Since the 1980s, massification, policy shifts, and changing ideas about who benefits from higher education have led to the expansion of national student loan schemes globally. For instance, student loans were introduced in England in 1990 and generalized in 1998. Australia introduced income-contingent student loans in the late 1980s. While federal student loans were introduced in the US in 1958, their number and the amount of individual student loan debt ramped up in the 1990s.
A lot of academic research has analysed this trend, evaluating the effect of student loans on access, retention, success, the student experience, and even graduate outcomes. Yet, this research is based on the choices and experiences of first-generation student borrowers and might not apply to current and future students.
First-generation borrowers enter higher education with parents who have either not been to higher education, or who have a tertiary degree that pre-dates the expansion of student loans. The parents of first-generation borrowers therefore did not take up loans to pay for their higher education and had no associated repayment burden in adulthood. Any cost associated with these parents’ studies will likely have been shouldered by their families or through grants.
Second-generation borrowers are the offspring of first-generation borrowers. Their parents took out student loans to pay for their own higher education. The choices made by second-generation borrowers when it comes to higher education and its funding could significantly differ from first-generation borrowers, because they are impacted by their parents’ own experience with student loans.
Parents and parental experience indeed play an important role in children’s higher education choices and financial decisions. On the one hand, parents can provide financial or in-kind support for higher education. This is most evident in the design of student funding policies which often integrate parental income and financial contributions. In many countries, eligibility for financial aid is means-tested and based on family income (Williams & Usher, 2022). Examples include the US where an Expected Family Contribution is calculated upon assessment of financial need, or Germany where the financial aid system is based on a legal obligation for parents to contribute to their children’s study costs. Indeed, evidence shows that parents do contribute to students’ income. In Europe, family contributions make up nearly half of students’ income (Hauschildt et al, 2018). But the role of parents also extends to decisions about student loans: parents tend to try and shield their children from student debt, helping them financially when possible or encouraging cost-saving behaviour (West et al, 2015).
On the other hand, parents transmit financial values to their children, which might play a role in their higher education decisions. Family financial socialization theory states that children learn their financial attitudes and behaviour from their parents, through direct teaching and via family interactions and relationships (Gudmunson & Danes, 2011). Studies indeed show the intergenerational transmission of social norms and economic preferences (Maccoby, 1992), including attitudes towards general debt (Almenberg et al, 2021). Continuity of financial values over generations has been observed in the specific case of higher education. Parents who received parental financial support for their own studies are more likely to contribute toward their children’s studies (Steelman & Powell, 1991). For some students, negative parental experiences with general debt can lead to extreme student debt aversion (Zerquera et al,2016).
As countries globally rely increasingly on student loans to fund higher education, many more students will become second-generation borrowers. Because their parents had to repay their own student debt, the family’s financial assets may be depleted, potentially leading to reduced levels of parental financial support for higher education. This is likely to be even worse for students whose parents are still repaying their loans. In addition, parental experiences of student debt could influence the advice they give their children with regard to higher education financial decisions. As a result, this new generation of student borrowers will face challenges that their predecessors did not, fuelled by the transmitted experience of student loans from their parents (Figure 1).
Figure 1 – Parental influence on second-generation borrowers
As the share of second-generation borrowers in the student body increases, the need to understand the decision-making process of these students when it comes to (financial) higher education choices is essential. Although the challenges faced by borrowers will emerge at different times and with varying intensity across countries — depending in part on loan repayment formats — we have an opportunity now to be ahead of the curve. By researching this new generation of student borrowers and their parents, we can better assess their financial dilemmas and the support they need, providing further evidence to design future-proof equitable student funding policies.
Ariane de Gayardon is Assistant Professor of Higher Education at the Center for Higher Education Policy Studies (CHEPS) based at the University of Twente in the Netherlands.
Higher education in England is in financial trouble, and maybe more. If former NUS President Wes Streeting were Education Secretary, no doubt he would be proclaiming that, like the National Health Service, ‘higher education is broken’. It may not be, yet, but many think that the higher education funding system, at least, is broken. So, there is talk of (yet another) review; those with long enough memories will feel that we’ve been here before. More than once a review of HE has been conveniently timed to straddle a general election, to ensure that any or all hard decisions fall to the incoming government. That was how, after the Dearing Report, we got student tuition fees in the first place. There was no review straddling the July 2024 general election, perhaps because the last government was too obsessed with culture wars and fighting amongst themselves. Probably not because they thought that overseas student visa restrictions and the Higher Education (Freedom of Speech) Act 2023 were all that was needed to fix HE.
