The other day when I was out delivering training for SUs, one of this decade’s perennials came up again.
Student leader discussing their experience of their provider describes how different their course and wider set of services was to that which was advertised to them.
We had an interesting discussion along the lines of “what do you think makes that possible?” Usually that conversation draws out the distinction between chooser and user, or the lack of awareness that students have of their rights, or the faulty power dynamics involved in a sector that retains endless trappings of “you’re lucky to be here” when it’s usually the other way around these days.
But one of the officers – an international PGT as it happens – piped up and said:
It’s because they’ve had your money already.
He might be on to something you know. In its guidance on unfair contract terms, revised in July 2026, the Competition and Markets Authority says:
One legitimate way for the consumer to obtain compensation from a trader is by exercising the right of set-off. Where a consumer has an arguable claim under a contract against a trader, the law generally allows the consumer to deduct the amount of that claim from anything they have to pay. This helps prevent unnecessary legal proceedings.
It also says:
If the right of set-off is excluded, consumers may have (or believe they have) no choice but to pay in full, even when there is something wrong with what they are buying. To obtain redress, they then have to go to court. The costs, delays, and uncertainties involved may in practice therefore deprive them of their rights.
Well, yes. If your course has been awful and you’re paying in instalments, it’s not as if you can withhold a couple of those instalments without risking not getting your qualification – and in many cases, risking being shopped to UKVI.
But more broadly, terms are more likely to be unfair:
where consumers are required to pay in full (or nearly in full) before the business has finished carrying out its side of the contract. For example, this includes where a substantial amount of work is carried out for the consumer after full, or nearly full, payment has been made. Generally, payment for services falls due after the service has been carried out and an invoice is given, so any term which requires substantial earlier payment may be unfair. For example, the consumer could lose their payment if the trader becomes insolvent before completion of the contract. Such terms also tend to remove or weaken the trader’s proper incentive to perform work with reasonable care and skill.
Or indeed, to deliver the material offer that was originally made.
Some of that has been in the guidance for years. The first two passages are near enough identical to the 2015 version that this one replaces. But the July 2026 revision sharpened the language considerably, and I’ll come back to exactly how.
One of the other officers chimed in and said:
Is it the same thing as why landlords can’t ask for more than a month’s rent now
During the passage of the Renters’ Rights Act, the government was pretty clear about the underlying problem in housing. Tenants lacked “the bargaining power to effect change”.
Ministers said that defenders of advance rent “seriously downplay the imbalance between landlords and tenants”, because in a contested market the supposed freedom to agree six months’ payment upfront can push people into agreements that stretch their finances to breaking point. When the Act passed, the government boasted that the scales had been tipped against tenants for decades and that it was now levelling the playing field.
Students might reasonably wonder why the same analysis disappears at the university gates. An international applicant doesn’t meaningfully negotiate a demand for £10,000 before a CAS is issued. A current student doesn’t freely agree that every instalment must be paid regardless of an unresolved dispute when refusal can mean withdrawal from the course and loss of visa sponsorship.
The power imbalance is at least as obvious. Yet instead of limiting prepayment or protecting the money, the regulatory answer is still to publish the terms clearly.
Set-off and match
Set-off is not a wild concept. It is the basic idea that when two parties owe each other money under the same contractual relationship, the consumer should not always have to pay the trader in full and then start separate proceedings to get some of it back.
Imagine that you’ve had work done on your house. The final invoice is £5,000, but there is an arguable £1,000 of defective work. The consumer law answer is not necessarily that you can refuse to pay anything. But nor should the builder be able to insist on the whole £5,000, forbid any deduction, and leave you to pursue the £1,000 through the courts afterwards.
You pay what is properly owed. You retain a reasonable amount reflecting the arguable claim. There is then a fair process for resolving the difference.
Universities don’t operate like that. The default is usually that the fee debt and the complaint are separate matters. You pay the fee by the deadline. You can complain about the course through another process. If your complaint is eventually upheld, someone might decide whether a refund or compensation is appropriate.
It is “pay now, complain later” dressed up as administrative tidiness.
That distinction matters. A retrospective complaints system isn’t an adequate substitute for the right to set off an arguable claim. The whole point of set-off is that the consumer retains some leverage while the dispute is unresolved. Making the student surrender all of that leverage and then ask the provider to give some money back transfers the financial risk, the delay and the inconvenience entirely onto the student.
