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What will the Office for Students do now?

by Rob Cuthbert

SRHE News Editorial, April 2026

The Office for Students has had a significant reset, after it was heavily criticised, not just by the HE sector, but also in a coruscating report by the House of Lords Industry and Regulators Committee in 2023. That report said “the regulator had a poor relationship with both students and providers, and that it lacked independence from the government.” In January 2024 the National Audit Office produced a scathing report on student finance in franchised providers, and Sir David Behan was commissioned to produce an independent review of the Office for Students, published in July 2024 as Fit for the Future: Higher Education Regulation Towards 2035. After the general election in 2024 the new Labour Government replaced the Chair of the OfS, former Conservative MP Lord Wharton, appointing Edward Peck CBE, the widely-experienced former VC at Nottingham Trent in March 2025. Peck had been appointed by DFE as the first Higher Education Student Support Champion in 2022, so might be seen as bipartisan. OfS chief executive Susan Lapworth left at Easter 2026, and John Blake, Director for Fair Access and Participation, left in 2025 to join Wonkhe’s new venture The Post-18 Project, replaced on an interim basis by his widely-respected predecessor Chris Millward.

There are now almost 500 OfS staff, about twice as many as the Higher Education Funding Council for England had when it was disbanded. The Chief Executive has a leadership team comprising eight ‘Directors’ and another 13 ‘Senior leaders’; it is difficult for outsiders to understand exactly who is responsible for what. There are Directors for: Freedom of Speech and Academic Freedom; Quality and Access; Strategy and Delivery; Regulation, and Enabling Regulation; Resources and Finance (2); and Legal Counsel (but, mysteriously, not the Director of Fair Access and Participation). The ‘Senior Leaders’ are Heads of: Interventions; Monitoring; Student Equality and Welfare; Financial Sustainability; Enforcement; Quality and Standards; Communications; Market Entry; Chief Data Officer; Student Outcomes; Provider Governance; Consumer Protection; Pathways and Funding.

If only most problems would fit into those pigeonholes – there must be a lot of day-to-day negotiation about who leads on which issues. With 500 staff there is scope to give every one of the 424 institutions under OfS regulation a different contact person, without even troubling the 22-strong leadership team, but perhaps that would just be too easy to understand. Behan’s 25th recommendation was “That the OfS develops a more transparent style of communications to demonstrate to the sector its independence from government.” It could start with more communication about staff and how the organisation is supposed to work.

New chair Peck wasted no time in recasting the OfS strategy to take account of the many criticisms of the OfS. After the Lords inquiry the Behan review called for a narrower focus on key priorities, and the Strategy for 2025-2030 said the OfS goals were “grouped into three areas”: quality; student experience and support; and sector resilience. Equality of opportunity was “woven into everything we do”. Peck chose four phrases to capture the approach:

  • “Ambitious for all students from all backgrounds”
  • “Collaborative in pursuit of our priorities and in our stewardship of the sector”
  • “Vigilant about safeguarding public money and student fees”
  • “Vocal that higher education is a force for good, for individuals, communities and the country”

The OfS announced on 30 March that Ruth Hannant and Polly Payne had been appointed as the new CEO of the OfS, job-sharing as they did as Director-General at the Department of Culture, Media and Sport, after previously being DCMS interim Permanent Secretary during 2023. They also job-shared as Director of Higher Education in the DfE from 2014-2017. Josh Fleming, current director of strategy and delivery at the OfS, will be interim chief executive until Hannant and Payne take up their new role on 15 June 2026. How will they make the new strategy work? What will be at the top of their agenda?

Their first problem is that the Office for Students, because of its name and remit, has a Strategy which can only deal obliquely with the most pressing and interconnected problems facing English HE: finding a way to finance HE sustainably (and sorting out the student loans row) and finding a way to cope with the many failures of the statutory HE market. Issues of academic freedom, freedom of speech and the once-ubiquitous culture wars may now be receding in prominence; at least, that will be the hope on all sides. Financing and markets will be the primary concern of the DfE’s promised review of HE finance, but there is no reason to suppose it will appear soon. Chancellor Rachel Reeves recently declared that the student loans issue was not top of her agenda. This gives scope for the new brooms at the OfS to rearrange the HE furniture in ways which may guide the DfE development of workable proposals.

The NAO issued a damning report on 7 December 2017 on The higher education market. It said that, if HE had been a financial product, they would be complaining of mis-selling by universities. But the NAO’s deeper criticism was of the idea that HE could be treated as a market at all, with the report listing all the ways that the market and its regulation fell short of what was necessary and desirable. The new chief executive(s) at OfS were in charge of HE at the DfE from 2014-2017. They must have been closely involved with the NAO investigation, but even more closely involved in the passage of the Higher Education Act 2017, which created a statutory HE market and the Office for Students.

Markets, student tuition fees and higher education financing have been inextricably linked since 2017. The Labour government in 2006 raised undergraduate full-time fees from £1000pa to £3000pa and created income-contingent loans as a means of repayment. In the 2010 general election a new Coalition government faced the perennial question of how to finance mass HE. Deputy Prime Minister Nick Clegg had made a very public pre-election ‘pledge’ to abolish undergraduate fees, but instead  the government tripled them, to £9000 pa from 2012. Deciding exactly how to make it work proved to be rather tricky. David Willetts, the universities minister in BIS, repeatedly promised an HE Bill setting out new policy, but it took years to arrive, prompting scepticism if not ridicule. Willetts declared that markets would “drive up quality” in HE. The hare had been running on ‘low quality courses’ even before Labour HE minister Margaret Hodge complained about ‘Mickey Mouse courses’ in universities (so the hare was really Bugs Bunny). Willetts believed that HE institutions would choose to set fees in a range from £6000-9000, reflecting their supposed ‘competitiveness’ in the market. Every university, of course, understood that price signals quality and accordingly set fees at £9000. From that moment the HE market – as imagined by statute – was dead.

