raise fees if they sign up to tough Access Agreements with a new Access Regulator, showing how they will take action to make sure that access to their courses is fair and that they are reaching out to students from all backgrounds.
· As we have said above, no student or parent will have to pay any up-front fee. 
· We will encourage university bursary schemes, and will consider whether we could work with universities to help pay more of the fees for some students.

Making Repayment Easier
Every student will pay less each year, because we will raise the repayment threshold at which payments start being made from £10,000 to £15,000, beginning in April 2005. This will particularly help those on low incomes when they first graduate. If graduates choose to, they can make extra payments, so as to pay off their debt more quickly. 

What does this mean in practice? From April 2005 all new students and existing students who took out loans from 1998 onwards will not have to pay anything back until they are earning £15,000. This means that a graduate earning £20,000 would make annual payments of 9% on £5000 (£20,000-15,000) – a reduction in the repayments by half, from £900 a year to £450 a year. This means the payments are more manageable, particularly for those on lower incomes, but repayment will be phased over a longer time. This new threshold will apply to payments for deferred fees once they are introduced, after 2006.

Independence at 18
The abolition of the current up-front fee, so that graduates themselves are responsible for paying for the cost of their course, is an important step towards treating students as independent adults. We do still ask parents to contribute to living-costs. But in the future we will think carefully about whether we could take more steps to treat students as independent at 18. 

We will also be carrying out a survey into how much students need to live on. We know that choices about lifestyle affect how much people spend, and we think that it is reasonable for students to work to pay for extras; but we want to make sure that we are giving students enough for the basics while they are at university. 


TIMETABLE OF CHANGES: WHAT HAPPENS WHEN?

Phase One: 2004 - 2006
· For new students starting courses in autumn 2004, we will introduce a new Higher Education Grant of up to £1000 per year for students from households with family incomes of £10,000 or less. Some grant assistance will also be available to those whose families earn up to £20,000 a year.
· From April 2005 the earnings threshold at which you will pay back loans will be raised from £10,000 to £15,000. This will apply to all new students, and, from this date, to all past students who took out loans from 1998 onwards. 
· Repayments are already and will continue to be linked to salary and therefore the individual’s ability to pay.
· The Government will continue to meet the full £1,100 cost of tuition fees for students with family incomes of up to £20,000, and pay part for those whose family incomes is between £20,000 and £30,000. 

Phase Two: From 2006 onwards
· From 2006, universities will be allowed to charge different fees for different courses, between £0 and £3000, but only if they have tough Access Agreements in place. 
· No-one will have to pay any fees up-front – they will be able to choose to pay them back through the tax system once they are earning. The new, higher repayment threshold will be used. 
· Student grants will continue, though we will consider whether the money could be targeted better by helping poorer students with fees.
· Student loans for living costs will still be available for everyone (with students from richer families, as now, getting 75% of the full loan)
· The Government will continue to meet the first £1,100 of the cost of tuition fees for students with family incomes of up to £20,000, and pay a smaller amount on a sliding scale for those whose family income is between £20,000 and £30,000. 

WHAT WILL I PAY BACK? CASE STUDIES

These case studies are illustrations of how the student finance system operates currently, and how it might work under the proposed system from 2006 onwards. The case studies are based on 2002/03 grant and loan rates, and graduate income levels are estimated. They do not include the inflation element of the loan – because that just keeps the real value of the loan steady – so all these figures are at 2002/03 prices.

PETER
Peter lives with his mother, a single parent on benefits with an income of less than £10,000, and is the first person in his family to go to University. He plans to attend a university in the Midlands to study English.

Current System
Under current arrangements Peter would be entitled have his £1,100 tuition fee paid by the Government. He would also be entitled to a loan of up to £3,905 for living costs in years 1 and 2 of his course. In his final year he would be entitled to a loan of up to £3,390. He would graduate with a student loan of up to £11,200.

Repayments begin when his income is over £10,000. Peter becomes a civil servant on graduation, with a starting salary of £18,000, rising to £30,000 after ten years. He repays:

· £60 per month in year 1;
· £98 per month by year 5, when his salary is £23,000;
· £135 per month by year 9 when his salary is £28,000.
He repays his loan in 10 years.

