Tag Archives: funding

Endowments could help postgraduate students

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Conor Ryan argues in a new Centreforum report that university endowments can make a contribution to postgraduate funding.

Sutton Trust research has highlighted the growing importance of postgraduate degrees in today’s labour market. Stephen Machin and Joanne Lindley have shown that 11% of 26-60 year-olds in the workforce now holds a postgraduate qualification, up from 4% in 1996.[1]

They also showed that somebody with a Master’s can on average expect to earn over £200,000 more over a 40 year working life than someone only holding a Bachelor’s degree.[2] The Sutton Trust report highlighted how the recent growth in UK postgraduates, dominated by international students, poses a threat to social mobility.

This makes it all the more important that postgraduate courses are affordable to the brightest graduates, regardless of financial circumstances. Universities and government need to think imaginatively about how to fund them. Without action to enable bright students from all backgrounds to access postgraduate qualifications based on their ability rather than their ability to pay, this could become yet another barrier for those from low and middle income homes.

The Trust supports targeted state-backed loans for postgraduates. But Government is concerned about affordability, given the growing cost of the current student loan scheme. One way to keep costs lower would be develop income-related bursaries funded by universities through their alumni alongside means-tested loans for postgraduates.

Funding today

Tim Leunig’s earlier research for Centreforum has shown that while there is some funding available through university bursaries, research councils and other sources, fewer than 4% of students on taught master’s programmes receive sufficient funding to cover their fees in full.[3] Most universities offer some partial bursaries, but these are often a fraction of the costs of fees and living costs, which can be £18-£20,000 a year, depending on the course.[4] This is an expensive proposition for graduates with debts already set to exceed £40,000 from their undergraduate studies.

Endowments

In the United States, many universities, including the Ivy Leagues, fund undergraduates from low and middle income homes fully through their endowment funds. Many also use their endowments to provide targeted support for postgraduates (as well as to develop new buildings and facilities, often their primary purpose in the UK.)

With a state regulated system of undergraduate fees and loans in the UK, and substantial mandated access funds linked to the new fees regime, there is a strong case for focusing a growing endowment pot on postgraduate studies and research. For this to happen, UK universities need to grow their endowments. Only Oxford and Cambridge currently have endowment funds comparable in size to the top 20 US universities, with the next largest, Edinburgh, significantly smaller at £248m.[5]

The 2004 Thomas report led the Labour Government to introduce a match-funding scheme designed to stimulate greater fundraising by English universities from alumni, and the development of larger endowment funds.[6] That scheme, which ran from 2008-11, had some success: annual fundraising by UK universities rose from £513 million to £694 million.[7]

But the potential is much greater. While US Ivy Leagues have always had large endowments, much American alumni fundraising is relatively new. Many state-funded universities have only developed their funds in the last 50 years: for example, the University of Florida increased its annual donations from $2m in 1976 to produce an endowment fund now worth $1.3 billion.[8]

Only 1.2% of UK graduates donate to their universities regularly, compared with 9% of US alumni. A Higher Education Funding Council for England report in 2012 proposed a target of 5% for the UK within the next 10 years, with some universities achieving double digit rates, to put the UK onto the US track.[9]

Explicitly linking some of those funds to support for postgraduates could make giving more attractive to some donors. Some universities already do this. Sheffield has alumni fund scholarships, funded by donations from 1500 alumni each year, worth £2000 each, and targeted at bright students who might not otherwise be able to study there.[10] However, such scholarships remain small scale: in 2013, they plan to provide them to 15 students, but only provided 6 in 2012.[11] Others with larger endowments say they are relatively generous. Oxford, with £3.7 billion in university and college endowment funds, says that 62% of its research students and 17% of its students on taught Master’s courses receive full scholarships covering fees and living expenses.[12]  

Building endowments into wider postgraduate funding

Such endowments may not cover all postgraduate costs, but they could make a significant contribution, when coupled with targeted student loans for those of modest means. Sheffield targets its scholarships to those who received maintenance grants as undergraduates. A similar approach more widely applied to those able enough to study as postgraduates would help ensure such support was well targeted where it was needed most.

Government may not want to cover the full cost of postgraduate studies and living costs, given the prevailing climate. While wealthier UK and overseas graduates may be able to turn to family funds, those for whom a postgraduate degree is the final rung on the social mobility ladder are unlikely to have access to such resources. Such students should have access to more means-tested bursaries, funded by universities through alumni fundraising. For that to happen, universities will need to improve their fundraising capacity. Government should make it easier for them to do so: the tax system needs to be simpler for large donations, and more pump priming should be available to enhance fundraising capacity.

Postgraduate studies are the next social mobility frontier. It is now widely accepted that we need to do more through nursery education, schools and undergraduate access to enable bright young people from low and middle income homes to fulfil their potential. They must not encounter a brick wall when it comes to postgraduate study. A new partnership between alumni, universities and government could help ensure they don’t.

The Centreforum report Postgraduate Education: better funding and better access is edited by Tom Frostrick and Tom Gault and available at the Centreforum website.