Nevertheless the 2017 Higher Education and Research Act institutionalised the economic idea that markets and regulation are the answer to effective performance of the whole HE sector, even though Willetts’ Special Adviser Nick Hillman always knew that “Straight comparisons between regular markets and educational markets don’t actually make much sense.”, as he said in response to the 2017 NAO report.  By 2017 Willetts had been replaced by Jo Johnson (later ennobled by his brother Boris), who doubled down on the script about “low-quality courses”, as did most of his many successors, with the honourable exception of Chris Skidmore.

Behan’s review said:

“I am of the view that higher education is not a ‘pure’ or ‘perfect’ market, but rather a ‘quasi-market’. Some of the reasons for this include:

• There is a complex relationship of choice between the student and the provider whereby students’ choices are dictated not solely by their preferences, but also by their expectations at being accepted/rejected by the provider.

• Government not only sets the price of a domestic undergraduate course that a provider can charge, but also heavily funds the sector through student loans.

• There are numerous and significant cross-subsidies between cohorts of students. 

• There are significant asymmetries of power and information between providers and students. Taking on a student loan and pursuing higher education is likely to be the biggest contract new undergraduate students will ever have entered.” 

With that list of deficiencies, calling HE a ‘quasi-market’ was charitable, even if – at a stretch – it reflected academic thinking. HE providers responded to the market in various ways, many eventually frowned on or outlawed. After 2010 new ‘challenger institutions’ expanded sub-degree business courses in London, exploiting the income from students able to gain £9000 tuition fee loans – money paid direct to institutions. They grew so much that in 2013 23 private colleges were suspended from student loans eligibility by the DfE. Government didn’t want that kind of response to market demand.

As universities increasingly suffered from rising cost but frozen tuition fees, many saw international student recruitment as the answer. Increasing numbers of universities outside London decided to open a London campus to exploit the overseas market, but were and still are criticised for it. The sector’s broad reliance on optimistic projections for international recruitment was deemed unsustainable and too risky. Government didn’t want that kind of response to market demand – but it decided to cash in anyway, with a levy on institutions for every international student recruited. Meanwhile some institutions thought they could still tap into new demand by expanding franchise relationships with partner colleges, but some of the largest of these have also now been discouraged or discredited. Government didn’t want that kind of response to market demand either.

Despite the downturn in franchising some people made a lot of money. Mike Ratcliffe noted on his MoreMeansBetter blog that the for-profit London School of Commerce had been “… incredibly profitable, with over £100 million paid in dividends to the family that own it.” He asked “Surely we can’t allow companies to stop being providers but to hang onto tens of millions in cash or other assets if either there have been a majority of non-genuine students or only a fraction of genuine students have completed their courses?”. It seems there were Mickey Mouse students as well as Mickey Mouse courses. Elsewhere, responsible HE institutions faced increasing financial problems as their real income fell precipitously. That line in the OfS strategy about resilience has a lot of work to do, and the OfS should look again at Behan’s recommendation “That the OfS board reviews its risk appetite framework and approach with a view to becoming more proactive in anticipating, identifying, and responding rapidly to address emerging risk.” After all, the new Strategy says; “We intervene where we have concerns that public money is not being used as intended …”

Students have repeatedly pronounced themselves largely satisfied with their course experiences in successive National Student Surveys, but this did little to quell the politicians’ and media obsession with course quality. The 2017 Act envisaged a Designated Quality Body to work with the OfS, the QAA was accordingly designated, but the OfS set increasingly restrictive conditions which the QAA ultimately deemed incompatible with its international role and credibility. The House of Lords Industry and Regulators Committee

“… expressed concern about the circumstances surrounding the QAA’s de-designation … The QAA … “blamed” this suspension on the “OfS’ regulatory approach”. The committee said it was “concerning” that England’s regulatory framework had “shifted away from European standards” because it had the potential to damage the international reputation of England’s HE sector. … it was unclear if the OfS had the capability to take on the role previously carried out by the QAA. It called on the regulator to align its framework with international standards and to appoint the QAA or another arms-length body to perform the quality assurance role.”

The OfS instead formed an apparently permanent intention to conduct quality investigations itself, defying the explicit intention of the 2017 Act. OfS now has many Senior Leaders with a finger in the pie, presumably including those for Interventions, Monitoring, Enforcement, Student Outcomes, and Consumer Protection, but most of the others might have grounds to join in.

The quality investigations by OfS generally reach conclusions much too late to benefit the students whose experience prompted the investigations. The OfS strategy says: “We will help drive improvement across the sector, recognising that while much provision is already excellent, there is room to improve further. And we will hold institutions to account when they fall short.” So far the OfS investigations have focused on newer providers or universities near the bottom of the pecking order. The OfS has not, for example, investigated the very public problems with veterinary courses at Cambridge. In those as in many others it seems that institutional self-regulation can deliver better and quicker results.

Those with long memories will recall the opposition of the pre-1992 universities to any incursions by Her Majesty’s Inspectorate, as it then was, which had the run of post-1992s. But HMI were able exactly to be “proactive in anticipating, identifying, and responding rapidly to address emerging risk.” Perhaps the OfS should not only reappoint a DQB but also look around for an independent and respected cadre of, say, His Majesty’s Inspectors. Behan said: ”The OfS should develop its regulatory model to create a virtuous policy circle with the objective of driving improvements in the quality of the higher education sector, and thus acting in the interests of students. The OfS and higher education providers should regard quality improvement as their common shared goal.”