Proposed System from 2006/07
If Peter were a new student in 2006/07 and his university charged £2,000 per year for his course, he would be entitled to the HE Grant of £1,000 a year, the full loan of £11,200 for the duration of the course, and a grant for fees for up to £1,100. He can choose either to take out a loan for the balance of tuition fees or to use his HE Grant to offset some or all of the cost. If he defers the extra cost of tuition, but uses the HE Grant so that he doesn’t have to take out the whole loan for living costs, then he will graduate with student loans of £10,900.

His repayments begin when his income is over £15,000. Peter becomes a civil servant when he graduates, with a starting salary of £18,000, rising to £30,000 after ten years. He repays:

· £23 per month in year 1;. 
· £60 per month in year 5 (at a salary of £23,000)
· £98 per month in year 9 (at a salary of £28,000)
He will repay his loan in 12 years.

SUSANNA

Susanna’s parents have a combined family income of £50,000. She is planning to undertake a degree in Psychology and Law at a university in the North of England.

Current system
Under current arrangements, Susanna’s parents are asked to contribute the whole of the standard £1,100 tuition fee. She would be entitled to 75% of the loan for maintenance costs: £2,930 in years 1 and 2, and £2,545 in year 3. She will graduate with student loans of £8,405.

Repayments begin when her income is over £10,000. Susanna becomes a voluntary sector worker when she graduates, and earns £15,000 in year 1, rising to £35,000 over 12 years. She repays:

· £38 per month in year 1;
· £75 per month in year 5 (at a salary of £20,000)
· £135 per month in year 9 (at a salary of £28,000)
She repays her loan in nine years.

Proposed system from 2006/07
If Susanna were a new student in 2006/07 and her university charges £2,500 a year in tuition fees, Susanna would be able to defer repayment until after she graduates. This would mean that her parents are no longer required to pay any tuition fees up front. She would not qualify for a grant, but would continue to be eligible for a 75% loan for living costs. Susanna would graduate with student loans of £15,905, including these deferred fees.

Her repayments begin when her income is over £15,000. Susanna becomes a voluntary sector worker when she graduates, and earns £15,000 in year 1, rising to £35,000 over 12 years. She would repay:

· nothing in year 1, because she does not earn more than £15,000;
· £15 per month in year 2, when her income has risen to £17,000;
· £38 per month in year 5, when she earns £20,000;
· £98 per month in year 9, when she earns £28,000;
· £150 per month in year 12, when she earns £35,000.
Susanna repays her loan in 15 years.


KHALID

Khalid’s parents have a joint income of £30,000. He takes a maths degree at a university in the south-west of England. 

Current System
Under current arrangements, Khalid’s parents would be expected to pay £1,047 of the standard £1,100 fee each year, up-front. He qualifies for a full loan for living costs of £3,905 in years one and two, and £3,390 in year 3. He graduates with a student loan of £11,200.

Repayments begin when his income is over £10,000. Khalid goes on to qualify as an accountant and works in a merchant bank in the City. He earns a starting salary of £24,000, rising to £60,000 by year 5. He would repay:

· £105 per month in year 1;
· £375 per month in year 5.
He repays his loan within 5 years.

Proposed system, from 2006/07

If Khalid were a new student in 2006/07 and his university charged £2,700 a year for his maths degree course, Khalid would still qualify for help with fees of £53 a year, and can defer the rest of the fee costs (£2,647). He qualifies for a full loan for living costs and graduates with a student loan of £19,141.

Repayments begin when his income is £15,000. Khalid goes on to qualify as an accountant and works in a merchant bank in the City. He earns a starting salary of £24,000, rising to £60,000 by year 5. He would repay: 

· £68 per month in year 1;
· £338 per month in year 5, when he is earning £60,000.
He repays his loan in just over 6 years.