And the university is not just any creditor. It controls the student’s access to teaching, assessment, facilities, results, progression and eventually the award. Where the student is sponsored under the Student visa route, it may also control whether continued non-payment results in withdrawal of sponsorship and reporting to UKVI.
The result is that a student withholding £1,000 over an arguable contractual breach is not taking the same risk as a householder disputing a builder’s invoice. The student may be risking the value of the entire course.
Loan and behold
For most home undergraduates, the issue is slightly stranger because the student never handles the tuition fee money at all.
In the English system, where the full-time undergraduate receives a Tuition Fee Loan, the Student Loans Company pays the fee directly to the provider in three instalments – 25 per cent at the start of term one, another 25 per cent at the start of term two and the remaining 50 per cent at the start of term three. The student becomes cumulatively liable for 25 per cent, 50 per cent and then 100 per cent of the annual loan.
On one level, that looks like the sort of staged payment arrangement the CMA regards as preferable to demanding everything up front. Universities incur costs across the year, and payments are spread across it.
But it is staged payment without student control.
The student can’t contact SLC in December and say that the promised contact hours have not appeared, the advertised specialist modules have been withdrawn, the equipment has never worked and £1,500 should therefore be held back from the next payment.
The university confirms attendance. SLC makes the scheduled payment. The student acquires the corresponding loan liability. The contractual dispute follows a separate track.
Attendance is not satisfaction. Confirmation that a student remains enrolled tells us nothing about whether the provider is performing the contract properly. But in the payment system, continued attendance is effectively treated as the trigger for further money to flow.
There is no student-controlled mechanism equivalent to set-off. The student has to allow the university to receive the money, accept the associated loan liability and then pursue a refund. Even if they ultimately secure one, the process depends on the provider correcting or adjusting the position.
Some of that machinery is statutory rather than invented by universities. Terms which merely reflect mandatory statutory or regulatory arrangements have particular protection under the Consumer Rights Act. A university can’t casually rewrite the SLC payment schedule.
But that doesn’t immunise everything surrounding it. Universities still choose their own terms on when fees are treated as contractually due, what happens when a student disputes a sum, whether complaints affect payment obligations, whether refunds are available and what sanctions can follow.
For SLC-funded students, the question is therefore not just whether the student has a formal legal right of set-off. It is what the functional equivalent is supposed to be when the payment architecture has removed their ability to exercise it.
As it stands, the answer appears to be “make a complaint and hope”.
Debt to rights
The sector’s existing complaints approach tends to start from the opposite direction.
The OIA says that where providers have published clear information about payment requirements and deadlines, it will usually be reasonable to suspend or terminate the enrolment of a student who does not pay. It also says providers must give students a route to challenge decisions relating to fee payments, and that international student cases should be dealt with promptly so that errors are identified before a visa is curtailed.
That is understandable where the debt is undisputed. Universities have to collect their income. A student can’t just decide that fees are optional, ignore correspondence and continue indefinitely.
But the CMA guidance exposes a missing distinction. There is a difference between:
I cannot pay the instalment.
I do not intend to pay the instalment.
And:
I accept that most of the instalment is due, but I have an arguable claim arising from your failure to deliver the contract and am withholding a proportionate amount.
Almost all university debt policies collapse all three into “non-payment”.
The student may be told that complaints do not suspend the obligation to pay. The entire outstanding sum remains due. Debt sanctions continue while the complaint is considered. Any payment made will be allocated against whatever debt the university chooses. No deduction, counterclaim or set-off is permitted.
That is the practical problem the CMA is describing. The student is required to pay the whole amount even when there may be something wrong with what they are buying. The route to redress comes afterwards, carrying costs, delay and uncertainty that may deprive the student of the right in practice.
It becomes still harder to defend where the university can impose the sanction without obtaining a court judgment. The guidance identifies concern wherever a trader “can impose a sanction on the consumer (without first going to court) where a consumer is in breach” – any breach at all, with failure to pay the whole price offered merely as an example.
A university can therefore decide that the whole fee is due, reject the student’s proposed deduction, classify the sum as debt, terminate registration and rely on the termination to end further delivery. In an international case, the consequences can extend into immigration status.
That is quite a lot of unilateral power arising from a sum that may genuinely be disputed.
It is also worth noticing what the sector regulator does and does not protect. The Office for Students’ proposed new ongoing condition C6 on treating students fairly gives, as an example of failing to treat students fairly, “withholding an award of a qualification or graduation for unpaid fees that are not tuition fees”.