English HE continues to be highly respected and in demand worldwide, but time is running out. The ‘narrow reputational range’ acclaimed by David Watson is jeopardised by misbehaviour by some new providers, misjudgments by a handful of institutions in desperate financial straits, and cutbacks  everywhere. Nevertheless, the National Student Survey shows that students continue to be broadly satisfied, while identifying particular problems such as feedback which institutions have worked hard to address. Some in the media persist in asking “Is higher education worth it?” by highlighting graduate debt, but student demand remains doggedly high. This suggests that you really can’t buck the market, and what we need is the right kind of review to deal with the student loans row and make higher education finances sustainable. In this the OfS has a huge role to play: the new OfS Chief Executives have to transform how the OfS works, to live up to this optimistic but necessary condition for success: “We will deliver our work in collaboration with students and the institutions we regulate. Accepting there will be issues on which we disagree, we will cultivate relationships based on mutual respect, confidence and trust. We will work with student bodies, sector agencies and other partners that share responsibility for stewardship of this important sector to support a cohesive regulatory environment and foster a thriving ecosystem equipped to create opportunity and drive growth. We will champion the many benefits of higher education for society, culture and the economy and regulate in a way that enables universities and colleges to drive growth, create opportunity, champion free expression and support a flourishing society.”

Rob Cuthbert is Emeritus Professor of Higher Education Management, University of the West of England and Joint Managing Partner,Practical Academics rob.cuthbert@btinternet.com. X/Twitter @RobCuthbert. Bluesky @robcuthbert22.bsky.social.


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End of the road for higher education student loans?

by Gavin Moodie

Although we’ve come to the end of the road

Still, I can’t let go

As an expat Aussie I have been sad to see the unremitting erosion of public support for what is arguably Australia’s most innovative modern higher education export, income contingent student loans. While Australian student financing may not yet be as ‘unsustainable’ as England’s, the former Labor leader and current vice chancellor of the University of Canberra Bill Shorten argued that Australian universities are in a ‘political cul-de-sac’, with ‘a tired funding model’.

This blog seeks to understand how Australia’s higher education finance reached its Neighbourly cul-de-sac Ramsay Street, why it is perhaps not yet quite unsustainable, and the difficult choices confronting policy makers over the next 5 to 10 years in Australia, England, and elsewhere in the UK.

Introduction and early years: 1989 – 1996

The national Australian Labor Government introduced substantial tuition fees accompanied by income contingent loans in 1989 on the recommendation of the Committee on Higher Education Funding chaired by the astute late Neville Wran, former Labor premier of Australia’s biggest state, New South Wales. A consultant to the committee was Bruce Chapman, an advocate for income contingent loans for higher education and a range of other public policy problems such as farmers’ drought relief and penalties for insider trading and other white collar crimes.

The Wran committee recommended that total student charges should be about 20% of estimated costs in 8 categories of disciplines, which it aggregated into 3 contribution levels. While the Government agreed that student contributions should be about of 20% of system costs, it introduced a single price that avoided the complexities of students paying different rates for different subjects, and the possibility that higher charges may discourage students from enrolling in higher cost courses.

The Wran Committee also recommended an employers’ training levy, which was similar to the UK’s apprenticeship levy except that it could be spent on any form of employee training. Australia’s training guarantee was reasonably successful, but it was vociferously opposed by at least some employers and the Government discontinued it in 1994 after only 4 years of operation. This is consistent with employers’ long term substantial cuts to their induction and development of their own employees in Australia and Canada, as well as the UK.

Government charges by cost and expected income: 1997 – 2004

In 1997 the newly elected conservative Australian Government cut funding to higher education and increased student charges to about 40% of the presumed cost of higher education. The Government established 3 bands of student charges based on a combination of the presumed cost of subjects and graduates’ expected earnings.

In the lowest band were humanities and social sciences that were funded at a lower rate and whose graduates had lower earnings. Also in band 1 were languages and the creative arts. These were higher-cost disciplines, but most graduates’ earnings were lower than average.

In band 3 were disciplines with high costs and high graduates’ earnings: dentistry, medicine, and veterinary science. Also in band 3 was law: it was a low-cost discipline but graduates had high earnings. Band 3 charges were 1.7 times band 1 charges. All other disciplines were in band 2 which were charged 1.4 more than band 1: health, science, and engineering because they were high cost; and business because graduates had high incomes.

University fees by cost, expected income, and Government priorities: 2005 – 2020

From 2005 the Conservative Government changed student contributions from Government charges to institutions’ fees, and established four maximum fee amounts. It introduced a new fee band for the expensive STEM disciplines and for business which is funded at the base rate but has high graduate incomes, though lower than law which was still in the top band.

The Government also published government contribution amounts in 12 bands. The combination of maximum fee amounts and government contribution amounts gave total financing in eight bands. Agriculture, dentistry and medicine were in the highest financing band, which was 2.6 times the lowest band for business and humanities.

The Government also sought to influence students’ behaviour by setting low maximum fee amounts and to influence institutions’ behaviour by setting higher government contribution amounts for the ‘national priority’ disciplines of education and nursing. Institutions’ total revenue for education was 1.2 times the base rate and 1.5 times for nursing.

Job-ready graduates: 2021 –

In 2021 the then Conservative government further cut higher education funding and increased maximum student fees to be a weighted average of about half of total teaching financing, although this differs markedly by discipline, as we shall see. The Government also extended its attempts to influence both students and institutions’ behaviour with financial incentives intended to create ‘job-ready graduates’.

The Government set the lowest student fees for agriculture, education, English, foreign languages, mathematics and statistics, and nursing. It added humanities and most social sciences to business and law in the top fee rate of 3.7 times the base rate. Humanities and social sciences students now pay annual fees 28% higher than dentistry and medicine students, whose maximum fees are 2.9 the base rate.

The Government’s contribution is lowest for business, humanities and social sciences, and law; it is highest for agriculture, dentistry, medicine, and veterinary science, which is 24.6 times the base rate.