[1] Stephen Machin and Joanne Lindley, ‘The Postgraduate Premium’, Sutton Trust 2012
[2] This is a gross figure, so it doesn’t allow for lost earnings, fee costs, extra taxes due or inflation, as some other analyses showing smaller premiums have done.
[3] Tim Leunig, ‘Mastering Postgraduate Funding’, Centreforum 2011
[4] Cambridge suggests these figures for most courses at http://www.admin.cam.ac.uk/students/studentregistry/fees/costs/coursecost/costs2013v9.pdf . Taught course fees for home or European students at Sheffield and Newcastle universities are typically £5000-£6000 a year, with research fees starting at around £4000 a year, but often much higher depending on the course.
[5] http://www.suttontrust.com/research/university-fundraising-an-update, drawing on data from ‘Caritas Higher Education Yearbook’ data in the UK and the US ‘Chonicle of Higher Education’.
[6] ‘Increased Voluntary Giving to Higher Education’, DfES, 2004,
[8] ‘Increased Voluntary Giving’, p.25 and University of Florida website for latest data http://www.uff.ufl.edu/AboutUFF/Endowment.asp
[9] ‘Review of Philanthropy’
[11] Information supplied by University of Sheffield. The University also uses alumni funding to provide £3000 scholarships for undergraduates.

High graduate debt state-side is rare and considered highly undesirable

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Sir Peter Lampl reports on how US universities don’t want students leaving with big debts

I’m in the United States this week, visiting Ivy League universities to find out more about what they offer, preparing the ground for next year’s Sutton Trust US summer schools.

Here, the situation is very different. For one thing, one can’t help but be impressed by these magnificent universities and the quality of what is on offer. They certainly deserve their standing in the international league tables.

The American undergraduate has a much broader education than their British counterpart, typically spending two years taking a broad subject mix before majoring in one or possibly two subjects.  At Harvard an admissions officer told me that a distinguished former President said that when you graduate from Harvard, the objective is that you know a little bit about everything and a lot about one or two things. As someone who had to specialise much too early, as is the case with the English system, that strikes me as a pretty good principle.

But it is also on student funding that the differences between the US and the UK are starkest. American universities don’t want to see students starting life with significant debts.  This may surprise those who argued for raising the tuition fee to £9,000 for all in England thinking that we are just catching up with the Americans.  Nothing could be further from the truth.

An excerpt from the Princeton Financial Aid brochure puts it in perspective.  “Our no loan policy has made it possible for most students to graduate with little or no debt.  About 75% of our students graduate debt free.  Of the remaining 25% who choose to borrow, usually for additional expenses such as a laptop computer, the average total indebtedness at graduation is $5000.  For comparison, about 66% of college seniors in the United States graduated with loans in 2010, and they carried an average debt of $25,250.”

So the reality is that a third of Americans graduate with no debt and the two-thirds who do have loans to repay carried an average debt of $25,250 (£15,700) and that is for a four-year programme.  This contrasts sharply with the system in England where graduates will owe on average almost 3 times as much – $73,000 (£45,000) after only a 3 year course.

Americans find this hard to understand.  I remember talking to Lou Gerstner, former IBM chairman and CEO and now a major education philanthropist, about the plans to treble university fees in England. “What: you’re loading students from low and middle income households with debt? He asked, “What are you doing that for?  That’s a bad thing to do.” I now understand where he was coming from.  In the US, the newspapers complain about states raising tuition fees by 7% per year. People are astonished to hear that we just put ours up by 200% in one year.

Harvard, Yale and other Ivys have large endowment funds enabling them to provide needs blind admissions to students from anywhere in the world, with accommodation and tuition fees – worth $60,000[1] (£37,000) a year – free to those with family incomes below $65,000[2] (£40,000) a year.  All student support funds are means-tested.

Columbia, Brown,the University of Pennsylvania and many others pay the tuition and accommodation costs of all their less privileged students from the US and the costs of study for many less privileged overseas students.

Around seventy five per cent of US students go to public universities, which have big state subsidies, whereas we have cut the teaching grant in England by 80% so we are funding just one tenth of university teaching costs, effectively removing state funding for supporting undergraduates.

The truth is that when it comes to debt, we are a complete outlier amongst developed nations, drastically reducing state funding of universities when others are increasing theirs.

US universities want graduates to feel able to go into teaching or get involved in public service rather than head to Wall Street, without worrying about paying back a mountain of debt. They also want their graduates to feel able to go to graduate school, and indeed at the University of Pennsylvania in Philadelphia which I visited, two thirds of its graduates go to grad school within five years of graduation, which is typical for leading US universities.

In England last week, we learnt how less privileged graduates are being put off studying for Masters degrees and doctorates, with a potential cost to their careers and our economy.  The Higher Education Commission report highlighted how postgraduate education in the UK is becoming increasingly the preserve of well-off students from overseas.

By contrast, Ivy League universities are on a hunt for the best talent in the world, and they don’t want their affordability to stand in their way. So they will fund those that can’t afford full fees in their studies, the vast majority from abroad as well as the US.   I support the Commission proposal for a state-backed loan scheme that should be pursued alongside other measures to support non-privileged postgraduate students.

The Sutton Trust has also commissioned research in this area by the Institute for Fiscal Studies, looking at what the effects of leaving university with large debts are on the ability to go to graduate school, buy a house, start a family and so on.

But we need to think again about the debts we are loading on our low and middle income graduates– and learn the lessons from America about how to fund our universities and our students.