The equivalent guidance to initial condition C5 says much the same about aggressive pursuit of academic sanctions for “non-payment of non-tuition fee debts”. Library fines and accommodation arrears, then. Tuition fee debt – the only debt against which set-off would ever be exercised – is left out.
Revised and resubmitted
I said earlier that some of this is not new. The CMA’s unfair contract terms guidance carries the reference CMA37, and the version published on 22 July 2026 is a full replacement for the one issued on 31 July 2015. The passages about set-off itself appear in the 2015 text in near enough identical form. So does the observation that advance payment leaves consumers exposed to insolvency, and so does the point about removing the trader’s incentive to perform with care and skill.
Anyone tempted to argue that the sector has been ambushed should read the guidance it has had for eleven years.
What has changed is the emphasis, and it has changed in a direction that ought to worry finance directors. On the debt sanctions just described, the 2015 text was concerned only with sanctions imposed because the consumer had not paid the whole price when demanded. The current version widens the trigger to any breach at all.
And “accelerated payment” clauses, which the 2015 guidance illustrated only with a consumer refusing to let work start, now expressly catch the consumer who “does not make payment when due” – which is to say, the clause under which missing one instalment makes the whole year’s fees fall due immediately.
Then the guidance turns to the money itself, and here it moves further still. The line about payment falling due after the service has been carried out and an invoice given is new, and it sets a default from which universities now have to justify departing. Advance payment has been promoted from something with an “indirect effect” on set-off to a standalone marker of unfairness in its own right. Stage payments must now reflect “only” the trader’s spending, where the 2015 text asked merely that they “fairly reflect” expenditure.
Full payment in advance is now framed as something for which there must “exceptionally” be a good reason. And where money is taken up front, the secure arrangements holding it must “protect it in the event of the trader’s insolvency” – a requirement that simply did not exist in 2015, where the same mechanism did nothing more than stop the trader spending the money before a dispute was resolved.
Pay before you play
The position is most direct for self-funding students.
Some are offered instalment plans. Others – especially international students on one-year PGT courses – may be required to pay large sums before enrolment, with substantial further payments due before much of the course has been delivered. In some cases, the whole annual fee is paid in advance.
The CMA identifies two particular problems with that. The consumer may lose the payment if the trader becomes insolvent before completing the contract. And taking the money early removes or weakens the trader’s proper incentive to perform with reasonable care and skill.
It would be too simple to conclude that all advance tuition payments are therefore unlawful. Universities make commitments in advance. Staff have to be recruited. Timetables, rooms and placements have to be arranged. A place accepted by one student may not realistically be sold to another halfway through the year – although the idea of “places” or courses being “full” looks like mythology in many providers these days.
The question is whether the payment structure is proportionate to those costs and risks – and whether it leaves the student with an effective remedy when performance is disputed.
Dividing a large annual fee into three arbitrary dates and threatening withdrawal if any one of them is missed does not meet that test. A stage payment is supposed to correspond, at least broadly, to performance or expenditure, and to leave the student holding an amount reasonably sufficient to exercise an effective right of set-off. It should not merely be an accelerated debt-collection device.
Crucially, where full payment is required in advance, the arrangement is more likely to be fair only where two things are true. First, that “exceptionally there is a good reason” for demanding it. Second, that the amount is:
held under secure arrangements which protect it in the event of the trader’s insolvency and guarantee that it will not be released until any dispute is resolved.
That sounds more like escrow than an ordinary university (or, I might add, franchise partner’s) bank account.
Universities requiring the whole fee in advance are unlikely to be treating it as money held on behalf of the student pending satisfactory delivery. It is treated as the university’s income. The institution has the benefit of the cash. The student bears the delivery risk and then has to pursue the institution’s own processes if the bargain is not honoured.
A fee by any other name
There is a related issue with international student deposits.
The word “deposit” makes a payment sound small, provisional and attached to the reservation of a place. But some institutions require sums running into several thousand pounds before issuing a CAS or allowing enrolment.
The CMA says a genuine deposit can sometimes be retained if it operates as a binding reservation, is disclosed at the earliest opportunity and has precise, clear and narrow conditions governing when it is non-refundable – conditions narrow enough, it adds, that the trader does not have “wide discretion” to keep the money.
But it also says that such a deposit will not normally amount to more than a small percentage of the price. A larger prepayment may be a disguised penalty.
Calling half of an annual tuition fee a “deposit” does not make it one. It may simply be a substantial advance payment with restrictive refund conditions.