The combination of maximum student fees and Government contributions generates total financing for dentistry, medicine, and veterinary science 2.5 times the base rate for business, humanities and social sciences, and law. Total financing for engineering and science is 1.6 times the base rate.

Students pay markedly different proportions of the total financing for their courses. Business, humanities and social sciences, and law students pay 93% of the total financing of their course; engineering, science and medicine pay around 30% of their course’s financing; and education, languages, mathematics, and nursing students pay around 20% of their course’s financing.

These differences are widely considered unfair. It is also doubtful that they have changed students’ and institutions’ behaviour as they were designed to. Humanities and social sciences enrolments have fallen since the introduction of job-ready graduates, but that has continued a long established trend likely influenced by other factors such as prospective students’ interests and perceptions of employment prospects.

Enrolments in English and other languages have fallen even more than the humanities and social sciences, despite the government cutting their fees by 40%. An econometric study concluded ‘Overall, we estimate that the studied policy change led 1.52% of students to demand courses they wouldn’t have demanded under the old fee structure’.

This is entirely consistent with economic theory and Australia’s experience with its previous changes to students’ fees. The whole point of income-contingent loans is to insulate students from the up-front price of education, and that is just what they do, even when humanities’ students fees were increased by 113% and creative arts students’ fees were increased by 64%.

The Australian Labor government was elected in 2022 on a platform that included reversing job-ready graduates, and it was re-elected in 2025 with the same commitment. Yet Labor has kept job-ready graduates for longer than the previous conservative government, to the intense annoyance of many students and staff.

Debts, interest rates, return on investment

The size of Australian Government debt was a concern in the early years of income contingent loans when enrolments and thus accumulated unpaid debt was growing strongly and there were relatively few graduates yet in well-paying jobs repaying their debt. It is not such a big concern now: outstanding student debt is equivalent to 8% of all Australian government debt, which is around 50% of gross domestic product (in contrast to the UK where government debt is 101% of GDP).

The proportion of student debt not expected to be repaid increased from 16% to 25% from 2010 to 2016. However, this is sensitive to repayment conditions, and for 2024 the proportion of new debt not expected to be repaid was 12%.

The size of students’ debts has been concerning. Graduates’ average debt is currently about 30% of average annual earnings and takes just over 10 years to repay. But this varies greatly by individual circumstances. We have seen that the Government has set the maximum fee for arts subjects in the top band, meaning that arts graduates are likely to incur a total debt of half average annual earnings. Arts graduates have lower incomes than other graduates, and many are women who work part time at times during their career. Many are likely to take up to 40 years to repay their debt, if at all.

Graduates’ expected earnings was one of the Australian Government’s criteria for setting maximum student fees, and that remains the only explicitly progressive part of Australia’s student loans. The Australian Government charges interest on student debts, but only to preserve the debts’ real value. Australia does not charge higher income earners higher interest on their student debts, although they may have to repay their debt more quickly than lower paid graduates, as higher paid graduates are required to repay higher amounts each year than lower paid graduates.

Nevertheless, as in England, during a period of high inflation there has been controversy over which of the several measures of inflation to use, and when indexation should be assessed. Also as in England, there have been reports of new graduates’ annual repayments not even covering annual interest charges so their debt continues to increase. Accordingly the Labor Government promised to make repayment conditions more favourable to students, and to cut graduates’ debts once by 20%. Cutting graduates’ debt has been popular, despite being arbitrary and regressive, and arguably contributed to Labor’s re-election in a landslide in 2025.

Despite Australian students’ concerns about fees, debts, and interest rates, graduates have high economic returns, although these vary by gender and discipline.

Substantial differences from England

Further substantial differences between Australian and English higher education have important implications for student fees and loans in each country. The Australian Government retains student number controls. It removed number controls in 2012, some three years before most student number controls were removed for England in 2015/16. Australia introduced its so-called ‘demand driven system’ after a period of pent up demand for higher education, which saw very big increases in enrolments as enrolment caps were removed.

At the time the Australian Government provided about 60% of the financing for each student place, and of course it provided all of the up-front funds for student loans, so the demand driven system substantially increased Government spending on higher education. This was too much for the Australian Government, which ended the demand driven system and reintroduced number controls in 2017. One of the outcomes is that the Australian Government may limit increased expenditure on higher education by limiting its expansion, and not just by worsening students’ loan conditions.

Most Australian higher education students live with their parents. Nearly 80% of Australian higher education students commute from home, even to elite universities. While the proportion of UK 18-year-olds commuting from home is increasing, it is still only 30%. Living in purpose built student housing is a very different experience from commuting from home, and is probably one of the reasons for the UK’s unusually and commendably high student retention and completion rates. Commuting rates also has implications for institutions’ range of programs, which need to be reasonably comprehensive to meet the needs of local students. But a great advantage of commuting is that it greatly reduces students’ living costs, and thus their need for income support.

Universities’ social licence

An important limitation of Australian universities’ financing is their erosion of their social licence. A longstanding concern has been with Australian vice chancellors’ very high pay, amongst the highest in the world for public universities. The average Australian vice chancellor’s pay is almost double the Prime Minister’s. More recently there has been concern at the number of highly paid executives employed by universities: ‘More than 300 Australian university executives make more money than state premiers’. Closely related are complaints at universities’ changed governance, known broadly as the imposition of managerialism.

The very high pay and conditions of Australian universities’ senior executives is in almost feudal contrast to the very high number of academics they engage on precarious employment conditions. Australian universities’ staffing data collection and reporting are very weak on this issue, but the union estimates that about 45% of public Australian university employees are on casual contracts. This is related to widespread underpayment of casual staff.

