Time to tackle teenagers’ fears of fees

Sir Peter Lampl says that a new Sutton Trust/Ipsos Mori poll highlights cost concerns among the next generation of university students.

Earlier this year, the Government breathed an audible sigh of relief as university applications appeared to rise again after falling off in the first year of higher fees, although they are still not at 2010 levels.

But a new Ipsos Mori poll for the Sutton Trust suggests that ministers may have been a little premature in taking too much comfort from the latest UCAS data. The poll shows that two thirds of school children worry about the cost of going to university. Only 7 per cent of the 2600 11-16 year-olds polled said they had no concern about the cost.

At the same time, aspirations remain as high as ever. More than four in five young people say they are likely to go to university, even though in reality the proportion of 18-30 year-olds who do so is still less than half. 38% of young people say they are very likely to go to university when they are older, and 43% say they are fairly likely to do so. This is the same proportion as last year when the same question was asked.

Two thirds – 65% – of all the young people polled had significant concerns about university finance which break down as follows:  28% were concerned about tuition fees; 19% were concerned about student living costs and 18% were concerned about lack of earnings while studying.

And although 67% of young people said the most important consideration when deciding whether or not to go to university would be their exam grades, 17% said it would be the cost of going to university, with students from the least affluent families (23%) more likely to cite cost as the biggest consideration than those from the most affluent families (14%).

So, despite high aspirations – and a realistic sense of what they might need to do to realise them – nobody can argue that most young people aren’t still worried about the cost of higher education.

It’s hardly surprising that they are worried when graduates face debts of over £40,000 with fees of £9000 a year for most courses. The truth is that young people are caught between a rock and a hard place.

They know that they still need a university education to get on in life and get a good job. For all the talk of falling graduate premiums, a degree – especially one from a good university – still brings a substantial income bonus. And as Sutton Trust research showed earlier this year, a postgraduate degree is increasingly important, and brings with it an additional substantial premium.

And even if graduates may be finding it harder to gain an immediate job after university, their long term prospects remain brighter than for non-graduates.

But the canny teenager knows something else too. He or she knows that a degree comes with a much higher price tag than ever. Where this year’s graduates might be paying off their student loans into their thirties, those graduating from 2015 onwards will be paying back right into their fifties.

There may be some lower up-front costs, but a £40,000-plus debt with interest rates of up to 3% over inflation a year means that those repayments could impact on whether or when to buy a house or have a family. We’ve asked the Institute for Fiscal Studies to look into the implications of these debt repayments and to model the likely impact on important life decisions. They will report later this year.

But I think there is something else the Government could do now to ease the burden on low and middle income graduates in the future. They should means-test the tuition fee – as happened from 1998-2006 when fees were first levied on undergraduates – in the same way that the maintenance grant is already means-tested. As I noted in an earlier post, this is already commonplace in the United States.

Given that the Government already expects to write off a third of its loans – and some observers think they will have to write off much more – this need not be a particularly costly option. But it could start to allay the fears of debt that face all too many of those who should become tomorrow’s students. That would be a real investment in the future.

Are boys the losers with tuition fees?

Conor Ryan considers the lessons from this week’s report by the Independent Commission on Fees.

Students are well into the first year of higher tuition fees. While 54,000 fewer young people started university in 2012 than in 2011, the Government has been congratulating itself that the dip was not much greater.

And the water has been muddied by the changes in student controls that took effect just as the £9000 fee cap was introduced. Moreover, this year’s applications suggest that there is some improvement on last year’s dip.

So is all well in the world of higher fees?

The truth is it is too early to tell. And a new report this week from the Independent Commission on Fees highlights a number of areas where there is some cause for concern.

The first is what’s happening to boys, particularly working class boys. The Commission’s study of UCAS acceptance data has shown not only that the gender gap continues to widen, but that it appears even more pronounced in the lower participation neighbourhoods.