Consequently the new Labour government must deal with HE’s problems, and some of them are too urgent to wait for any kind of review. It is said that the Prime Minister’s former chief of staff Sue Gray had prepared a number of ‘disaster scenarios’ which need contingency plans, one of which involves a large university going out of business. More than half of all England’s universities are facing financial problems which have driven them to declare voluntary or compulsory redundancies; the situation is desperate. In such times we look for guidance where we can; this blog’s headings take inspiration from Yogi Berra, the legendary baseball player and manager, renowned for saying things that are somehow meaningful without making any sense. Another HE review? It’s déjà vu, all over again.
You can observe a lot by watching
Education Secretary Bridget Phillipson told universities in July they should not expect a government bailout, despite many being in financial difficulty, as Sally Weale reported for The Guardian on 22 July 2024. New HE Minister Baroness Smith of Malvern said, in effect, that “We’ll let universities go bust” in a Channel 4 News interview, as reported by Chris Havergal for Times Higher Education on 16 August 2024. However just after the Labour Party Conference The Times reported on 28 September 2024 that the government would index-link tuition fees and restore maintenance grants for the poorest students, so that fees would rise to £10,500 over the next five years. Still some £billions a year less than three years ago, but a welcome sign of change – if it is realised. Keep watching.
Predictions are hard, especially about the future
Sisyphus might have sympathised with HE about previous attempts to solve the HE funding problem. After the Dearing Review and New Labour’s election in 1997 it seemed that there might be a mutually acceptable halfway house, with tuition fees paying first some and then during the Blair/Brown government’s tenure about half of the costs of undergraduate teaching. The boulder was slipping down the mountain in 2010 as the money and faith in the government ran out and the Browne Report was commissioned. The Lib Dems made an election ‘pledge’ to abolish fees but reneged as soon as they were in coalition with the Conservatives: instead fees were trebled to cover most undergraduate costs. The Willetts-led progressive student loan scheme might even have been broadly acceptable, but index-linking of fees stopped after just one year. University finances became increasingly precarious, especially after the government conceded to pressure from the Office for National Statistics and accepted that student loans should appear on the balance sheet this year rather than many years in the future, ending the ‘fiscal illusion’.
At first universities escaped the worst of Chancellor George Osborne’s austerity for public services. Osborne even agreed to take the cap off student numbers, in the interests of market forces ‘driving up quality’, as Willetts, Jo Johnson and too many others wrongly believed they would, leading to the institutionalisation of a wrong-headed pseudo-market in the Higher Education and Research Act 2017 (HERA). The student loan scheme was working in theory but not in practice – too many critics could easily win headlines about ‘students who will never repay’. The boulder might have seemed near the top of the mountain but now it has rolled back down again.
When you come to a fork in the road, take it
Many universities did their best to behave as if they were in a HERA kind of market. They recruited international students in ever-greater numbers, for undergraduate and postgraduate programmes, charging fees which would cross-subsidise both teaching and research. Several universities not based in London opened London campuses, recognising the appeal off the capital for their target overseas market. Some opened campuses overseas. Those less able to attract overseas students looked to ‘sub-contractual arrangements’, previously better known as franchising, to shore up their student recruitment. Each initiative was kicked back. Government restricted visas for the families of students, hitting postgraduate recruitment hard in 2024. This jeopardised the availability of and access to many subjects in large areas of the country, without making any meaningful contribution to reducing immigration. The Office for Students cracked down on sub-contractual arrangements as they took over all regulatory responsibilities for quality and standards. They even tackled the more egregious ‘successes’ of ‘alternative providers’, the new entrants to HE. So what is to be done?
Richard Adams reported for The Guardian on 5 September 2024 that Shitij Kapur, the vice-chancellor of King’s College London, had told the annual UUK conference that HE needed £12500 fees – but would seem completely out of touch if it asked for them. On 30 September 2024 Universities UK issued a punchy report – Opportunity, growth and partnership: a blueprint for change – by a senior and influential group of politicians, vice-chancellors and others. In it Kapur and John Rushforth (Executive Secretary, Committee of University Chairs) said: “UK universities have been remarkably entrepreneurial and successful in the last decade. Despite a fixed and shrinking domestic resource, they have managed to engage internationally and generate the revenues to support research and domestic education of the highest quality. However, that innings has run its course. If universities are forced to play the same game for longer, we jeopardise the sector and its international reputation and success. It is time for universities and government to sit down together and agree a new financial model for the system that works for students, serves all our regions and ensures the future growth and prosperity of the UK.”