As in the UK, Canada, and elsewhere, Australian universities have relieved their public funding pressures by recruiting high numbers of international students. Some 35% of Australia’s higher education students are international, 80% of whom live in Australia on a temporary entry permit. There are the familiar concerns that Australian universities lower standards to recruit and graduate large numbers of international students who crowd locals out of accommodation, all to fund senior executives’ lavish pay. Accordingly, the Australian Government is cutting the number of international students. Regardless of the merits of these arguments, there is little public sympathy for increasing universities’ funding from their current three main sources: government grants, domestic student fees, and international student fees.

Difficult choices for policy makers

The late great sociologist of higher education Martin Trow observed that:

“No society, no matter how rich, can afford a system of higher education for 20 or 30 percent of the age grade at the cost levels of the elite higher education that it formerly provided for 5 percent of the population.”

That observation applies equally as we transition to universal participation of more than 50% in post-school education, from mass participation of from 16% to 50% which our countries financed by income contingent loans. That is to say, the current pressures on higher education financing will not be relieved, as some have suggested, just by cutting the number of senior university administrators and their pay, allocating more funds to higher education from increasing taxes on the rich or on companies, or by increasing student fees.

I suggest that there are two main options. The most frequently suggested, especially in England, is to retreat from universal and even mass participation in higher education by cutting greatly the number of higher education students. A second commonly suggested option is to cut radically the cost of providing higher education.

Advocates of each option need to address two consequential issues. To what extent would the much smaller or cheaper system retain stratified elite, mass and universal parts, as Trow envisaged? Secondly, how would access to the elite, mass and universal parts of the system be allocated? I would answer these questions by considering the relative importance I would give to egalitarianism, and to expensive forms of higher education such as research intensity.

Gavin Moodie is Honorary Research Fellow, University of Oxford Department of Education. He worked at 6 Australian universities over 38 years. @GavinMoodie. https://www.researchgate.net/profile/Gavin-Moodie

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Weekend read: What you need to know to make sense of the row about student loans

by Rob Cuthbert

In January and February the mainstream media were full of stories about the unfairness of student loans and the burdens on graduates facing huge debts and effective tax rates of more than 50%. They cut through in a way that the long-running stories about universities’ financial problems had not, and even dominated Parliamentary questions to the Prime Minister (PMQs) on 25 February 2026. But student loan repayments and universities’ financial problems are two sides of the same coin – how to finance mass higher education. The political debate about student loans is a case study in how almost everyone who didn’t know enough got almost everything wrong at first, until more realism gradually emerged.

Under Labour governments from 1997 there was a heated but, by comparison, measured debate about the costs of higher education, and who should pay for it. As HE participation rates soared from 10% towards 40-50% the international consensus was that it was reasonable for students or graduates to bear some of the cost. Higher education benefited society but also individuals who enjoyed a ‘graduate premium’ of higher lifelong earnings. Nevertheless, when the £1000 undergraduate tuition fee was raised to £3000 in 2003 it nearly brought down the Labour government. That probably represented about half of the total cost at that time. Students were of course vehemently opposed to fees, but for some in HE it felt about right to share the costs equally between students and general taxation.

Demand for HE continued to rise but total costs were controlled because government still determined total student numbers. Then came the Coalition government of 2011 with its determination to make higher education a market. The Liberal Democrats reversed their pre-election pledge to abolish student fees, instead agreeing as part of the coalition to triple fees to £9000. And government abolished its control on total student numbers. Universities Minister David Willetts claimed that student choice would “drive up quality”, but he, almost alone, expected a spectrum of fees from £6000-9000 to emerge. Everyone else realised that price would be the loudest signal of quality, and almost every university went for £9000.

The £9000 fee probably covered most of the costs of undergraduate tuition, although some grant funding remained for specialist high-cost courses, and Oxbridge complained that for them £13000 was the break-even figure. £9000 became the highest nationwide tuition fee in the world, and England still enjoys that dubious world-leading position. To keep higher education accessible to all, in theory at least, new arrangements were needed to make HE affordable at the point of delivery, with the cost being partly paid by students after graduation.

Under the new student loan system graduates would start to make repayments once their salary was above a specified threshold. Their debt would increase at a specified rate additional to the Retail Prices Index (RPI). The total repayments each month were capped, so most graduates would never repay their total debt, but any remaining debt was wiped out after 30 years. The explicit intention was that both fees and salary thresholds would rise with inflation.

This means that student loans are not like commercial loans. The system was never designed to get all the money back. It was designed to be progressive, like income tax, so that among graduates “those with the broadest shoulders”, as the Prime Minister likes to say, should bear a greater share of the repayment burden. In 2012 it was intended that the system should deliver about 72% of the total cost in repayments. The unmet cost (government subsidy) was known as the Resource Accounting and Budgeting (RAB) charge.

Almost immediately the RAB charge began to rise above its planned level, and the government soon found it necessary to restrict enrolments in many new ‘challenger’ institutions, which were providing courses of debatable quality, mostly in business and management, mostly in London. Far from driving up quality, student choice seemed to be driving it down. But these problems paled into insignificance as the economy continued on its path of sluggish low growth. To make things worse, government had to abandon a “fiscal illusion” in government accounting, as the Office for National Statistics forced a justified change which put more costs onto current balance sheets rather than allowing them to be deferred for many years. For a while, the fact that interest rates were near zero concealed the punitive possibilities of debt levels and loan repayments, but then government – facing budgetary pressure – decided to freeze thresholds and change repayment terms. (Jim Dickinson’s Wonkhe blog on 2 February 2026 was a detailed explanation of how we got to where we are). Interest rates rose to 3-4% but government persisted with the use of RPI + 3% as the loan interest rate, even though for almost every other purpose it used the lower figure of CPI (consumer prices index). The current outcry on loans became inevitable; indeed, it had even been predicted by Nick Hillman, one of the architects of the loan system, who wrote in a 2014 Guardian article: “… come with me to the election of 2030. Those who began university when fees went up to £9,000 in 2012 will be in their mid-thirties by then. That is the average age of a first-time homebuyer and the typical age for female graduates to have their first child. By then, there will be millions of voters who owe large sums to the Student Loans Company but who need money for nappies and toys, not to mention childcare and mortgages. So, however reasonable student loans look on paper now, the graduates of tomorrow could end up a powerful electoral force.”

