Facts on Fees - the facts. A check on claims about tuition fees

This page is a fact check on Facts on Fees, the Conservative Party's new website explaining what's happening with tuition fees. Shown below are the website's key points, with comments in red.

If you are listening Facts on Fees, it would help if you could clarify where some of your figures came from. Please post a comment below.

This page was updated on 10-11 December to clarify some of the points, reflect the latest analysis from the Institute for Fiscal Studies and provide links to original sources.

About me: I'm a journalist who has specialised in writing about universities for the past 20 years and the founder of Research Fortnight, a newspaper with over 70,000 paid-for online subscribers in the UK. I learnt my trade on The Independent and New Scientist and have appeared recently in the pages of Nature, Science, Conservative Home, Prospect, the Guardian, the Times, the Lancet, the BBC, Lib Dem Voice and Xinhua News. I also have a degree in maths, which helps in this case.

***

The new system

The Coalition Government is proposing changes to how higher education in England is funded.

• The upper limit on tuition fees will be raised to £9,000 with a lower threshold of £6,000. Courses charging between £6,000 and £9,000 will be subject to new requirements on widening access to the poorest students.

True.

• Although reductions in government spending on higher education will help reduce the budget deficit, there will continue to be substantial public funding for universities.

The government is cutting £2.9 billion next year from the money the Department of Business Innovation and Skills [BIS] gives to universities. Uprated to allow for inflation at 2.5 per cent, that equates to £3.2bn in 2015. But as the government's own Office for Budget Responsibility has set out, if student numbers are maintained, then by 2015 the new plans will increase spending on student loans by £5.6bn a year. In other words, the effect of the change of policy will be a net increase in borrowing of £2.4bn a year.

So how can the new plan reduce the deficit? Answer - unlike government borrowing, which is an objective fact measured in gilts issued by the Government Debt Office, the size of the deficit is subject to arbitrary decisions by ministers over what to include or exclude. In this case, they have chosen to exclude the borrowing needed to finance student loans.

HEPI, the independent Higher Education Policy Institute, has described this as "smoke and mirrors". I agree. In the end, repayment of the debt incurred to finance student loans relies on taxation of workers. If Britain were to reach the situation of an Ireland or Iceland, it would be because the government's ability to raise funds from this source had been exhausted. So if push were ever to come to shove, there is no real difference between this debt and the debt ministers have chosen to include in the deficit.

But, I can hear careful readers saying, that's just by 2015. Surely by making students pay, the new scheme will cut even borrowing in the long term. Answer - maybe, maybe not.

Many graduates will never pay back all of their debt. How much they fail to pay back, and hence how much taxpayers end up paying, depends on many things we don't know - eg how fast salaries rise in the future and the rate of inflation over the next 10, 20, 30 years. HEPI thinks the government has made several optimistic assumptions about these things, for example that there will be equal numbers of men and women going to university whereas in fact the percentage split is usually 55/45 in favour of women - and they tend to earn less over a lifetime. Consequently, it concludes that the new scheme is as likely to cost money as save it.

• The balance of university funding will shift from 60 per cent government, 40 per cent private to approximately 40 per cent government, 60 per cent private.

I'm not sure where this figure comes from, but I think it must include funding for research, which obviously is not part of this debate about teaching. Of the £3.6bn provided by the government for teaching in English universities via BIS, £2.9bn is disappearing, which is a loss of about 80 per cent. And of course if HEPI is right, and it is all over-optimistic smoke and mirrors, then the public contribution may even increase.

• The earnings threshold for graduate contributions will be raised from £15,000 to £21,000. The repayment rate will remain at 9 per cent. This means that no one earning under £21,000 will pay anything and graduates earning over £21,000 will pay back £45 less each month.

Well that £21,000 is in 2016 money while the £15,000 is in today's 2010 money. This makes a big difference.

The government is saying that the threshold will be uprated with earnings every year after 2016, and is assuming earnings will increase at 4.5 per cent a year. If you do the arithmetic backwards and work out what the equivalent of the 2016 threshold would be today, then the answer is £15,900. In other words, when you think yourself six years into the future (which is when the policy will start to fully hit home) there is actually little difference in the thresholds.

Also, we see a lot of statements from the government saying graduates will pay back less "each month". That obscures the fact that the government is extending the loan repayment period from 25 to 30 years. So, with an extra five years, "less each month" can easily add up to "more in total".

• All outstanding contributions will be written off after thirty years.

True.

• 40 per cent of graduates will have at least some of their contribution written off. 

Based on average fees of £7,500, the independent Institute of Fiscal Studies estimates that 48 per cent of graduates will have some of their debt written off. I don't know where Facts on Fees got the 40 per cent from.

