NUS report on higher education funding

03 September 2008

Responding to a report from the National Union of Students which calls for an extensive review of the system of funding in higher education, the Director General of the Russell Group, Dr Wendy Piatt, said:

“Undoubtedly there needs to be a debate on university funding.

“The UK is a world leader in higher education with our institutions making an enormous contribution to the economy and society. But it is clear that in order for our universities to stay internationally competitive, provide a first-rate teaching experience for a growing student body and offer generous support to disadvantaged students, we will need to increase funding from a range of public and private sources. The introduction of variable fees has managed to halt the long-term decline in funding per student. But funding for higher education in the UK is significantly lower than most other OECD countries, and particularly our primary competitors, meaning there is a real danger that our success will not be sustained.

“The current system of student support in England is one of the most generous - and expensive - in the world. Students pay no up-front fees; grants and bursaries are given to students from poor backgrounds, and there is no real interest rate on loans. Tax-payers pay a relatively high subsidy to provide interest-free loans for all students no matter what they or their parents earn.

“The idea of 'debt-aversion' is often cited as an argument against fees but this is simply not borne out by the evidence. There is a staggering body of evidence that demonstrates that academic attainment before the age of 18 is the most important factor in whether a student will go on to higher education, not financial considerations. When A-level grades are taken into account, students from deprived and wealthy backgrounds are equally likely to go to university. So it is not surprising that under the new system of fees, loans and grants, applications to English universities have continued to increase from students of all social backgrounds.

“Reports like this must ensure they separate the idea of student ‘debt’ from commercial private debt. Low-earning graduates are protected by generous terms as they do not pay anything until they earn over £15, 000 and have their loan wiped after 25 years. All repayments are on a pay-as- you-earn basis with no real rate of interest.

"There is absolutely no evidence that a national bursary system would widen participation - in fact it is more likely to hamper all the efforts Russell Group universities are making to encourage students from non-traditional backgrounds to apply.  There is evidence that targeted, generous bursaries have helped to attract very able students from low-income backgrounds to universities they may not otherwise have considered.

“One could understand the call for a national bursary scheme if there were no assistance available for students in need. But this is just not the case. The present financial system already provides a guaranteed level of support for all students with much higher support offered to disadvantaged students through government grants, loans and no upfront fees. To suggest that it is somehow wrong for universities to then choose to top up this support with bursaries that far exceed the amount originally required by OFFA seems profoundly misguided.

“Bringing in a national bursary system would see many losers and few winners – with relatively small increases to a standard bursary but many high-achieving, low income students losing out on substantial support currently available. Rewarding the high achievements of students from these backgrounds is an important part of widening participation and supporting the gifted and talented. By removing universities’ ability to offer large bursaries to students from low income groups there is a risk that some students will not apply to the university that best suits their aptitude and abilities.”

Notes:

1. Based on the most recent OECD data, the UK’s annual expenditure on higher education is lower than most other OECD countries, in terms of GDP, expenditure per student and as a proportion of total educational funding.

• The US invests 2.9% of GDP on HE and China now spends 1.3% of GDP (to be raised to 2.5% by 2020). In comparison, the UK spends 1.1%.
• Annual expenditure on higher education (for all services including research activity) per student shows that the UK is spending less than all of its main competitors – US, Australia, Germany and most Nordic countries. The UK spends approximately $11,484 (USD), while the US spends double at $22,476.
• Average funding spent on HE as a proportion of all educational spending is 24%. The US spends 36.4% on higher education, the UK spends 19%. The only country to give a lower proportion of educational funding to HEIs is Iceland.
• Since 1999, China’s spending on Research & Development has increased by more than 20% each year. Spending by central government in 2006 reached £4.7 billion in China compared with £3.2 billion in UK.

2. Harvard’s annual endowment fund is greater than the total public funding for all universities in England in any one year. In 2005, Harvard's endowment amounted to £13.4 billion. In 2007, higher education expenditure was £12.6 billion out of a total budget expenditure of £587 billion (HM Treasury 2007 Budget Report and DfES 2007 Annual Report).
3. According to the Ipsos MORI Young People Omnibus Survey (2008), for respondents who said they were unlikely to proceed into higher education, the lack of affordability and debt aversion ranked 12th and 10th respectively as a deterrent factors.
4. Government research has found that, once level of attainment is controlled, there is little difference in entry to Higher Education for students from low and high socio-economic backgrounds. Fig 2.15, Office of National Statistics (2004). “Focus on Social Inequalities: Education, Training and Skills”. London: TSO http://www.statistics.gov.uk/downloads/theme_compendia/fosi2004/SocialInequalities_full.pdf
5. Research at one Russell Group university found that 80% of lower-income entrants in 2006 said the bursary scheme influenced their decision to choose that institution. In the same year its proportion of low-income students rose.
6. A student from a low income background attending a Russell Group university receive, on average, £1,680,in bursary money- according to OFFA statistics. This is nearly six times the minimum bursary of £305 required by OFFA (2007/08).  For some of our institutions, students from low income backgrounds with high A-levels can receive as much as £4,000 - £5,000 a year.
7. A forced pooling of income may also damage universities’ efforts to widen participation by severely limiting their ability to fund projects which aim to tackle the true cause of under-representation, low attainment and low aspirations.

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