There are lots of ways to be more transparent about university finances

We ask students to make a considerable investment in their degrees. Universities have huge revenues and must be more transparent about where this money is going.

DfE and the Treasury might consider a little transparency experiment of their own.

In 2017, undergraduate tuition fees in England were capped at £9,250 a year.

That year the Department for Education started to publish official forecasts of higher education student numbers, student loan outlay and student loan repayments in England.

It said that the RAB charge on those loans – the proportion of loan outlay that was expected to not be repaid when future repayments were valued in present terms – was estimated at 45 per cent.

In other words, collectively at least, students were only paying £5,088 a year. The rest was intended to be picked up by the government.

It seems like a long time ago now that government – or indeed the media – used to talk about a mixed system of financing students.

Now we hear a lot of faux outrage about some students being unlikely to ever earn enough to pay back their debts – despite that write off being a policy intent. It, along with the repayment threshold, is how the system delivers the government’s main contribution within the loan system.

That’s not to say that students ever saw that – because accepting there was a subsidy always depended on a) students somehow seeing their own student loan statements as just one contributing to an overall aggregate, b) the write-off part of the subsidy is only set to kick in decades after the student takes out the loan, and c) in the meantime what people do see is a growing “balance” on their annual statement.

If you’re designing a subsidy that the public will be grateful for, my top tip is to never design it (or at least communicate it) in such a way as to suggest that you’ll get a bung, in a few decades, if you don’t do very well in life.

But anyway, that was 2017. Here in 2025, IFS has the RAB at 10 per cent.

In other words, (FT UG) students this autumn will pay £8,581 a year – only this time around, while paying 68 per cent more for the privilege, they’ll almost certainly be getting a worse experience – as providers cut modules, bursaries, hardship funds, catering subsidies and spend on IT.

The big difference is that less successful graduates will pay even more than they used to (because policy change has held down the repayment threshold and extended the loan term) and richer graduates will pay much less (because interest on loans is now RPI rather than RPI+3%)

It’s all a problem because when I led some work on students’ perception of value for money a few years back (for OfS, no less) we found that students were far more likely to consider quality and input measures as proxies of value for money, rather than thinking about the outcomes of getting a degree.

Dirty business

You’ll see here (where amusingly, OfS left a screenshot from The Thick Of It that I used in the presentation as the title screen) we found that there are basically two categories of factors that influence how students perceive value for money – hygiene factors and motivator factors.

Hygiene factors were baseline requirements that needed to be met before students can begin to appreciate the broader benefits of higher education – adequate contact hours, good teaching, and transparency about where their money goes.

What we found was that providers often try to sell prospective students on the motivator factors – career prospects, learning gain, life-changing experiences – but that students find it impossible to appreciate them when the basic hygiene factors aren’t up to sniff.

When students expressed dissatisfaction, they almost exclusively focused on input measures, while those who felt they received good value mentioned both categories.

Of course it’s really worse than 68 per cent. While maintenance loans haven’t been increasing with inflation, they have been increasing – pushing the cost up beyond a 68 per cent increase, but fatally not providing enough support to enable students to take advantage of what’s on offer.

Paul Gratrick’s longitudinal research (covered elsewhere on the site this morning) reinforces and expands those findings. His work on the “temporal location” of student value judgments builds on that hygiene-motivator framework – students perceive value in the services they actually use, and students who don’t engage tend to rate those same services negatively rather than neutrally.

It’s like paying top whack for a ticket to Alton Towers. Only 3 of the rollercoasters are out of service, it’s raining, and it’s a Bank Holiday – so you only end up on one of them anyway.

As students face increasing financial pressures – working longer hours in part-time jobs, commuting longer distances to save on accommodation, or struggling with basic living costs – they just have less time and fewer resources to make the most of the things they are funding. If they then try to engage with the time and resources they do have, only to find more of the “stuff” being stretched across more students – guess what’ll happen next.

Add in the regret thing – caused partly by an absence of choice and over-specialisation that looks set to be exacerbated by the cuts raining down – and the inevitable decline in the graduate premium that’s caused largely by increases in the minimum wage, and if even if students did understand the economics of it all, they’ll be more and more miserable.

That said, whenever someone looks at this, transparency about fee expenditure dramatically improves value perceptions. Paul’s data showing how students who understand where their fees go are much more likely to report good value (73 per cent vs 44 per cent) matches the 2018 findings on the importance of transparency as a fundamental hygiene factor.

The old joke about Transparent Approach to Costing (TRAC) data doing almost nothing to improve transparency is what it is – but the more that students’ fees go on servicing debt and the dumped-on-providers costs of supporting students with particular characteristics and needs, the less likely that providers will offer the sort of programme-level comparisons that students told us they wanted back in 2018.

That’s a shame – because even if students were angry about where their money went, at least they’d know – and either be able to suggest ways to spend less of it, or join in calling on the government to provide more of it. Hiding the realities treats students like consumer lab rats – putting extra effort into enabling students to know as much as the governors would give them a proper stake.

The name’s bonds

Of course the real driver of VFM in HE has always been the Treasury, and there’s doom on the horizon on that front. Every point that the government lends to students is borrowed by the Treasury via the bond markets – but the government’s borrowing costs have tended to be lower than the interest rates it charged on student loans. Three years ago, just before the most recent student loans reform, it was expecting to pay 1.4 percentage points less than the rate of RPI inflation.

But that has been changing. In January 2024, IfS said that the cost of government borrowing as measured by the 15-year gilt yield had risen from 1.2 per cent to 4.0 per cent over the previous two years – so the government was expecting to pay 1.6 percentage points more in interest on its debt than the interest rate it charges on student loans.

And since then, Trump. The cost of government borrowing as measured by the 15-year gilt yield is now just shy of 5 per cent – about 1.8pp higher than the interest rate.

The negative spread transforms what was previously profitable for the Treasury into a massive liability – what was already projected to be a £7.3 billion loss on the 2023 university cohort has now grown even larger by an estimated additional £1-2 billion annually.

That’s obscured in official reporting – neither the ONS nor the Department for Education’s backward-looking calculation methods account for the rapid increase in borrowing costs, but ONS is bound to clock the problem soon enough, and the Treasury will be looking for reforms to recoup some of its losses.

Students and universities might have hoped that a partial reversal of the 2022/23 reforms – putting some real interest back on student loans – would have helped fund some spending in the here and now. Instead there’s a real danger that students are expected to pay even more again for less. That’s unlikely to be a bit of transparency they’ll be treated to.