Ryan Shorthouse: Fees put universities to the test over value for money

Cambridge was first to say they will charge the maximum fee of £9,000. Then Oxford. This week it was Imperial. Who next?

Behind the scenes, other universities are lobbying hard to follow suit, especially as central funding from government has been cut so vehemently. “We do so much outreach work”, “we’re proud of the number of state school students we take”, they argue.

OFFA, apparently, could block them if they fail to meet the terms of new access agreements. But the Government refuses to give minimum requirements – it’s up to OFFA and individual universities to reach an agreement.

OFFA only has three staff – is it really able to endure bitter battles with institutions that have their request for higher fees rejected?

This body has failed to sanction any university since it was formed in 2004 for palpable failure to reach targets on admitting poorer students.

So, gradually, it seems it is likely there will be a clustering of fees around the maximum £9,000 as both the Higher Education Policy Institute and National Union of Students forecast.

It seems unlikely that price competition, which the Government is hoping for, will really work in driving down fees.

This is because the demand for higher education seems to be rather inelastic, as Oxford academic Professor Neil Shephard has argued, with students willing to pay higher fees in a system where they pay nothing upfront.

Even if some students were put off by higher prices, universities are probably judging there is sufficient demand to get away with inflated prices. Indeed, there may be more risk of deterring students if universities charge less – perhaps indicating lower quality – than charging more.

There is little risk for universities in charging these high fees. This is because the Government pays off the loans of those low lifetime earners unable to afford to pay for their education in full.

What could happen, therefore, is that students do not get value for money, they pay a lot more for a degree that was not really worth the price tag and are then forced to pay off a loan over a much longer timescale than envisaged.

The generous subsidies attached to student loans means the Government incurs a cost for every loan distributed. To control this expenditure, Ministers have to cap student numbers. Officials in the Department for Business are now very nervous that universities will get away with charging extraordinarily high prices, putting even greater pressure on controlling numbers. More qualified, ambitious young people will be left disappointed, denied a place at university.

It is the universities, setting these high prices, that students really should take issue with. So far, however, they’ve escaped the wrath of students. Instead, students target the politicians, protesting outside Parliament and Tory party headquarters, arguing the reforms are making it harder for young people to get on in life.

They even turned against the current NUS president Aaron Porter, who is now standing down, for not being radical enough against the government.

In this triad relationship between Whitehall, universities and students, the Government, however, is being rather helpful to students.

The Government has ensured a degree remains affordable for everyone, providing a loan for the full cost of tuition so it is free at the point of use.

The Government has raised the income threshold for paying back loans, so young people will pay less each month, meaning they will have more disposable income to spend and save. What the higher tuition fee does is extend the number of years you continue to pay your loan back: so it’s not putting an extra burden on young people, but those in their thirties and forties.

And if graduates have not earned enough over 30 years, the Government pays off the student loan. The Government has not saddled students with real debt – it will never become unaffordable or unmanageable.

Where students do have grounds for anger with the coalition is the creation of a system where universities will be able to get away with charging excessively high fees for degrees that are not really worth the money.

It will eventually become too costly for the Government to issue higher loans. Reforms will be needed: a reduction in student numbers, a higher interest rate on loans or an extension of the time before the debt is written off for low lifetime earners.

The best-kept secret by universities is that the Government will, over time, increase the amount of funding they receive from the state.

Yes, funding through the HEFCE grant will be cut by £2.9bn, which Universities UK believes can only be rectified by charging on average just over £7,000 a year in tuition fees. Well, it is very likely that these universities will now charge up to £9,000. And these upfront fees, let us not forget, are paid by loans using government money. It just the source of the bulk of this money is future graduates rather than general taxpayers.

It is time for students, led by a new NUS president, to put universities under the spotlight. They should be more critical and demanding of these institutions charging high prices.

The NUS, to its credit, is thinking creatively and working with the Government to push for “student charters” that will bolster the consumer rights of students: they want students to get a rebate on fees if universities fail to deliver what was in the prospectus and a right to switch institutions if they are unhappy with the service provided.

Such ideas may pressure universities to improve the student experience: boosting the quality of teaching, and employment advice and opportunities. More young people may then start getting better value for money.

Ryan Shorthouse is a researcher at the social Market Foundation and spokesman for Bright Blue.