The UUK report was tuned to the new government agenda and asserted the crucial role of universities and other HE providers in helping to achieve growth and success. The wide-ranging blueprint was nevertheless fairly narrowly focused on demonstrating the instrumental value of HE in promoting economic and social growth, unsurprisingly given its target audience. Many in universities will still regret that the idea of HE as a public good is now more narrowly confined than in, for example, the 1963 Robbins Report, which suggested four main “objectives essential to any properly balanced system: instruction in skills; the promotion of the general powers of the mind so as to produce not mere specialists but rather cultivated men and women; to maintain research in balance with teaching, since teaching should not be separated from the advancement of learning and the search for truth; and to transmit a common culture and common standards of citizenship”. But we live in different times, and must be thankful for smaller mercies on this fork in the road.
Bridget Phillipson also said in July “The culture war on university campuses ends here”, as she announced a pause in implementation of the Higher Education (Freedom of Speech) Act (2023). HEPI’s Nick Hillman said: “I think it is now time for the Conservative Party – if they are serious about showing they’ve changed – to say the war on universities is over.” Judging by the leadership contenders’ speeches at the Conservative Party conference in October, we fear not.
If people don’t want to come to the ballpark, how the hell are you gonna stop them?
Anti-university sentiment is widespread in Brazil, China, Russia, and parts of Eastern Europe. In the USA, Republican Vice-Presidential nominee JD Vance has spoken approvingly of Hungarian Prime Minister Viktor Orbán, who forced the Central European University to relocate from Budapest to Vienna. Vance said that Orbán has made “some smart decisions … [on campus dissent] that we could learn from in the United States”, but already several high-profile university presidents have stepped down after failing to navigate a course between student protest, staff, boards of trustees and politicians in Senate hearings.
The fork in the road might mean a choice between anti-university sentiment leading to a smaller student population, and continuing growth and development of an expanding HE sector. Despite right wing rhetoric there is no evidence that demand for HE is declining: people still want to come to the ballpark and they still enjoy the game, as the National Student Survey continues to demonstrate. But there are nevertheless understandable reports of student dissatisfaction about some aspects of what can be an impersonal student experience on account of large student numbers. More pressing is the continuing student dissatisfaction with debts after student loans. However many times it is explained that ‘student debt is not like other debts’, graduates continue in reality to see large and depressing numbers in red on their student loan account, and there is no wider public understanding of how repayments work.
Nobody goes there anymore, it’s too crowded
In a blog for HEPI on 5 September 2024, Peter Scott (UCL) outlined some of the current problems of English HE and argued that the best solution would be the reintroduction of a student numbers cap: “Imposing an overall student number cap would restore a stronger sense of stability and predictability into the future, which might just reassure the Treasury as it contemplates an inevitably unpopular decision to allow the maximum fee to be (modestly?) increased. It might also reassure politicians more generally that higher education, and universities in particular, will not be allowed continuously to ‘crowd out’ other forms of tertiary education and training. Similarly it is difficult to see how far down the road of realising its new financial sustainability remit the Office for Students can go without at least considering reinventing institution-by-institution student number controls, within broad tolerance bands like the former maximum aggregate student numbers, to reduce turbulence and damagingly unpredictable consequences.”
The old HEFCE regime of managed growth and change involved student number controls with some marginal tolerance for expansion and the possibility from time to time of bidding for more. The danger of an overall student number cap in the present environment is that it might freeze some undesirable aspects of the status quo. We now have a regulator not a funding council, and it is a regulator which – as required by HERA – is bound to treat potential university closures as a natural consequence of market forces. The problem with university closures is they can easily drag down a whole local economy as well as creating huge gaps in locally or regionally accessible HE provision.
It ain’t over til it’s over
HEPI published Debate Paper 39 on 25 September 2024, in which Tim Leunig (LSE), a former very senior civil servant, argued for a fiscally-neutral set of changes to restore university finances. Employer contributions was a repeated theme of HE discussions at the Labour Party Conference in September, and a significant part of Leunig’s argument was for a 1% surcharge on employers of graduates. His ten-point package of proposals was for:
“1. A 20-year, rather than 40-year, repayment term on student loans.
