Who should pay for tertiary education?

Post-18 education in England is split into further education (FE) and higher education (HE) – there is no overarching tertiary system. There is some overlap, but in general the two sectors are separate and very different.

HE receives much more public funding than FE, which experienced funding cuts during the early 2010s. High HE tuition fees, funding inequalities between sectors, and falling FE student numbers led to heated debate about how tertiary education is funded and who should benefit, culminating in the Augar Review.

What is tertiary education?

FE covers education from basic skills to degree level and is delivered by 200 FE colleges and numerous training providers. In 2017/18, 1.1 million adults took publicly funded FE courses and almost 2.2 million participated in some form of funded FE and skills training, including informal community learning and apprenticeships.

HE covers education at undergraduate and postgraduate level in universities and colleges. In 2017/18, 1.5 million students from England studied at UK HE institutions. Trends in student numbers are shown in the graph.

How is tertiary education funded in England?

In 2012, tuition fees for undergraduates were raised to £9,000 per year and public funding for teaching grants was cut. Most teaching funding now comes via Government-supported fee loans. The Government provides top-up funding for high-cost subjects. High fees and the removal of the student numbers cap has encouraged universities to expand.

In 2019/20 the HE sector received £1.4 billion in direct public funding for teaching. Total direct support, including funding for research and capital, was £3.7 billion. Fee income is estimated at £9.7 billion. Around half the value of loans is expected be written off and end up as public costs.

FE is funded by the Education and Skills Funding Agency through annual contracts to provide adult education. These are based on the amount of learning delivered in the previous year. Loan funding is available for some learners. In 2019/20 the general Adult Education Budget is £1.5 billion. A further £0.5 billion is available as loans to support FE students who do not qualify for direct funding. The total budget for FE and skills, including apprenticeships, is £3.8 billion.

The difference in funding between sectors is shown in the bar chart. Note that HE loan figures include only their estimated public costs.

How are students funded in England?

HE students can get Government-supported loans for fees (up to £9,250) and maintenance (up to £11,672 in London, £8,944 outside London and £7,529 living at home). In 2019/20, £16.7 billion is expected to be loaned to HE students overall. Repayment starts when the borrower reaches a certain income. Loans are written off after 30 years. Most students will not repay their loans in full, and many will make few or no repayments. The public cost of loans made in 2019/20 is forecast to be around £7.8 billion.

FE students are funded differently and funding is lower. Students studying specified courses may receive free tuition. Other students taking certain courses may be eligible for Advanced Learner Loans – these loans are for fees and are repaid on an income-contingent basis like HE loans. There is no maintenance support.

Augar Review

In February 2018, the Augar Review of post-18 education and funding was launched which aimed “to create a joined up post-18 education system which would work for students and taxpayers“.

The Review report in May 2019 contained 53 recommendations including:

• reducing HE fees to £7,500 per year
• replacing lost fee income with increased teaching grants directed towardsdisadvantaged students and high-value,high-cost subjects
• extending the student loan repayment period, capping the overall amount of repayments and reducing the income threshold for repayments
• reintroducing maintenance grants
• introducing maintenance support for level 4 and 5 qualifications
• funding a first free full level 2 and 3 qualification for all learners
• introducing a lifelong learning loan allowance

See The Post-18 Education Review (the Augar Review) recommendations for more details.

Party policies

The Conservatives said they would create a £3 billion National Skills Fund, reintroduce maintenance grants for nursing students and look into interest rates on loan repayments.

Labour pledged to scrap tuition fees, reintroduce maintenance grants and Education Maintenance Allowances, establish a National Education Service, guarantee six years’ free education for adults and allow paid time off for training.

The Liberal Democrats said they would reintroduce maintenance grants, refund colleges for VAT, introduce a Young People’s Premium and a £10,000 ‘skills wallet’, and establish a review of HE finance.

So who should pay?

Tertiary education funding is split between the taxpayer, students/graduates and employers, but more of the cost now falls on graduates. The Institute for Fiscal Studies has estimated that the poorest students could accrue the largest debts of up to £57,000.

Arguably those who benefit from tertiary education should contribute most. However, many stakeholders benefit – taxpayers through higher tax revenues/lower benefit payments, employers from a skilled workforce, and the economy through increased productivity and innovation.

The changes to funding outlined in Augar aim to increase the number of people who could directly benefit from tertiary education. Now could be the time to shift the balance of funding contributions to reduce graduate ‘debt’, alleviate skills shortages and stimulate lifelong learning.

Further reading

• The Post-18 Education Review (the Augar Review) recommendations, House of Commons Library
• The forthcoming review of post-18 education and funding, House of Commons Library
• Higher education funding in England, House of Commons Library
• Higher education student numbers, House of Commons Library
• Higher education finance statistics, House of Commons Library