Meanwhile, some of the graduates of yesterday were quick to ride the coat-tails of the loans debate and cry “more means worse”, even as all the more successful world economies continue in the opposite direction. Often mentioned but never identified, ‘Mickey Mouse courses’ also took a supposed share of the blame, despite expert commentators like David Kernohan of Wonkhe pointing out the extreme difficulty of identifying them in ways that government or the regulator could operationalise. The Labour government adjusted its stance on exactly what the country needs with some vaguely quantified assertions about skills in its White Paper, and former Skills Minister Robert Halfon popped up on Times Radio on 14 February 2026 to argue, as he always did, for more apprenticeships. Acknowledging employers’ decades-long unwillingness to pay for training, he suggested they should be ‘incentivised’ with £1billion of public money. But even with public funding for employers’ costs, vocational training apprenticeships will mostly remain a great idea ‘for other people’s children’, as Alison Wolf once witheringly put it. Conservative leader Kemi Badenoch got the kind of publicity she probably hoped for as she proposed in an ITV interview to help Plan 2 graduates by reducing interest rates, even as personal finance guru Martin Lewis pointed out this would only help the richest graduates, and the way to help people was by unfreezing the salary thresholds at which the higher repayments kicked in. He apologised for gatecrashing the interview, but he was quite right, and understandably frustrated. Badenoch said this could be afforded by removing 100,000 students on ‘low quality’ courses and using the consequent savings. Shadow Education Secretary Laura Trott, under pressure from the BBC’s Laura Kuenssberg, waxed lyrical about LEO data on graduate salaries and suggested that Creative Arts courses were low quality and should feature in the 100,000 reduction. She refused to say that university closures could be ruled out, but there was, of course, no coherent plan for the supposed reductions and their effects on local economies, especially in regions where salaries are lower.

Conservative leader Kemi Badenoch was unabashed and led with the topic at PMQs on 25 February 2026 and Jim Dickinson blogged the same day for Wonkhe, pointing out the problems with most of the interventions from backbenchers of all parties, and noting that things will soon get worse with barely-noticed measures affecting postgraduate student support in the previous budget. Prime Minister Keir Starmer committed to a review of the loans problem, but in Times Higher Education on 27 February 2026 Helen Packer had experts queueing up to point out that: “Quick tweaks to the terms of English student loans are unlikely to satisfy disgruntled graduates and may conflict with wider plans to reform post-16 education.”

The major problems with HE finance have still not yet had equivalent mainstream recognition. In recent years the tuition fee income of universities fell from £12billion to £10billion simply through inflation and the freezing of tuition fees. 40 % of universities are reporting deficits and the majority are making staff redundant. Government has unfrozen tuition fees but then hit universities with a levy on international student fees which more than wiped out the extra income from fee increases. Visa restrictions have also hit international student enrolment and severely reduced some universities’ opportunity to compensate for the losses on home students. In 2011 Universities UK hoped that accepting the £9000 fee would rescue the HE sector from the coming austerity, but the rescue was short-lived, as fees failed to rise with inflation. Now another government faces the challenge of finding a long-term sustainable solution to the problem of funding higher education. It seems far from the top of the agenda for the embattled Starmer administration, but the media outrage over student loans might push it higher.

Successive cohorts of students have experienced various Plans for repayment. The main problem is Plan 2, affecting students who started their courses from 2012-2013 to 2022-2023. The numbers rapidly become hugely confusing, and some commentators fail to recognise even such basic issues as the need to ensure that all costs and prices are on the same base. But almost all agree that Plan 2 is unfair and should be changed.

American students have more orthodox commercial loans to pay for their tuition and in the USA the growing scale of student debt also became a major political problem. However Americans are much more accustomed to the high costs of HE: the culture encourages parents to save from birth to pay for tuition, and the taxation system rewards both savings and loan repayments. In addition, a ‘borrower defense’ program, created in 1994, allows students to get loans cancelled if they are misled by their colleges about their future employment prospects. The Obama administration began to penalise institutions, mostly for-profit institutions, which did not adequately prepare students for gainful employment which would enable them to repay their loans. Student debt rose to about $1.6trillion; by January 2025 President Biden had forgiven $183.6billion of debt, before President Trump set out to turn the clock back. In the USA the ‘graduate premium’, the advantage for graduates who earn on average higher pay than non-graduates, has continued to rise despite continuing HE expansion, whereas in the UK, almost uniquely, the premium has declined. This suggests, as Jim Dickinson has argued on Wonkhe, that the problem is one of supply rather than demand – employers will not or cannot pay more in the sluggish UK economy. Graeme Atherton (West London) pointed out in Times Higher Education on 26 February 2026 that despite Trump’s changes the US system is still more progressive than Plan 2. John Burn-Murdoch had a telling chart in his Financial Times article on 16 February 2026, ‘Is higher education still worth it is the wrong question’, showing that in the UK the graduate premium had decreased from 1997-2022 as HE numbers increased, contrary to the trends in the USA, Canada, Netherlands, France and Spain.