2. No increase, even in nominal terms, of the amount owed.
3. A minimum student loan repayment of £10 a week after graduation.
4. An additional repayment of 3% of income between the income tax and student loan repayment thresholds.
5. Letting graduates reduce their pension contributions in order to make higher student loan repayments more affordable.
6. Reintroduction of an interest rate supplement for graduates earning over £40,000 a year, set at a maximum of 4% for those earning over £60,000.
7. A new 1% National Insurance surcharge for employers that recruit graduates.
8. New maintenance grants for students with parental incomes up to £65,000, with full grants of around £11,000 for those with household incomes below £25,000.
9. Provision of maintenance loans for all students not receiving a full grant, provided their parents’ income is below £100,000 a year.
10. Additional teaching grant averaging £2,000 per student.”
English HE needs a rescue package right now, and in the slightly but not much longer term the funding system needs an overhaul. It remains to be seen whether something like Leunig’s package of proposals might be adopted. At this stage no-one knows: it ain’t over ‘til it’s over.
SRHE News EditorRob Cuthbert is Emeritus Professor of Higher Education Management, University of the West of England and Joint Managing Partner, Practical Academics rob.cuthbert@btinternet.com. Twitter @RobCuthbert
Governments across the globe are increasingly adopting student debt cancellation or forgiveness policies. Recent proposals in the US, Chile, and Colombia have reignited discussions about the student loan crisis and the need for alternative funding solutions in higher education. But why are governments pursuing these policies, and what does it mean to cancel student debt?
The demand for student debt cancellation emerged in the wake of the 2008 financial crisis, a time of economic hardship for many households burdened by high-risk loans. While banks and financial institutions received massive bailout packages, ordinary citizens faced mounting debts with little relief. This stark disparity fuelled a movement for a general “jubilee” or widespread debt forgiveness. The logic was simple: if banks could be saved from their financial burdens, why not the people?
Cities like New York, London, Madrid, and Athens became centres of protest against government policies that seemed to protect the financial elite while ignoring the needs of ordinary citizens. In the US, the Occupy Wall Street movement became the focal point for debtors, calling for cancelling all debts, including student loans. Similar anti-austerity movements erupted worldwide, with student protests in countries like the UK, Chile, Colombia, Quebec, and South Africa challenging tuition hikes and market-driven education policies. These movements also pushed for free education and an end to student loans (Cini, 2021).
In this climate of widespread discontent, the call to cancel student debt became a symbol of resistance against the rising cost of education and overwhelming debts. Activists argue that student debt not only increases the financial burden of higher education but also undermines social mobility. For many, student loans trap them in a cycle of debt that limits their opportunities and financial freedom.
Initially, debt cancellation was seen as a radical proposal outside mainstream education policy. Even some progressive movements, such as Corbynism in the UK, hesitated to endorse full debt forgiveness, opting instead for free education and the restoration of grant systems[i]. However, the 2020s saw a dramatic shift, with countries like the US, Chile, and Colombia making debt forgiveness a central policy issue.
In the United States, President Joe Biden has introduced two major plans for student debt forgiveness. His latest proposal includes forgiving $10,000 in federal student loans for most borrowers and up to $20,000 for lower-income debtors (Rios-Jara, 2022). The plan also includes the SAVE plan, which ties repayments to borrowers’ incomes, marking the most significant reform to the American higher education system since Obama’s presidency. Despite legal challenges that have stalled these initiatives, the government has already forgiven $143.6 billion in student loans for nearly 4 million borrowers[ii].
In Chile, President Gabriel Boric, a former student leader, promised to introduce a comprehensive debt forgiveness policy. His government recently unveiled a plan to cancel a portion of student debt, ranging from $500 to $3,000 USD for all borrowers with government-backed loans, based on their academic success and if the are in default or not[iii]. This proposal aims to eliminate the participation of commercial banks in the student loan system and replace it with an income-based contribution system. This reform reduces overall debt and ensures education is more accessible. The plan expects to erase all debt for approximately 20% of borrowers. In total the plan will eliminate 65% of total loan debt, being biggest cancellation debt package ever probed.
Both governments have justified their debt cancellation efforts by highlighting the crippling effects of student debt on graduates. Many borrowers find themselves unable to pay off their loans due to stagnant wages and high monthly payments, preventing them from investing in long-term life goals. In the US, there are 45 million student debtors, holding a collective debt of $1.753 trillion[iv]. In Chile, 2 million borrowers owe a total of $12 billion[v], and it is one the countries with the biggest student debt in Latin America.