There may be legitimate reasons to require evidence that an international applicant can fund their studies. There may be costs associated with admissions work, CAS issuance and places that cannot be filled at short notice. But those arguments justify recovering reasonable, evidenced losses. They don’t automatically justify retaining a large payment whenever a student does not enrol, regardless of the circumstances or the university’s actual loss.
It is worth noting that this was raised with the OfS during the C5 consultation. A respondent asked it to work with UK Visas and Immigration to agree a position on non-repayment of deposits for visa-sponsored students. The OfS declined, on the basis that the relevant prohibited behaviours “quite closely reflect existing legal requirements with which traders in any sector are required to comply”. Those provisions all govern what a provider may keep when a student cancels. None of them touches whether the provider should be demanding the money in the first place.
Going concern, going, gone
There is an awkward crossover with OfS’s new financial risk categories. Category 4 doesn’t mean that a provider is feeling a bit wobbly. It means acute financial concerns – consistently negative operating cashflow, a short-term risk of running out of cash, and possible reliance on borrowing or third-party support to keep operating. Category 5 means market exit.
At that point, the insolvency risk in the CMA guidance is not exactly hypothetical. How could a provider known by its regulator to be at material risk of closure continue requiring an international student to pay a year’s fees in advance, sweep the money into its general working capital and leave the student as an unsecured creditor if it collapses? Surely the choices are to stop demanding substantial prepayment, collect fees in stages as teaching is delivered, or place the money somewhere genuinely protected.
And “somewhere protected” ought to mean more than a separate account with the university’s name on it. If the money still belongs to the provider and can be reached by its other creditors, it has not really been protected at all.
To be fair to the CMA, it does not say which mechanism it has in mind. The guidance asks only for “secure arrangements which protect it in the event of the trader’s insolvency”, and leaves traders to work out what satisfies that. But the test is a demanding one, because very little does. An arrangement that survives a provider’s failure has to put the money beyond the reach of that provider’s creditors, which in practice means something like escrow, a trust, a bond or insurance. A designated account on the university’s own balance sheet is not one of those things.
In England, OfS almost gets there. A student protection direction can require a provider to explain how it will handle complaints, refunds and compensation – including how it will fund them when its finances are already stretched. But that is planning for what happens after the trouble arrives. Protecting future fee payments would stop the provider using the money of students it may never teach to keep itself alive for a few more weeks.
In fact, ring-fencing substantial advance payments looks like an obvious requirement for every provider placed in Category 4. Otherwise the regulator may know that the provider is at material risk of market exit, the provider may know, its lenders may know – but the student is still expected to transfer tens of thousands of pounds into the danger zone.
Ironically, complying with the law (or at least CMA’s revised interpretation of it) would probably push some providers currently in Category 4 into Category 5 (Market Exit) and some in Category 3 into Category 4 (material risk of it).
Oddly, none of this appears in C6. The prohibition on writing away a student’s right of set-off is there – and it is not merely proposed. It already sits on the OfS prohibited behaviours list as part of initial condition C5, which means it binds anyone registering now, and the C6 consultation simply extends the same list to providers already on the register.
Under it, a provider must not use key documents containing provisions which have the effect of “excluding or limiting the legal rights of the student in the event of the provider’s total or partial non-performance”, and the list adds that “this includes the student’s right to offset money they owe to the provider against any claim”.
C6 would also require clear refund and compensation policies, and tell providers to identify risks to delivery and act early. But it says nothing about whether the money needed to pay those refunds should still be there.
In fact, institutional closure is deliberately carved out of C6 and handed over to C4, under which the OfS can require a bespoke Market Exit Plan once it decides that closure presents a material risk. That may eventually involve asking how refunds and compensation will be funded. But there is no automatic requirement to protect the fees being collected in the meantime – no escrow, trust, bond, insurance or ring-fenced account.
So a provider can be in acute financial difficulty, require an international student to pay a year in advance, use that student’s money to maintain operating liquidity and only later be asked how it proposes to fund the refund if the course disappears. That is not really student protection. It is allowing students’ prepayments to finance the period immediately before they need protecting.
Prudence and prejudice
To be fair, there is a timing problem that explains a good deal of this. The C6 consultation ran from 16 April to 9 July 2026. The revised CMA37 was published on 22 July 2026. The regulator was drafting against the 2015 text, in which advance payment was a knock-on effect rather than a standalone unfairness, and in which the requirement for secure arrangements said nothing at all about surviving insolvency. There was, in short, considerably less to import than there is now.
