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Alex Morton is Head of Policy at the Centre for Policy Studies, and is a former Number Ten Policy Unit Member.
The CPS yesterday published its report The Value of University, available here, by Conor Walsh. We believe it is a useful contribution to a critical debate about where to go in education post-18. There is increasing concern about our current structure and calls for reform.
Much of the data we used was from the Institute for Fiscal Studies, which has produced essential work in this area. But we made a core argument that the expansion of the university sector has in places been deeply flawed – for the government, for our society, and most of all for students themselves, and that we need urgent change. We want to ensure that universities are actually adding value to both students and wider society by ending the scandal of poor-quality courses.
Young people are still being told that going to university will lead to better jobs. But for many, it simply means a millstone of debt that will hang over them for decades.
Meanwhile, for our society, it is an increasing burden on taxpayers – under the current system then less than half of the money that is lent out will ever be recovered. The subsidy to undergraduate courses alone from loans that will never be paid back now totals a pretty huge £8 billion each and every year to universities (and that is before you look at other grants, postgraduate subsidies and the fact universities are, rightly, charities, giving favourable tax treatment).
The system overall benefits the Treasury due to higher earnings overall from graduates, but this is substantially skewed by those graduates who do pay back their loans and earn the most over their lifetime.
The system is clearly not working for many people. The problem is that universities have been encouraged to simply expand courses even if this does not add much to the earning potential of the student. So, for example, the creative arts are estimated to have a lifetime net negative impact for male students of close to £100,000.
Around 20 per cent of students fall into this category – not only will they never repay their debt, but they will be worse off than if they never went to university, while usually having a burden of debt worth tens of thousands hanging over their entire working life. Female creative arts students are literally no better off than if they never went, and most will not repay their debts. Interestingly, even at some top universities, some courses and students will never repay their debt.
The sums involved are staggering. We spend £1.2 billion on subsidising creative arts courses alone each year. Indeed, the graduate debt that has been required to fund the expansion of universities is so large that the average graduate’s debt it is now greater than in the USA, standing at a staggering £45,000. Given this, graduates and students cannot be asked to take a greater burden than they already do in fixing the system.
Our core proposal in the Value of University is therefore that we should change how fees are made and repaid. We propose that Government loans directly to universities, and that universities, not students, are then responsible for collecting and repaying the loans made. This would make the system more self-financing, and incentivise students and universities toward high-productivity courses that make them and the country better off in the long run.
We propose requiring greater information is made available about repayment rates and post-graduation earnings to help with this. This would help stem the high and growing losses being made on subsidising undergraduate courses without increasing the amount of debt students have to repay.
We would also put a cap on the amount a university can charge from any specific student in order to stop unreasonable levels of cross-subsidy where some graduates are milked to pay for poor-value courses. This would encourage courses that improve the economy and the earning potential of students themselves.
Poor-quality universities and poor-quality courses would lose from this – and hence the howls of outrage from parts of the sector, as well as a wider argument that it is somehow morally wrong to question any spending on the university sector. There have been arguments made that we do not understand the social value of university, and that we are callous to the fact that shifting the payments like this might discourage less affluent or some ethnic minority students from attending.
But is it really moral to encourage poorer students of all ethnicities to attend university only to be saddled with high and unpayable debts? And is this the best way for the Government to help young people from less affluent backgrounds compared to, for example, greater spending on vocational training?
Further, this ignores that some poor-quality courses will be taken up by the children of the rich, who will be getting essentially a hand out for spending three years on what they find interesting, paid for by taxpayers as a whole.
On the social value of university, if we are going to subsidise ‘socially valuable courses’ we should do this upfront, and we propose that £1 billion should go into greater grants for areas – e.g. engineering and medicine – where we do want more graduates.
More widely, shifting the repayment structure like this, and saving substantial sums of money could, over time, save £7 billion a year to put toward technical education, as well as research and development to boost the UK’s position as a global leader in high value innovation. We know that the technical sector is where many bright young people from less affluent or some ethnic minority households tend to go – and it is supporting this sector that has the greatest potential to drive the levelling up agenda.
Our proposed shift could also lead to greater innovation – perhaps courses compressed over two years, or ones that cost less than £9,000 a year, moving away from a model made for a time when just 1-2 per cent of people went to university.
Overall, we believe that the value of university can be great. But the expansion of poor-quality courses degrades the whole concept of universities, and has often been code for taking young people and the government for a ride. We think our proposed solution to link student loans to universities not students, so driving out the worst quality courses, should enhance the value of universities for our society, economy, and most of all, for young people themselves.