Women are now a third more likely to enter higher education than men and the gender gap seems to have widened as a result of the new fees regime. Among UK residents, 143,600 women aged 19 and under were accepted to English universities in 2012 compared with 118,952 young men.

This represents a decline since 2010 of 2.6% for girls and 4.0% for boys, and a 5.9% decline for girls and a 7.5% decline for boys since 2011.

But in the 40% of English neighbourhoods where university participation is lowest, there were 1700 fewer boys aged 19 and under who were accepted for places in 2012 than in 2011. This represents a decline of 5.4% in the number of young men from these areas going to university this year. By contrast, the fall in the number of young women from these neighbourhoods going to university was smaller, at just 3.7%.

Perhaps of more interest, since it discounts any surge into 2011 to avoid the higher fees, when compared with 2010, the number of young male acceptances fell by 1.4%, while young female acceptances increased by 0.9%. By contrast, between 2009 and 2010, male and female acceptances rose.

In England, while the overall change in the gender gap in the less disadvantaged neighbourhoods was 1.6 percentage points between 2010 and 2012, the overall change in the gender gap in more disadvantaged neighbourhoods was greater, at 2.3 percentage points.

Although the decline in male participation in the most advantaged neighbourhoods was even larger, 20,000 more boys go to university each year from the two top fifth neighbourhoods than from the two bottom fifth neighbourhoods.

It means that the female: male ratio is now nearly 57:43 in the less advantaged neighbourhoods whereas it is closer to 53:47 in the more advantaged neighbourhoods.

With 2013 applications, UCAS has suggested that this gap is persisting. Its January applications report noted that 18 year women remain a third more likely in England to apply to university than men, but this rises to 50 per cent in disadvantaged areas.

If this is the case, it suggests that the information about the new loan repayments may be proving more attractive to young women than to young men, or that young men from disadvantaged areas are less likely to believe that the cost of a degree is worth it. Either way, there is a challenge here for policymakers to meet.

The Commission’s new report has two other important findings that should cause policymakers to take pause. The first is the familiar data on mature students – those aged 20 and over – who had 7.6% fewer acceptances in 2012 than in 2010, more than twice the 3.3% decline for younger students as a whole.

The decision to allow part-timers to have access to student loans hasn’t seen full-timers move to part-time courses either. HEFCE has shown a dramatic drop in part-time numbers, with 105,000 fewer students since 2010, or a 40% drop.

This is important for access, as studying later is an important route to social mobility for those from less advantaged backgrounds, and it is vital that the impact of fees on this group is not neglected just because the reductions among young people are smaller.

As the new President of Birkbeck College, Baroness Bakewell, put it at the weekend:

“Part-time study is crucial for our society. It improves skills and kick-starts new careers – exactly what we need for the economy, employers and individuals during these difficult economic times. In response to the dramatic downturn in part-time students nationwide, unprecedented support is needed now to ensure part-time study thrives in future.”

And the other key finding is perhaps a warning shot at this stage, but one that will need closer scrutiny as the university-level data becomes clear.

While there has been an increase in the numbers of young people from the most disadvantaged areas going to the least selective universities, there has been minimal improvement in the numbers going to the Sutton Trust’s list of the 30 more selective universities (which includes the 24 Russell Group members) and a small dip in the numbers going to the Sutton Trust 13 most selective group.

While the only rises to the Sutton Trust 30 were in the lower participation neighbourhoods, the only quintile showing a dip in acceptances to the Sutton Trust 13 was the lowest participation group. This means that there is a widening gap between this group and other more advantaged areas, and those from the richest fifth of neighbourhoods are ten times more likely to attend these universities than those in the poorest fifth of neighbourhoods.

Closer scrutiny of patterns among individual selective universities will be important here. Already, there is some evidence from HESA data that in 2011, the proportion of new undergraduates from state schools and colleges at the 13 top universities slipped for the fourth year in succession.

