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New HEPI report – How should undergraduate degrees be funded?

uni students standing outside

The Higher Education Policy Institute (HEPI) today publishes a new report entitled How Should Undergraduate Degrees be Funded? – a compendium of essays edited by Rose Stephenson, Director of Policy and Advocacy at HEPI.

The report explores a range of potential funding models for undergraduate education, against a backdrop of financial sustainability concerns for higher education institutions.

Key findings:

  • Abolishing tuition fees would cost the public purse £10.5 billion per cohort and sees only a tiny rise in the percentage of potential students who would be likely to apply to university.
  • The most popular proposed alternative model with potential students is the graduate employer levy – where employers pay a small percentage of graduate salaries to fund higher education.
  • Potential students are already carefully considering the cost implications of living in different university towns when making their application choices.
  • Half of potential students say they won’t apply to university if fees rise with inflation.

Ahead of the upcoming general election, HEPI is focussing on the significant policy questions about the future of higher education. This report arrives at a crucial juncture, as the sector seeks to adapt to a challenging economic environment while still meeting the expectations of students and society.

The collection includes authoritative contributions from student leaders, leaders of higher education and two former Ministers for Universities. Proposed funding models include: dismantling the marketisation of higher education; differentiated tuition fees tied to Teaching Excellence Framework (TEF) outcomes; and innovative proposals like a graduate employer levy.

Each proposed model has been analysed by London Economics for its economic impact on students, institutions and the public purse.  Polling was undertaken (by UCAS on behalf of HEPI) with potential students to understand better how each model might impact application rates, providing a unique window into the minds of those directly impacted by funding decisions.

Rose Stephenson, Director of Policy and Advocacy said:

‘Higher education institutions across the UK are under financial strain. In England, the cost of higher education is disproportionately borne by graduates, and in Scotland, it is disproportionately borne by the state. This report aims to breathe new life into the debate on university funding before the election, analysing different options, including how the cost of higher education could be split between graduates, the state and employers.’

In his contribution, the Rt Hon. the Lord Willetts, Minister for Universities and Science (2010-14), writes:

‘The forthcoming election presents a dilemma to both big political parties. They have to say something about higher education, but they do not want to nail their colours to any particular proposal now. A review of the calibration of the scheme is a way to avoid political traps now and give them maximum room for manoeuvre after the election.’

In his chapter, the Rt Hon. the Lord Johnson, Minister for Universities and Science (2015-18), writes:

Finding a higher education funding system that protects both the student and taxpayer interest is not complicated. We do not need a big review. The mechanism to link funding to quality exists already in law in the Higher Education and Research Act 2017 (HERA).’

In her piece, Chloe Field, NUS Vice President for Higher Education, writes:

‘Higher education needs to be publicly funded and in public ownership, not only to ensure access for all students from all backgrounds, but also to make sure every single community has a stake in their universities, and that they are run as truly civic institutions. We must invest in all areas of education and build a system that will ensure a future for my generation and for our planet.’

The other contributors to the collection are:

  • The Rt Hon. James Purnell, President and Vice-Chancellor of the University of the Arts, London, who proposes some radical reforms to student loans including a stepped repayment model.
  • Johnny Rich, Chief Executive of the Engineering Professors’ Council and Chief Executive of the outreach organisation Push, who proposes a levy on graduate employers.
  • Alison Payne, Research Director at Reform Scotland, who proposes a graduate contribution model for Scotland.
  • Lily Bull, Policy Manager at the Russell Group, who writes about the financial sustainability of higher education institutions.

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