We need fairer fees

University tuition fees were the surprise election issue this year. Jeremy Corbyn promised to scrap them. Theresa May has since raised the level when graduates start to repay their loans, as well as saying she wants a “major review” of student finance.

Disillusion with the fee system has been building for some time. Since the £9000 fees were introduced, Sutton Trust research has found that English students have by far the highest levels of debt in the English-speaking world, owing around £46,000 when they graduate.

It is right to look again at what students pay to go to university. But as we do so we must address the unfairness of the current system. A new Sutton Trust report offers a way forward that is fairer to students and the taxpayer.

At present, graduates face debts averaging £46,000, plus interest rates of up to 6.1% a year. Because poorer students borrow more – since loans replaced maintenance grants – their debt is nearly £52,000 on average. They repay at 9% on income over £25,000. The debt is written off after 30 years.

A broken system

But the system makes no sense. New analysis for the Sutton Trust by London Economics shows that four in five students now won’t pay off their full debt, and that the Treasury will recoup barely half of all student loans. Moreover, a system where someone from a council estate has higher debts than someone who has been to private boarding school, is manifestly unfair.

The cost of higher education shouldn’t just fall on the taxpayer. Graduates earn more and should contribute to the cost of their degree. But the trebling of fees in 2012 pushed the balance too far in the wrong direction.

While the new system hasn’t put off poorer students overall, there remains a huge imbalance, especially at more selective universities, where better-off students are ten times more likely to be admitted than the poorest. We believe the number of disadvantaged students would be much higher without high fees.

A better way

That’s why I’m urging the Chancellor, ahead of next week’s Budget, to consider a different approach. Instead of charging every student the same fee, make courses free for those from the poorest households and have staggered fees for the rest, including higher fees for those from households earning over £100,000 a year. At the same time, bring back maintenance grants so poorer students don’t have to borrow for all their living costs.

Doing that would cost around £3 billion a year more – about the same as the long-run costs of the PM’s little-noticed change to the repayment threshold, from £21,000 to £25,000. However, it would cut debt for the poorest 40% of students to just £12,700 and it would increase the proportion of loans repaid from around half to two thirds.

The time has come for a change. It is right that graduates should contribute to the cost of their education, and they should share that cost with government. Means-testing fees and bringing back maintenance grants would offer a more affordable and fair alternative than either the current system or the opposition proposals to abolish fees outright.