University fees could be in for another shake-up if the government adopts controversial proposals in a new report.

Tuition fees may be coming down

A government-commissioned report has proposed significant changes to the funding of university tuition fees in England. 

Students resident in England (different rules apply in other parts of the UK) pay a maximum university tuition fee of £9,250 per year, financed by a student loan. Further loans to cover maintenance plus interest at RPI+3% mean that at the end of a three-year course graduates can start working life with £50,000 of debt. That debt is currently written off after 30 years, but until then repayments must be made at the rate of 9% of income above a threshold presently set at £25,725. 

At the time of the last General Election, the Labour Party’s manifesto proposed scrapping future tuition fees at an estimated cost of £11.2bn a year – the party’s most expensive single measure.  The idea was predictably popular in many university towns and may have been enough to swing the vote in some of them. After the election the government responded by setting up an independent review of 18+ education in England.

That review, headed by Philip Augar, published its report in June. There was a long list of recommendations, including:

  • Reducing the maximum tuition fee to £7,250;
  • Cutting the earnings threshold for repayments by £2,000;
  • Introducing means-tested maintenance grants of up to £3,000;
  • Reducing the interest rate to match inflation during the period of study; 
  • Capping total loan repayments at 120% of the loans drawn, revalued in line with inflation; and
  • Extending the loan repayment period to 40 years. 

The proposals have one consequence which has raised a few eyebrows: they would reduce the total outlay for the highest earning graduates while increasing it significantly for middle earners.

Whether or not these ideas are adopted, they are a reminder of the eye-watering expense of higher education, both for students and the government. If you have children or grandchildren heading to university, the sooner you start planning for that cost, the better.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.