Should universities be charging master’s deposits?

A particularly upsetting story has emerged on social media that suggests that an applicant to a masters programme may have died by suicide having had a deposit for the tuition fees retained.

Jim is an Associate Editor at Wonkhe

A tweet from last week from an apparent applicant said that they had lost £1,000 in a deposit to a university because, while they met the offer requirements, it became clear that they hadn’t made enough money to fund their living costs after two years saving in full time work.

It’s important to say that as yet the story is not confirmed, and if it is then an inquest is the right forum in which to go on to determine cause of death. But what the story does raise is a set of questions about charging non-refundable deposits for master’s courses – a widespread practice that seems to have come as quite a surprise to people.

Unlike (home) undergraduate fees, master’s fees are pretty much unregulated in the UK, and the practice of charging an acceptance deposit is very common – both for home students (most of whom hope to go on to fund that deposit and at least a percentage of their fees via student finance) and international students.

In most cases these deposits are non-refundable, except where applicants fail to meet the conditions of their offer, and/or they are refused a visa or entry clearance to enter the UK.

Most of these deposits hover around the £1-2,000 mark – one I’ve seen for international students is £4,000.

I can think of lots of good reasons why applicants might not in the end be able to join a master’s programme – especially this year when a cost of living crisis has emerged over recent months, student finance has failed to catch up and so those who really struggle for money will be having second thoughts and may need any deposit they paid back to heat their house this winter.

It’s shocking enough that this has become common without most of us noticing – but is it legal? Under consumer protection law – which sometimes applies to master’s courses, and sometimes doesn’t – businesses must make sure their terms are fair.

The Competition and Markets Authority says that they can ask consumers to pay a fee if they cancel – or to keep some of an upfront deposit – to cover their losses. But the amount they keep must be in proportion to what they are actually losing as a result of a cancellation:

Terms and conditions that don’t follow this approach – for example, where the business keeps a large upfront deposit which bears no relation to its losses – are likely to be unfair. As a general rule, deposits should only be a small percentage of the total cost.

It might be a pain, and disappointing if a student doesn’t enrol – but I am struggling to identify any significant losses if the odd student doesn’t turn up.

The problem, as we found during the pandemic, is that the CMA couldn’t show any less signs of interest in higher education if it tried. Its guidance from 2015 explicitly only covered undergraduates. Promised liaison mechanisms between CMA and the Office for Students don’t seem to be working, or at least producing anything meaningful. The SFC and HEFCW don’t seem very interested either. And the Office for Students’ thus far unfulfilled promises on doing something meaningful about the enforcement of consumer protection law date back to 2017.

As I’ve said before on here, folks might loathe the framing, but while we have fees the need to communicate, strengthen and help students to enforce their consumer rights has never been stronger.

4 responses to “Should universities be charging master’s deposits?

  1. “It’s shocking enough that this has become common without most of us noticing”

    I don’t buy this or is it just that this was a home student that it suddenly mattered? UK Universities have treated international students as cash cows for years.

    Is it most staff don’t know or don’t want to know where the funds for their internal research leave is coming from?

  2. I think most people know about high fees for international students Alan – it’s the un-refundable deposits that I think has come as a shock

  3. The problem is without an equivalent to UCAS for PGT programmes, there is no means to control applications without a deposit. The deposit is the equivalent of going firm in UG language and gives Universities the ability to have some indication of likely enrolees. This is more than just the odd student…. The implications of getting those intake forecasts materially wrong are serious. Needs some creative thinking to look at the issue from both perspectives.

  4. The analogy is with parents booking spaces at independent schools – the courts will enforce the non-return of a reasonable deposit or even the liability to pay a full term’s fees if the child fails to arrive.

    Here, providing the documentation is crystal-clear and providing the deposit is a reasonable proportion of the potentially lost fee income arising from a vacant space within a PGT course with demonstrable break-even costs, the term within the business to consumer (U to applicant) contract to admit is likely to be fair and hence enforceable under the Consumer Rights Act 2015.

    At a guess 10% of the PGT fee is not unreasonable and could be retained even if the place is filled by somebody else – but the U could, of course, use its discretion in terms of applying the ‘penalty’ of not returning a deposit if the course is still ‘profit-making’ even with the particular unfilled place (although often Us do not know with any accounting accuracy just when a specific course breaks-even taking into account contribution to overheads!).

    The same legal principles apply to the filling of undergraduate courses but I have never heard of a U demanding cash compensation where an offeree fails to turn up or a new student drops out within a few weeks, thereby breaching the contract to admit or the contract to educate that the former turns into. Where, however, the U does not want too many new students who have met the conditional offer after all, it must offer adequate cash to bribe the potential student to defer arrival by a year or pay compensation if it were to breach the contract to admit by turning away the customer.

    See discussion in Ch12 of The Law of Higher Education (OUP, 2021 third edition).

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