QUESTIONS AND ANSWERS

Q I am currently at university. Will these changes affect me?
A No – you will carry on under the current system. The only change that will affect you is that, if you are still paying back your student loan in April 2005, your monthly repayments will go down when the repayment threshold goes up to £15,000 (this is explained in more detail above). 
Q I am going to university this autumn. Will these changes affect me?
A No – you will go under the current system. The only change that will affect you is that, if you are still paying back your student loan in April 2005, your monthly repayments will go down when the repayment threshold goes up to £15,000 (this is explained in more detail above). 
Q I am planning to go to university in/after autumn 2004. How much grant will I get?
A This depends on your household income. The Higher Education Grant will be available to new students from autumn 2004. Those from families with incomes below £10,000 will get the full grant of £1000, and those with family incomes up to £20,000 will get some grant, on a sliding scale. 
Q How much will I have to pay towards the cost of my tuition fees?
A From 2006 Universities will be able to set their own fees up to a maximum of £3,000 a year. So what you will pay depends on the course you choose. You can either pay the fee straight away, or pay it back later through the new Graduate Contribution Scheme, explained above. If your family earns less than £20,000, the Government will pay £1,100 towards the cost of your course, and if they earn less than £30,000 they will pay a smaller amount, on a sliding scale.
Q How will I know how much my university/college is going to charge me?
A Each institution will produce a prospectus which should tell you the tuition fee costs associated with their courses. These prospectuses are normally produced in May, allowing students to make choices during the following academic year for the one after. Our new Guide to Universities, which will be produced with the National Union of Students, will help you decide whether the course is good value for money by giving you clear information about it. 
Q Will my parents still have to make a contribution towards the costs of my course?
A No. From 2006 there won’t be any up-front fee any more – all tuition costs can be paid afterwards, once you graduate. But your family’s income will still affect whether you can get a grant, and how big a student loan you can take out for living costs – so if your parents are reasonably well-off they will still be asked to contribute something to your living costs. 
Q My parents won’t (or can’t) give me anything, even for living costs – how will I manage?
A You will still be able to get a student loan for living costs – everyone is entitled to at least 75% of the full loan, depending on their family income. You may also be entitled to a grant from 2004. Additionally, you may also be entitled to apply for the Access to Learning Fund - your institution’s student welfare office will be able to tell you how to apply.
Q When will I have to start paying anything back?
A From April 2005, you will start paying back your student loan once you have started work and are earning more than £15,000 a year. This goes for your student loan for living costs, and from 2006 also for your Graduate Contribution, if you choose to pay your fees after you finish University. 
Q Will I have a choice about how I can do this?
A Because contributions are collected through the tax system, there is a standard rate for paying back. This is 9% of what you are earning above the threshold (explained in more detail above). But that doesn’t stop you paying off some more if you want to, to bring your debt down. There’s no charge for paying early.
Q Will I have to pay interest on what I borrow?
A Student loans for living costs don’t have a ‘real’ rate of interest – the only interest charged is at the same level as inflation, which just means that the real value of the loan stays steady. Deferred fees will work in the same way – there will be no ‘real’ interest, although the amount will go up with inflation. 
Q How long will it take me to repay the amount I owe?
A This depends on the amount of loan that you have taken out, and how much you earn. A larger amount will take longer to pay back than a smaller amount. The examples above give an idea of what different people might pay. But it also depends on how much you choose to pay – there is nothing to stop you paying a bit extra each month to pay off your loan more quickly. 
Q What happens if I don’t get a job, or stop working for a while?
A You do not need to repay anything unless you are in work and earning above the £15,000 income threshold. 
Q I am a part-time student. How do these changes affect me?
A We are introducing a generous new package for part-time students, which includes a new grant of £250 a year. You can get more information on the part-timers package on the website, below. 
Q What if I choose to study in Scotland, Wales or Northern Ireland?
A Arrangements for students studying in other parts of the UK are made according to where they live, rather than where they study. If you are an English student, you will be able to get English levels of support. You can get more information on what happens for students studying in other parts of the UK on the website, below.
Q Where can I get more information?
A You can visit the Department for Education and Skills website http://www.dfes.gov.uk, or telephone their student finance number on 0800 731 9133. Or, if you prefer, you can contact the National Union of Students at www.nusonline.co.uk or on 020 7272 8900.

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Last updated: 24 January 2003 10:55
Created by: Rachel Tunstall

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