• The poorest 20 per cent of graduates will pay less over their lifetimes with the new system than they do under the old system.

This depends on what you mean by "poor". Generally, the government means those graduates with the lowest incomes in the decades to come. In this sense, the statement is true. The figures come from the IFS.

However, that definition of poor obscures the wealth of the family the student comes from. So another way of looking at it is to consider the income of the family when the student goes into university. Especially if you are one of those who worries students from poor families will be put off by high fees, this may be more relevant. And in this case, the IFS concludes that the poorest 30 per cent of students will pay more than now.

• There will be more support for students on low incomes: there will be a new £150 million National Scholarships Programme to help the poorest students into the top universities; maintenance grants for students from lower-income families will increase from £2,906 to £3,250; and partial maintenance grants will be available to students from families with incomes between £25,000 and £42,000.

There are new schemes that help. But there are also old schemes that are being killed off. Overall, we're back to the discussion immediately above. Students from the poorest 30 per cent of families will be worse off than now.

• Anyone earning under £21,000 will continue to have the interest on their loan subsidised by the government. A real rate of interest will be applied to the loans of graduates earning £21,000 or more. The rate of interest will rise gradually as a graduate’s earnings increase, reaching a maximum of the RPI (Retail Price Index) + 3 per cent for those earning £41,000 or more. This will provide extra revenue and mean that those who earn more, pay more.

True.

• Although reductions in government spending on higher education will help reduce the budget deficit, there will continue to be substantial public funding for universities. The balance of university funding will shift from 60 per cent government, 40 per cent graduate to approximately 40 per cent government, 60 per cent graduate.

This is the same statement as higher up. I still don't know where these figures come from.

• For the first time, part-time students will be eligible for student loans. Until now, part-time students have had to pay fees upfront. Part-time students on their first degree will no longer have to pay anything until they have graduated and entered well-paid work, so long as they are studying a third as much as a full-time student.

Well actually it's 25 per cent, not a third. But that's a good thing. The bad thing is that fees for part-timers are likely to shoot up. This is why the government's own analysis by the Department of Business Innovation and Skills last month concluded the whole effect of the reforms was likely to be bad for part-timers.

***

Further reading

If you liked this, you may also be interested in:

How to read Nick Clegg's article on tuition fees in the FT

How to read David Cameron's big speech on tuition fees

Comments

[jonjo]

Nobody has commented so far from what I can see but can I just say that this is excellent analysis and I know for a fact it has been used to educate students up and down the country, particularly in University occupations.

The fact that it is being updated makes it the go-to article for myself and hopefully many others.

Keep up the good work.

[William Cullerne Bown]

Jonjo - that's great to hear. Positive feedback always makes a big difference! Please everyone - post any questions here and I will answer them.

Meanwhile, I have two further links now that you and other students may be interested in.

The first is a comprehensive critique of the government's case as it stood at the end of December: http://exquisitelife.researchresearch.com/exquisite_life/2010/12/an-open-letter-to-the-house-of-lords-on-tuition-fees.html .

The second looks at the specific topic of the improved access arrangements being promised for poor students: http://exquisitelife.researchresearch.com/exquisite_life/2010/12/an-exceptional-explanation-from-vince-cable-on-tuition-fees.html

[AR]

From where do you arrive at the 4.5% increase in earnings figure?

[William Cullerne Bown]

@AR The people at the IFS told me this was the government's own working figure for post-2016. The key point really is that it's well above the rate of inflation used in the modelling - one of the huge assumptions HEPI was referring to.

[AR]

Thanks for the response. Do you know if that figure is for general earnings or for graduates alone?

Also is there any source for the figure you can give me? I'd like to use it too, but obviously need to back it up.

[William Cullerne Bown]

Umm. Not sure if it's just for graduate earnings *or* everyone. Significant mismatch in either case as quite of lot of people who take out the loans will never actually graduate. The original source is BIS somewhere but I don't have that (you may need to dig into their "ready reckoner"). But see for example HEPI's paper (referring in fact to a figure of 4.47 per cent at the top of page 2) at http://www.google.co.uk/url?sa=t&source=web&cd=3&sqi=2&ved=0CCIQFjAC&url=http%3A%2F%2Fwww.hepi.ac.uk%2Ffiles%2F50%2520Government%2520proposals%2520for%2520HE%2520funding%2520addendum.docx&rct=j&q=bis%20tuition%20fees%20ready%20reckoner&ei=OkMqTaicL4GKhQeA0YyWAg&usg=AFQjCNFTgms5csZ-yUbwipFEvPhJW-VJrw&cad=rja