Debt also exacerbates social inequality. In both countries, graduates from low-quality institutions with predatory lending practices are often left with larger debts and lower earnings, making them more likely to default. In the US, advocates argue that student debt disproportionately affects students of colour, limiting their upward social mobility. In Chile, the government has emphasised the gender dimension of the issue, as women—who represent the largest group of debtors—face a significant wage gap, making it harder to repay their loans and fully benefit from higher education.
In Chile, the government has also framed debt cancellation and loan reform as a matter of efficiency, addressing the failure of the current system to improve repayment rates. Similar to the US, Chile’s loan system relies on government-backed loans involving commercial banks. However, the anticipated efficiency from bank involvement has not materialised, with only 55% of borrowers keeping up with payments. The proposed reforms will remove banks from the equation and return financial aid administration to public institutions, as the US did under Obama’s 2011 reforms to federal student loans.
Debt cancellation policies represent a relevant attempt to rectify these long-term challenges, but questions remain about their effectiveness and whether more comprehensive alternatives are needed to tackle the broader failures of market-driven higher education systems. For instance, activists have criticised Joe Biden’s plans for maintaining a loan-based system rather than pushing for a more transformative reform that includes free education. In this debate, one distinctive feature of President Boric’s proposal is the complete elimination of student loans, replacing them with an income contingent graduate contribution system.
Graduates’ contributions are calculated based on the length of their studies and their annual income. The approach combines the flexibility of income-contingent loans with an updated version of a short-term graduate tax. What each graduate contributes will be determined not by the cost of their degree but by their ability to contribute based on their income. Under this mechanism, individual debt will be erased, and loans will stop being issued, moving the higher education system into a new stage where free education and graduate contribution are the main columns of student financial aid.
Whether debt cancellation will fully resolve these issues remains to be seen, but it marks a significant shift in how governments are addressing the unintended consequences of student loan systems. The push for debt forgiveness reflects not just an ideological critique of neoliberal policies but the frustrations of millions of graduates struggling under the weight of unmanageable debt. They feel betrayed by broken promises of social mobility and fearful of the financial uncertainty that student loans have brought into their lives. To face these issues, governments with a long history of student loans are looking for new ways of funding higher education, moving beyond market solutions and looking for new forms of higher education public funding policies that leave behind market instruments but also the traditional policies of public education.
Héctor Ríos-Jara has a PhD in Social Sciences from University College London (UCL). He works as a postdoctoral researcher at the Economic and Society Research Center (ESOC) of Universidad Central de Chile.
[i] Rios-Jara, H. (2022). Between Movements and the Party: Corbynism and the Limits of Left-Wing Populism in the UK. Populism, Protest, New Forms of Political Organisation. A. Eder-Ramsauer, S. Kim, A. Knott and M. Prentoulis, Nomos. 2: 130-149.
[v] Subsecretaría de Educación Superior (2022). Primer Informe del Crédito con Aval del Estado (CAE): Características de la población deudora e impactos.
And I am a weapon of massive consumption, And it’s not my fault, it’s how I’m programmed to function.
When I was asked to speak about my experiences of graduate indebtedness at the recent SRHE event in June, I was initially enthusiastic. I was a member of the first cohort of school-leavers expected to take out the government loans to pay the then new £9000 university fees in 2012-13. I took a gap year, completed an undergraduate degree, and subsequently received funding for a Master’s and a PhD. I believe I am one of the first of this new generation of highly indebted graduates to have been afforded the time and space to develop expertise around and reflect on the HE system I was a part of. Few graduate voices on their indebtedness are heard in research or policy discourse.
However, figuring out my contribution became frustrating. Firstly, any perspective I would bring would be unrepresentative. I am a mixed-race male from the home counties. I attended a Russell Group university, and had far too much fun in the sandbox of further academic study, sheltered from having to think seriously about entering the external labour market. Secondly, I had conducted no research myself on graduate experiences. I am also not an economist. I would be exposing my feelings about the current student finance regime (albeit informed by my related research) to the potentially sharp questioning of experts. This felt epistemically precarious.
Graduate indebtedness
My frustrations around the legitimacy of my voice and my disenfranchisement from the conversation around indebtedness are part of a broader series of doubts and tensions. It’s hard to avoid a sense of resentment every time I check (mainly to satisfy a grim curiosity) my rapidly ballooning student debt total on the Student Loans Company website. I will likely be making payments that have a negligible impact on that total until 2047. It is Sisyphean. At the same time, I had heard for many years hear policymakers and academics like Nick Barr talk about the inherent fairness of income-contingent loans. Given that individuals receive a substantial return from their investment in higher education (HE), it is right that the balance of costs should be shared between students and the state.