The problem of financing UK HE remains unsolved and the clamour of vested interests has become almost deafening. The main architect of the fees regime, David Willetts, who wrote a book about intergenerational unfairness, tried hard on Conservative Home to blame someone else while defending progressive expansion rather than reduction in HE student numbers. Alternative solutions abound, but have not yet penetrated the mainstream media debate about HE policy. Nick Barr (LSE), a longstanding expert commentator on HE finance, wrote in July 2023 about ‘A fairer way to finance tertiary education’.  There was detailed and expert analysis in Financial modelling by London Economics in March 2024. In September 2024 Tim Leunig, a former Chief Analyst at the Department for Education wrote a HEPI blog on ‘Undergraduate fees revisited’ alongside his HEPI debate paper, which promised that “Highest earners would pay the most, as is appropriate in a social insurance scheme”. The Higher Education Policy Institute (HEPI) in April 2025 published a report asking ‘How should undergraduate degrees be funded? A collection of essays’. Mike Larkin (emeritus, Queen’s University Belfast) posted on his Total Equality for Students blog on 13 January 2025 a detailed and plausible set of proposals for reform of the present system, summarising many of the attempts to initiate debate.

Yet it is only now that the financing of HE might creep into the mainstream debate, entering through the back door of unfair student loan repayments and threatening to deliver results that may help some graduates but damage higher education even more. Nick Hillman has argued persuasively that of the three main proposed solutions to the student loans furore, one is unwise, one unaffordable, one unpalatable, and all are unfair. Nevertheless, something must be done. Former Director of Fair Access John Blake, interviewed by Nicola Woolcock in The Times on 4 February 2026, said;“…  a system that feels so suffocating to so many is fundamentally broken, no matter how many graphs about average graduate salaries we make…. I think we may need to move to a formal graduate tax. There are no popular options here, it’s not just people saying I’m in debt and it’s going up every year. Even if the system computes, it has a sense of being ridiculous when you’re in it. This system has run out of road.” Blake is Director of the new think tank The Post-18 Project. ‘The walls are closing in on our doomed student loans system’, as Jim Dickinson wrote for Wonkhe on 11 February 2026.

When it started, the student loan system was perhaps financially logical, if you accepted its progressive premise of redistribution. Repeated government tinkering in the face of extreme budgetary pressure, especially the freezing of thresholds, made it successively more and more unfair, and has now exposed the underlying psychological and emotional illogicality. The oppressive psychological impact of the loan system on graduates facing a difficult job market makes it unsustainable. So what is to be done?

If  higher education is free, poor people who don’t go to university pay for the education of rich people who do. If students pay all the cost of their higher education, as is now being widely proposed, then everyone suffers because economic growth and incentives are diminished. We need to find a halfway house which shares the cost of higher education between graduates and the wider society which benefits from HE. The immediate challenge is to find a sustainable way to preserve the progressive and redistributive nature of student finance, which is not experienced by successive cohorts of graduates as oppressive and demotivating.

The Labour government has accepted the need for a comprehensive review of how HE should be financed, but it remains a work in progress, promised but not near the top of the agenda. Short-term budget fixes like the international students’ fees levy suggest that there is limited sympathy in government for the financial plight of many universities. Previous governments of various stripes have resorted to bipartisan national inquiries (Dearing, Browne) which straddle general elections to reduce their electoral risk, and such a device cannot be ruled out this time. The danger is that, under the short-term pressure of finding a fix for the student loans problem, government will lurch into a ‘solution’ with possibly massive collateral damage to the whole HE sector, and to local economies. Government is desperate not to increase its spending and borrowing any further, and in any case has other higher priorities than HE. But a solution to student loan repayments which requires HE to contain the cost of improving the system may force the closure of a significant number of universities, with long-term and possibly irreparable damage to their local communities and economies – probably mostly in the Midlands and the North, not London and the South East. Brian Bell (King’s College London) has just been appointed principal adviser to both the PM and the Chancellor on macroeconomics and fiscal policy. He spoke at an LSE event in February about migration, where he said, discouragingly: “I’m sure we’d all like for there to be a complete rethinking of university financing, and perhaps even the university model across the UK – perhaps we shouldn’t all be teaching three-year degrees in X and Y – perhaps we should have different universities doing different things. But I see no realistic prospect of that happening.” These are hard questions with no easy answers, but too many people are getting too many things wrong about both the costs and the benefits of higher education. Let us at least start by understanding what the problem is.

Rob Cuthbert is editor of SRHE News and the SRHE Blog, Emeritus Professor of Higher Education Management, University of the West of England and Joint Managing Partner, Practical Academics. Email rob.cuthbert@uwe.ac.uk. Twitter/X @RobCuthbert. Bluesky @robcuthbert22.bsky.social.


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Private international foundation courses, and what they say about university leadership

by Morten Hansen

My research on the history of private international pathway providers and their public alternatives shows how some universities have stopped believing in themselves. Reversing this trend requires investment in their capabilities and leadership.

The idea that universities have stopped believing in themselves as institutions that can take on the challenges of the day and find solutions that are better than those developed by private rivals echoes a point recently revived by Mariana Mazzucato. Mazzucato explains how private firms often are portrayed like lions. Bold animals that make things happen. The public sector and third-sector organisations, on the contrary, are too often seen as gerbils. Timid animals that are no good at developing new and innovative solutions.

Skilled salesmen convinced some universities that private companies are better than universities at teaching and recruiting for university preparatory programmes. The inbuilt premise of this pitch is that universities are gerbils and private providers are lions. One university staff member explained what it felt like meeting such salesmen:

“The thing that sticks most in my mind is the dress. And how these people sat differently, looked differently, spoke differently, and we felt parochial. We felt like a bunch of country bumpkins against some big suits.” (University staff)

The lion-gerbil pitch worked in institutions across England because universities were stifled by three interlocking practices of inaction: outsourcing capability development; taking ambiguous stands on international tuition fees; and refusing to cooperate with other universities.

Outsourcing capability

Universities are increasingly outsourcing core aspects of their operations, such as recruiting international students. While university leadership is often characterised as conservative, my research suggest that this trope misses something critical about contemporary university leadership in English higher education. The problem with the term ‘conservative’ is that it implies that leadership is risk-averse, and comfortable projecting past power structures, practices and norms into the future. This does not correspond to historical developments and practices in the sector for international pathways.

