Office of Planning and Budgeting

Britain Rethinks Higher Ed Financing

While some may be expanding public investment in higher education, the US is not alone in wondering how to maintain globally competitive institutions while significantly increasing student access in the face of diminishing public resources. A British panel headed by Lord John Browne released a long anticipated report, Securing a Sustainable Future for Higher Education, which outlines Britain’s higher education goals, assesses the ability of the existing system to meet them, and proposes a new financing model that shifts the cost away from taxpayers and toward the graduates themselves.

The debate about higher education as primarily a public or private good is a familiar one in the US, where shifting the costs from the state to students has been a decades long trend. British institutions only introduced student fees in the early 90′s, and since 2006, British institutions have been allowed to charge a maximum of  £3,000 ($4,800) per year to supplement government funding. If Britain were to implement the report’s recommendations to slash government funding by 82%  and remove the cap on student fees, British higher education would not only catch up, but surpass the US in terms of the public/private split in higher education funding. However, note that loan repayment terms in Britain are much more flexible than in the US.

Some of the primary components of the proposal include:

  • The institutions shall set fees competitively.
  • The Government will front the cost of attendance via student loans.
  • These loans will be paid back after graduation, but not unless or until the student is making more than £21,000 per year.
  • The interest charged will only be high enough to cover the Government’s cost of making the loans.
  • The student’s monthly loan payment will be based on earnings.
  • All outstanding loan amounts will be forgiven after 30 years of payments.

Because the Government is taking on the risk in this model, they propose that institutions face a government levy of 40-90% on any fees charged above £6,000 to discourage needless fee increases.

Such a dramatic increase in the cost of higher education for British citizens is alarming to many. However, proponents note that as many as 20% of students might never have to repay the loans due to low income, and that many others will pay less than the total amount owed. Concerns remain, however, for those who believe in the concept of ‘sticker shock‘, wherein a lower income student is deterred from attending an institution due to the high sticker price, even if financing options may dramatically reduce the overall cost. Still others, including in the humanities and social sciences, are concerned about the differential treatment of medical and other STEM related education fields, which would continue to receive government investment.

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