The current university funding system has stopped working so it’s time for a rethink - Justine Greening

One of the best parts of campaigning with the Purpose Coalition on social mobility is the young people I get to meet studying at our universities. It’s inspiring to learn about their plans for the future and their hopes and aspirations.

For a long time our university system has been a standout success story on driving social mobility. I know first-hand the difference higher education can make to your life. Having grown up in Rotherham, I was able to study for a degree in Economics at Southampton University. I’ll always be hugely grateful to the lecturers who interviewed me who could see a spark of something that meant they gave me the opportunity to do that degree. It changed my life for the better.

But students today face something I didn’t - tuition fees. When I talk to students around the country, few disagree that they shouldn’t pay back into a higher education system which not everyone can attend and benefit from as they do. Tuition fees have been a crucial part of maintaining investment in higher education. But they have been frozen since 2017, crippled by Theresa May’s lack of a majority in Parliament and untouched by her successors ever since. With double-digit inflation this now means real term cuts in higher education funding at a time when virtually every other country is ramping up investment.

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Meanwhile, for the least advantaged students the cost of living crisis has been made worse because maintenance loans to cover living costs for students have also not kept up with inflation. The pressure on students grows to do less study and more paid work. Vice Chancellors tell me of their concerns for the students for whom university can be most transformative, but who are now at greater risk of dropping out simply because they cannot afford to stay on the course.

'I know first-hand the difference higher education can make to your life'.'I know first-hand the difference higher education can make to your life'.
'I know first-hand the difference higher education can make to your life'.

The consequence of our current system is that it sees those students with the least family financial support leaving university with the highest debts, so they pay for longer and face more interest charges. That is hugely unfair. It is also anti-levelling up.

If university is to remain open to talented young people from working class backgrounds like my own, and we want to make sure our world-class university system keeps getting the funding it needs, then we have to recognise that with frozen fees the current system has stopped working. It must now change.

So what’s the route forward? We need a simple principle: that those graduates who financially do the best out of university should financially contribute the most back. Let’s make the current unfair graduate contribution - the means by which ‘loans’ are paid off by graduates - a fair graduate contribution instead.

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For those less familiar with the way the system works, though our graduates might technically have something we term a “loan”, how much they actually pay month by month - the ‘graduate contribution’ - is based on their earnings. It essentially works like an extra, time-limited tax that is deducted from payroll, for up to 30 years. Those paying for the full 30 years are those with the highest debts, or those on the lower post-graduation earnings, which could include vital public sector roles such as nurses or social workers.

A progressive, fair graduate contribution would see all graduates pay their earnings-based graduate contribution as now, but for the same set time period, whether it’s 25, 30 years or more - whatever Parliament decides - rather than being based as present on how much debt was accrued. It will shift the contribution much more fairly towards the financially most advantaged post graduation - whatever their background. Someone from a very working class background who nevertheless went on to do very well in a career in finance or industry should be paying more back overall than their graduate counterpart, even if privileged, who also went to university but then went on to become a nurse or a teacher.

The Student Loans Company which administers the present moribund tuition fees and loans system costs us a massive £300m a year. It’s money that could be saved or reinvested in front line higher education if we had this simpler and fair graduate contribution approach.

As for universities currently receiving £9,250 per course per student per year, there needs to be guarantees and transparency on channelling the graduate contribution back into higher education. I’d suggest a Higher Education Fund explicitly and directly funded by graduate contributions, supplemented by the Teaching Grant as now. Potentially a wider skills levy replacing the apprenticeship levy could see employers contribute into it as well, akin to employer and employee National Insurance.

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Neither the Conservatives nor the Labour Party seem particularly capable, willing or ambitious to fix the current university funding model. Yet both parties will have to grapple with this in the run-up to the next general election. For the Conservatives, the latest polling shows a 6.2 per cent drop in the number of 18-24 year olds who intend to vote Tory at the next general election, compared to the same demographic at the previous one. Finding a solution could be a vote-winner and help it connect to a new generation of voters. For Labour, the 2019 Corbyn election policy to simply scrap tuition fees and student loans but with no plan to maintain funding to universities clearly needs to be replaced by Sir Keir Starmer’s Labour Party with a more credible approach for voters.

Justine Greening was Secretary of State for Education from 2016 to 2018.