In Claire Callender and Steve Jones’ work on student experiences of indebtedness, the complaints of students and graduates are primarily centred around the slight delays of a few years to the privileges of an expected middle-class lifestyle, like buying a first house or having a family. Are these frustrations really valid, or are they just the mewlings of the demanding children of the late welfare state, now that democratic due diligence has found the public investment in our education was not providing an effective social return?
Thinking through these doubts was hard. Like the students in Claire’s and Steve’s research, I had internalised a certain logic. My failure to shed the shameful label of indebtedness lay in my regrettable choice to pursue history, my (apparently?) poor work ethic, and my subconscious suspicion of Big Four consultancy grad schemes. But I came to think about my frustrations with indebtedness through the work I’d done during my PhD. My frustration with the current loans regime is a frustration with ‘the whole way in which a society selects its priorities and orders itself’, to redeploy EP Thompson’s phrase from 1970. Our current politics has de-prioritised investments in the future, which undermines the realisation of a good society. Indebtedness serves as a sharp and recurring reminder of all of this.
The balance of freedoms
The axiom that those that benefit most from HE should bear proportionately more of the cost derives somewhat surprisingly from the 1960s. The story of post-war massification in the UK is a familiar one; participation in HE grew from less than 5% prior to 1939 to approaching 50% today. In 1962 a mandatory grant was introduced to pay for the education of ‘all those qualified by ability and attainment and who wished to do so’, in the words of the Robbins Report (1963). While this public-mindedness feels inevitable in the spirit of post-war optimism, at the time it was not uncontested. As one economist put it, in a system of grants, resources of the ‘poor and stupid’ in the general population who would not benefit from HE are used to fund the privileged lifestyles of the few ‘rich and intelligent’ who attended universities. While the Robbins Report advocated expansion based on grants, the chairman of the Robbins Report, Lionel Robbins (himself a neoliberal economist, as I have explored) thought the argument for loans and grants was delicately balanced.
Robbins considered the problem one of what he called the ‘balance of freedoms’. There was an important balance to strike between preserving freedoms in the present, and enabling future freedoms in the pursuit of social prosperity. For Robbins, prosperity was a consequence of the inherent tendency of individuals to pursue their own self-betterment in conditions of freedom. This included generating individual returns on the labour market and broader social returns. University education would increase young people’s productivity and ingenuity, while enhancing their understanding of their responsibilities to society.
Taxation (a substantial transgression of personal freedoms by the state) was only justified when it could be shown to enhance future freedoms. In the context of proportionately low attendance of HE in the UK in the post-war period, grants were a state investment in removing structural and psychosocial barriers to self-betterment in the population, particularly for women and others from underprivileged backgrounds. When a greater proportion of the population were empowered to pursue those opportunities, both individual and social prosperity would follow.
As a greater proportion of the population attended HE habitually, the justification for increased taxation would fall. It would no longer be justified to take poor people’s money to pay for the continued elevation of the gifted. When this happened, it would be more just for the burden of HE cost to fall back to young people so they could make an informed decision about the relative costs and returns of them attending HE.
The question of the balance of costs of HE was never as simple as stating that: because attending HE generates both a social return and a large individual return, students should be expected to take on some burden of the cost of their education.
As Robbins understood it, the question is: on the balance of how far future freedoms are enabled by the reduction of freedoms in the present, how far is it right that resources should be redistributed from the general population to fund HE?
Three frustrations
Revisiting the question of the balance of freedoms in the twenty-first century leads you to a different place than in the twentieth century. The burden of the costs of education is now tipped towards graduates far in excess of a good faith balance of freedoms. It serves a regime which has played politics, fetishised austerity, and sought short-term returns above sustainability and long-term economic prosperity. Reflecting on my indebtedness, I identified three rough frustrations:
Short-termism
Because we live in a democratic society, the assessment of our collective capacity to engender future freedoms is, rightly, subject to accountability through our political system. But the downward pressure this exerts on public expenditure is not inevitable (as it is sometimes presented) but a consequence of political culture. Public and policy discourse seems to have completely lost sight of the capacity of collective action to advance future freedoms. Austerity has led to an underinvestment in social infrastructure, ducked the costs of maintenance, and eviscerated our national capacities. The burden of the costs of repairing this damage has been shifted to our future. There is limited research as to the economic and social consequences of this debt. Both Labour and the Conservatives’ commitments to avoiding raises in tax feels like a failure to have an honest conversation with the electorate about our national priorities in the face of serious national and international challenges.
