Tuition Fees... The Debate.

The recent Browne review of university funding has concluded that from September 2012 universities will be able to charge students up to £9000 per year, up from the current level of £3,290. This is obviously very disappointing for students and means that graduates with a three year course could face debts around £38000 (if the maximum fees are charged). I want to examine why these changes have occurred and what effects they will have on higher education. I will not dwell on the politics of the situation as the hypocrisy of the Lib Dems has been very well documented recently. I want to concentrate on the economics of the matter.

Firstly, the rise in tuition fees has been necessary following the recent news that 40% would be cut from the higher education budget over the next 4 years. The rise in tuition fees is therefore needed to recover these losses. Having met with Richard Williams, Pro-Vice Chancellor of Leeds university, he disclosed that currently it costs Leeds university £21000 per medical student per year to educate. Therefore it seems that at present these students are getting an incredibly good deal and maybe they should be charged higher fees, especially as Doctors are well paid. Without the tuition fee rises the quality of teaching would inevitably fall.

Secondly, will the tuition fee rises lead to an elitist situation where only the very rich can afford to go to university? Well history tells us this may not be the case. The Higher Education Act of 2004 which allowed fees to rise to the current level from £1000 per year sparked massive debate. Many thought that this decision would reduce the number of university students but in fact the opposite has been true where now universities are not able to cope with the number of applicants. Now i know that the increase this time around is a much larger increase  (in real terms) but history may indicate that demand for higher education may not fall by as much as expected. What is more concerning about the top up fees is that universities may now try and compete on price. This may mean that very strong candidates from poorer backgrounds may be disincentivized to apply to the best universities (which will charge the maximum fees) because they feel they can not afford to. Oxford university has said however that it will charge lower fees to students from deprived backgrounds as well as increasing the number of bursaries available. This price competition situation looks unlikely to occur however as 21 universities have already confirmed they will charge the maximum fees to students. What the top up fees should do though is to encourage students to think if university is really right for them. I am not saying that people shouldnt go to university but some students may just go to university for the sake of delaying getting a job. Many jobs do not require a university education and the fee rises may encourage students to further their education in other ways such as apprentices etc.

What is interesting is whether these top up fees will be profitable for the government. It is estimated that 70% of graduates will not fully pay back their loans for which the taxpayers will have to pick up the bill. Now, im sure the government have done their maths and got the figures right but because of the changes to the way the loans are repaid this could be a very expensive (and unpopular) mistake if they've got it wrong. Just a thought