There is clearly an important issue for the most selective universities and their recruitment from the poorest neighbourhoods – and it is one that the Sutton Trust will return to shortly. The Trust has also commissioned the Institute of Fiscal Studies to examine the potential impact of students leaving university with debts likely to exceed £40,000 on their ability to afford graduate study, buying a house, and having children. Their findings will be published later this year.

So, the truth is that the jury is still out on fees. We need to see whether these findings for 2012 become clearer trends in the next few years. It is vital, meanwhile, that Government, universities and schools do all they can to reach young people with the ability and potential to benefit from university, particularly in areas where university participation is already low.

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

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.

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[1] http://admissions.yale.edu/financial-aid

[2] http://www.admissions.college.harvard.edu/financial_aid/index.html

The Case for Fairer Fees

Sir Peter Lampl makes the case for means-tested fees as new research suggests that fear of debt is a significant concern.

Today, the Sutton Trust has published new evidence that the level of fees may be having a disproportionate deterrent effect on young people from low income homes.

Research by Ipsos MORI for the Trust shows that fear of debt and cost concerns could be deterring significant numbers of young people from going to university, or choosing the most appropriate place to study.

While it remains true that four in five 11-16 year-olds aspire to enter higher education, children from single parent families are nearly three times as likely to say their family couldn’t afford for them to be a student as those living in two parent homes. Youngsters also start to worry more about student debt as they get older.

The polling also shows that many potential students expect to pay more to attend elite universities – such as Oxford, Cambridge, Durham or Bristol – than other universities.  This is despite the fact that almost all universities are now charging close to the £9000 maximum for their courses.

This latest polling follows a report in August by the Independent Commission on Fees, chaired by Will Hutton, showing that around one person in 20 who would have been expected to apply to university in 2012 if the recent trend of increasing application rates among 18-years-olds in England was maintained did not do so. This equates to approximately 15,000 ‘missing’ young applicants.

It also comes after the latest UCAS figures for 2012-13 showing that the number of young people from the UK and the EU who have been accepted this year is 56,000 below that for last year. This figure included under-recruitment at seven Russell Group universities.

I think that taken together these pieces of evidence suggest that the Government has gone too far in allowing universities to set fees of £9000 each. The new fees are simply too high, and the cuts in teaching budgets too deep. Taken together, they make Britain a complete outlier by international standards.

I supported the £1000 fee in 1998 and I backed the increase to £3000 in 2006, because I believed that they struck a reasonable balance in funding between the state and the individual. Had the Government opted for an increase to, say, £5000, this might have been reasonable.

But £9000 is a step too far. Of course, ministers will argue that the repayments system is fair because young people need not make any repayments below an income of £21,000, as opposed to £15,000 in the old system. But the size of the cumulative debt for tuition is trebled and daunting to an increasing number of young people from low and middle income families, and their parents. Those who currently pay independent school fees can simply pay these fees up-front.

University vice-chancellors have toed the party line, arguing that extra fees will boost academic coffers and not alienate students. But the Oxford experience suggests this is not how they truly feel.

My old university recently announced a £300 million fund that builds on an exceptional gift of £75 million by Michael Moritz, a fellow alumnus based in California, that will result in no increase in tuition fees for low-income students. This surely is a bold statement – backed up by £300m – that they believe fees are a deterrent.

What would I do about it all? Put simply, I think we now need to move to needs blind admissions for universities, just as happens in many US universities. We treat young people as if they are financially independent at 18, which is plainly ridiculous. Why should a boarding-school student pay the same as a kid from a council estate? Before the era of tuition fees the student maintenance grant was means-tested, so there is no logic in treating fees differently. It could be paid for, in part, by savings from state-subsidised loans.

I saw a better vision of university funding in action over the summer when the Sutton Trust ran its first US summer school for low and middle-income British students at Yale. If those students went to a top US university, those from families with an income below £40,000 would get their higher education free.

The Government should think again about its fees and loans package. The evidence is mounting that the new fees are seen as too high, particularly by those on modest means. Ministers should means test the fees, so that merit not money is the key consideration in a young person’s decision.