Poor redistributive justice
Recent London Economics modelling demonstrated that, for those taking new loans from August 2023, lower income female graduates will subsidise high-earning males’ education. Or, as James Purnell put it recently in publications for HEPI, ‘a nurse must now pay back more than a banker’. This is deeply unjust. It is completely antithetical to the progressive income tax regime we all abide by. It violently severs one route this generation can mutually support one another in our pursuit of human flourishing. And it is pointless. As Barr has argued, ‘The argument that tax cuts lead to growth is mistaken; lower taxes are not always better. Productive private investment needs to be complemented by productive public investment’. Job forecasts from other advanced economies expect more than 80% of the workforce will require some tertiary accreditation by 2050. Skills shortages even today are calculated to cost the UK economy up to £39 billion a year from 2024 through to 2027. Investment in education and training by employers and the state has deteriorated and productivity is stagnant. Redistribution is imperative.
Deterioration of HE
The deterioration of the unit cost following from the political deadlock around loans makes HE an unappealing place to plan a career. The transition period at the end of the PhD consists of a ridiculous juggling act of multiple contracts for everything from research to teaching to administrative roles. Despite all the hard work, remuneration is comparatively poor. All the delays to adult life that indebtedness inflict are compounded. Even permanent academic roles do not seem particularly secure given the redundancies sweeping over the sector. Add on top of all that the expected workload, bullying managerial cultures, artificial ED&I strategies, it is a wonder HEIs are able to attract qualified and ambitious candidates at all. During my time as a PhD and Fellow, I was paid more per hour as head coach of the university swim team than I was to deliver seminars.[1] Why bother?
The next sixty years
Robbins was arguing for expansion just after the Cuban Missile Crisis. The wars of the first half of the twentieth century were raw, living memories. HE was implicated in this in a complicated way – the powerful knowledge of modern societies taught through HE had the potential to both to raise living standards to unparalleled heights but also enable mass atrocities. A proper education cultivated the wisdom in students to wield modern technologies with responsibility.
Obviously freedom is diminished after a nuclear holocaust. But the existential crises I fear – everything from crises in teaching and healthcare, gender and social inequality, to the climate change and the resurgence of fascism across the world – if they are not tackled are also equally non-conducive to overall freedom. They require exponentially more of my generation and later generations to be part of the solution. Indebtedness is a constant reminder that our contribution to solving these problems is not worth collective support.
Josh Patel is a Researcher at the Edge Foundation. There, he has contributed to research on Degree Apprenticeships, New HEIs, and T levels, and is currently leading research on student experiences of tertiary pathways between HE and FE. He was previously a Fellow at the University of Warwick and completed his PhD on the justifications for the massification of higher education in liberal thought. He is writing a monograph on this topic for SRHE’s Research into Higher Education book series with Routledge. Here, Josh writes in a personal capacity. The views contained within do not necessarily reflect the views of the Edge Foundation.
[1] I have to qualify this by stressing that participation in student-led communities was central in my and (as I saw as a coach, tutor, and researcher) others’ personal development. My point is that there is a social maldistribution of resources that permits this circumstance.
The Government’s latest plan for university funding in England makes depressing reading for future students and universities alike. Students will be paying off their student loans (albeit with slightly reduced but still compound interest), for forty years not thirty. Universities will have the tuition fees funded by their loans capped at £9,250 a year until 2025, making seven years since they were last (slightly) increased. Yet this can be no more than a holding move in the face of a current student loan-book total of more than £160bn.
The scale of that student debt was not supposed to matter. When loans for student fees began they were considered to be a mere supplement to the Government ‘grant’ of public funding for universities. The write-off of unpaid student debt after 30 years would not count as a loss to the tax-payer in the eyes of the Treasury.
The Coalition Government’s decision in 2010 to triple student fees to £9,000 and shrink the ‘block grant’ to vanishing point made that view of things impossible to sustain after 2012. In 2019 the Office for National Statistics redesignated the write-off of student loans as public spending. The now only too visibly mounting £billions have become a major embarrassment. The current proposal to limit student numbers by imposing minimum entry qualifications for students is designed to ensure that fewer loans are taken out, but the system is clearly not sustainable in the long-term.