The University of Exeter, for example, submitted incorporation documents for their limited liability partnership with INTO University Partnerships only six years after the Limited Liability Partnerships Act 2000 was passed, which marked the first time in England’s history that this legal setup was possible. They took a big leap of faith in the private sector’s ability to recruit students for them, and after doing so invested time and resources helping INTO to further develop its capability. They even invited them onto their campuses. It is hard to overstate how much these actions diverged from historical practice and thus ‘conservative’ leadership.

What was once a highly unusual thing to do, has over the last two decades thoroughly normalised—to the extent that partnering with pathways now seems unavoidable. One respondent from the private sector explained this change in the following way:

“In 2006, ‘07, ‘08, ‘09, ‘10, the pathway providers were, if you like, the unwelcome tenants in the stately home of the university. We had to be suffered because we did something for them. Now, the relationship has totally moved. It’s almost as if they roll out the red carpet for the pathway providers” (C-suite)

The far more conservative strategy would have been to lean into the university’s core capabilities – teaching and admissions – and scale this up over time. Yet that is precisely what my respondents said ‘conservative’ university leaders were unwilling to do: they did not believe the university could manage overseas recruitment by themselves. As argued by former Warwick VC Nigel Thrift, this timidity is not unique to the recruitment of international students, but also extends to their engagement with government agencies. University management by and large “has done as it has been told. It hasn’t exactly rolled over and played dead, but sometimes it can feel as though it is dangerously close to Stockholm Syndrome” (Thrift, 2025, p3).

Ambiguous stands on international fees have deepened the current crises

There is no law in England that compels universities to charge high international students fees. By setting them as high as possible and rapidly increasing the intake of international students, universities de facto offset and thus obfuscated the havoc that changing funding regimes wreaked on university finances. This has contributed to what Kings’ Vice Chancellor Shitij Kapur calls the ‘triangle of sadness’ between domestic students, universities, and the government.

Had universities chosen to stand in solidarity with their international students by aligning their fees more closely to the fees of home students, then the subsequent crises in funding would have forced universities to either spend less money, or make it clearer to the wider public that more funding was needed, before building up the dependencies and subsequent vulnerabilities to intake fluctuations that are currently on full display. These vulnerabilities were exacerbated by overoptimistic growth plans, and university leadership not always fully understanding the added costs that came with such growth. In an example of this delayed realisation, one Pro-Vice-Chancellor explained to me what it felt like to partner with a private foundation pathway:

“At the time you are signing up for these things, there is euphoria around because they are going to deliver against this business plan, which is showing hundreds of students coming in. International student is very buoyant, you sign up for a 35-year deal. So, everything is rosy. If you then just take a step back and think ‘so what am I exposing the university to?’  …  because in year seven, eight, ten, fifteen whatever, it can all go pear-shaped, and you are left then with the legacy building.” (Pro-Vice-Chancellor)

By seeing fee setting as a practice, that is, something universities do to their own students rather than something that is inflicted by external (market or government) powers, we make visible its ideological nature and implications. The longer history of international fees in Brittan was thus an important site of ideological co-option; it was a critical juncture at which universities could have related in a more solidaric manner towards their students.

Unwillingness to cooperate on increased student acquisition costs

You might, at this stage, be wondering: what was the alternative? The answer is in recognising the structure of the market for what it is: efficiently recruiting and training a large number of international students requires some degree of cooperation between universities. My research, however, suggests that universities have often been unwilling to cooperate because they see each other chiefly as competitors. This competition is highly unequal given the advantage conferred to prestigious universities located in internationally well-known cities.

The irony is that many universities nevertheless end up – perhaps unwittingly – cooperating by partnering with one of the few private companies that offer international foundation programmes. These private providers can only reach economies of scale because they partner with multiple universities at the same time. One executive explains how carrying a portfolio of universities for agents to offer their clients is precisely what gives them a competitive advantage:

“The importance of the pathways to the agents is that they carry a portfolio of universities, and the ambition is that you have some which are very well-ranked and academically quite difficult to get into. And, you try and have a bottom-feeder or two, which is relatively easy to get into academically. The agent is then able to talk to its clients and say, look, I can get offers into these universities. Some of them are at the very top. If you are not good enough there, then you might get one in the middle and I’ve always got my insurance offer for you. […] what the pathways do is that they provide a portfolio that makes that easier.” (Private Executive)

A public consortium with pooled resources and that isn’t shy about strategically coordinating student flows would have functioned just as well, and the Northern Consortium is living proof of this. The consortium in fact inspired Study Group to get into the pathway business themselves. The limited growth of the Consortium, relative to its private rivals, is equally proof of missed chances and wasted opportunities.

Could the gerbil eat the lion?

Private providers can use and have used these practices of inaction to pit universities against each other, over time resulting in lower entry requirements and higher recruitment costs. In this climate, public alternatives such as in-house programmes struggle to survive. Once invited in, pathway companies are also well positioned to expand their business with their partner universities in other ways, deepening their dependence. As one senior executive told me:

“Our aspiration is to say that the heart of what we are is a good partner to universities. They trust us. […] for some of our core partners, we bring in a lot of revenue. And, that then puts us in a really good position to think about the other services that we can add of value.” (Private Executive)

The economic downside of relying on these ‘good’ partners is the expensive and volatile market dynamics that follow. As long as universities are trapped by the notion that they are chiefly competitors best served by outsourcing capabilities to sales-oriented firms and leaving international students to pick up the bill, there is limited hope for any genuine inter-university collaboration and innovation. This limits the public potential for scaling an economically viable and resilient market in the long-run.  As a sector, HE has the know-how, experience, capital, and repute to do this. It’s just about getting on with it!

Morten Hansen is a Lecturer in Digital Economy and Innovation Education at the Department of Digital Humanities, King’s College London.