That is not a small point, because the condition C6 would replace is literally titled “Guidance on consumer protection law”. The whole architecture is pegged to what the CMA says. The CMA has now said something materially different, thirteen days after the consultation closed and precisely on the questions OfS did not cover. Finalising C6 against superseded guidance would be an odd way to run a regime whose stated purpose is to reflect consumer law.
But there is a deeper reason to expect OfS to hesitate, and it is structural rather than accidental. OfS is the only body in this chain that is simultaneously the prudential regulator and the consumer regulator. Those two roles give opposite answers. As consumer regulator, it ought to require that students’ prepayments are protected. As prudential regulator, it knows precisely what ring-fencing those prepayments would do to a provider with consistently negative operating cashflow. The CMA never has to make that trade, which is why it could write the requirement into CMA37 without flinching.
You can see the tension in the consultation itself. OfS justifies the reform partly on the basis that “there are increased risks to financial sustainability in the higher education sector compared to 2018”, then declines to require anything that would protect student money against exactly that risk. And when it explains how it can interfere with institutional autonomy at all, its answer is that its requirements “are consistent with existing legal requirements” – a defence that works for restating consumer law, and evaporates the moment the regulator starts telling universities where to keep their cash.
None of which means a choice was consciously made. It may just be that the guidance arrived too late. But the effect is the same either way. The regulator best placed to require protection of student prepayments is the one with the strongest institutional reason not to.
Fair pay, fair play
None of this means that writing “set-off” in an email should operate as a magic spell.
A student shouldn’t be able to transform a vague complaint about teaching into an entitlement to withhold the entire fee. A claim would need to be genuine and arguable. The amount retained would need to be proportionate. The student should pay the undisputed balance and engage with a process for resolving the rest.
But the university would have obligations too.
Its terms should distinguish disputed sums from ordinary arrears. It shouldn’t suspend or withdraw a student solely over a reasonably quantified, bona fide disputed amount while an expedited process is operating. It shouldn’t demand payment of the whole sum as the price of accessing that process.
There should be a rapid initial decision on whether the claim is arguable. That isn’t the same as deciding the whole complaint. It’s a triage stage capable of filtering out fanciful claims while protecting students who have raised a serious issue.
For large or consequential disputes, there should be independent adjudication. This is not merely a preference of mine. The revised guidance adds, as a new condition of fairness, that terms demanding payment in full are more likely to be fair where “there is a clear and fair process for the consumer and the trader to follow to resolve disputes about how much the final price should be”, and that “depending on the sums at stake and the nature of the product, this might have to be an independent adjudication”. Nothing equivalent appeared in the 2015 text.
A university marking its own contractual homework while holding both the money and the power to terminate the consumer is not a balanced dispute-resolution system. It’s not clear that the OIA would, at present, count – and anyway, consumer law applies UK-wide.
Self-funding students could be allowed to pay the disputed amount into a protected account. SLC-funded students need a mechanism through which a successful complaint can produce a prompt adjustment to the fee and associated loan liability – not just a discretionary payment several months later.
And universities reviewing their terms should be searching for familiar formulations:
All fees must be paid without deduction, counterclaim or set-off.
The submission of a complaint does not affect your obligation to pay.
Any failure to pay any amount by the deadline may result in suspension or withdrawal.
Those clauses may have felt like standard debt-management boilerplate. Read alongside the revised CMA guidance, their effect looks a lot more significant.
A rights issue
The CMA’s higher education guidance has spent more than a decade telling universities that students are consumers. The sector has responded by producing longer terms and conditions, larger pre-contract information sets and more elaborate complaints procedures.
But rights aren’t made real by placing them in a PDF.
They are made real through the allocation of power when something goes wrong. Can the consumer retain money? Can the trader impose sanctions? Who carries the risk while the dispute is being decided? Does the provider have a financial incentive to resolve the problem promptly, or does the student have to spend months pursuing money that has already disappeared into the institution’s accounts?
For home undergraduates, the state-backed payment system removes the student’s direct leverage. For self-funders, university terms often require the leverage to be surrendered before the course has been delivered. For students paying by instalments, debt sanctions may make exercising it practically impossible.
Maybe the persistent gap between the course that was advertised and the experience that is delivered is not only about information, awareness or culture.
Maybe the officer had it right the first time.
They’ve had your money already.