The ‘block grant’ imposed no debt upon students until tuition fees were introduced in 1998, and until they rose to their current levels the debt was not crippling. Now it is, and it weighs on the taxpayer as well as the student. The Government ‘grant’ was clearly taxpayer money spent, but it could be measured out year by year, was a known quantity, and once spent could not still be costing the taxpayer unforeseen amounts decades later. It was regularly grumbled that fixed annually it gave universities little chance to plan ahead, but that problem has not been removed by leaving universities to gather what fees they can by admitting students.
Funding by Government grant served universities for almost a century from 1919, The call for it began in earnest at the beginning of the twentieth century, once half a dozen new universities had been founded and needed it. In 1918 the Vice-Chancellor of Birmingham University, Sir Oliver Lodge, set about organizing a deputation ‘for the purpose of applying to the Government for greatly increased financial support’.
One point of principle quickly became important. In 1919 Oxford’s scientists wrote directly to H.A.L. Fisher, President of the Board of Education, to press for money for salaries for demonstrators and scholarships in science and mathematics. The very future of science was at stake, they cried. This prompted a clarification. Fisher explained that:
‘each University which receives aid from the State will receive it in the form of a single inclusive grant, for the expenditure of which the University, as distinguished from any particular Department, will be responsible’ (Oxford University Gazette (1919), p475).
This established the ‘block’ character of the grant’.
The second important principle was that Governments must not be able to attach conditions to the grant however they pleased. As Lord Haldane argued, there must be a buffer or intermediary. From 1919 until the creation of the statutory funding bodies under the Further and Higher Education Act of 1992 that took the form of the universities-led University Grants Committee. After 1992 HEFCE always received a guidance letter from the Secretary of State at the beginning of the year, giving a steer about the way in which the block grant should be allocated, but it continued to take its ‘buffering’ duty seriously.
In Times Higher Education on 24 February Aaron Porter told the story of the shrinking of the ‘block grant’ by the Coalition Government and its almost total replacement since 2010 by greatly enlarged student tuition fees. Those of course were in principle payments for teaching, but there were soon complaints that they were being used to fund research.
The Higher Education and Research Act of 2017 made a decisive separation between teaching and research by creating the Office for Students and UK Research and Innovation. The equivalent of the old ‘grant letter’ now comes to the Office for Students from the Department for Education. The most recent of these is dated 9 August 2021. The Higher Education and Research Act 2017 (HERA s.2(3)) empowers the government to give ‘guidance’, ‘setting out the principles which should be followed in distributing the funding’. UKRI, which bundles together a number of entities, takes the form of a non-departmental government body, under the Department for Business, Energy and Industrial Strategy. Its funding by the Secretary of State preserves the ‘buffer’ or Haldane principle, as defined in HERA s.103, but not the principle that such funding should go in a ‘block’ to each university.
This means there would now be a significant structural difficulty in restoring a ‘block grant’ as the principal source of funding for universities, because it could under current legislation affect only the cost of ‘teaching’. But legislation can be amended and there is unfinished business, because the separation of teaching and research has left research students inadequately supported.
What is the alternative? The present adjustments are unlikely to be sustainable in the long term. Freezing tuition fees cannot continue indefinitely, or even for the period to 2025 now proposed by government, without causing some universities to collapse. In a report on 9 March 2022 the National Audit Office warned that OfS and the DfE had to improve trust in their regulatory processes, with ten institutions already subject to ‘special monitoring’ because of doubts about their financial sustainability. Whether students will be willing to pay off their loans for longer and longer periods remains to be seen. (The possibility of restoring ‘free tuition’ was a prominent issue in the recent US presidential election. Although it remains unlikely at present, it suggests that such a change might come back onto the policy agenda in England.) The 40-year repayment period now adopted by government is in effect a ‘graduate tax’; the revenue from loan repayments might be more efficiently and progressively collected via tax simplification, rather than the imposition of what appears to graduates to be a significant debt to be repaid throughout their working lives. It might be time to give serious consideration to the restoration of a true block grant.
SRHE member GR Evans is Emeritus Professor of Medieval Theology and Intellectual History in the University of Cambridge.
So there is to be a review of higher education finance. Probably. But it is still unclear whether it will be a ‘major’ review, whatever that means. It might only mean ‘major enough to see off the threat from Jeremy Corbyn’, but we await most of the detail.
After the June general election the apparent appeal to young people of the Labour Party pledge to abolish fees, and perhaps even write off student debt, sent the Conservative Party into panic mode. Of course it might not have been a pledge, nor even a promise, more an aspiration or a direction of travel. Students have heard that kind of thing before.
Storms were brewing, but no-one expected Hurricane Adonis. Continue reading →
