What is happening with tuition fees?
On 4 November 2024, the new Labour government of Keir Starmer announced the cap on tuition fees for undergraduate home students in England would increase by £285 to £9,535 for the 2025-26 academic year. This will be a 3.1% increase, in line with the Office for Budget Responsibility’s latest forecast for RPIX inflation (which excludes the mortgage interest payments component from RPI). The increase in fees will apply to new students starting university from September 2025, and any existing students liable under their contractual relationship with their higher education provider.
The Institute for Fiscal Studies (IFS) has said because monthly student loan repayments are determined solely by a borrower’s earnings, and not their outstanding loan balance, it will be many years following their graduation before the impact of the fee increase will be felt, and 20% of borrowers will see no difference in their overall repayment amount.
The first increase to tuition fees since 2017 followed growing pressure on the financial sustainability of many higher education providers due to tuition fee income being eroded by inflation. The Office for Students, which regulates higher education in England, has said nearly three quarters (72 per cent) of providers could be in deficit by 2025-26. The government said the increase in fees would mean providers “can start to address systemic problems… and help ease pressure on their finances”. It also said that in exchange for the tuition fee increase, universities will be expected to improve in several areas, with a package of reforms to be announced in the coming months.
Source: Institute for Fiscal Studies, Annual report on education spending in England: 2023
How have tuition fees changed over time?
The expansion of higher education following the Second World War was accompanied by the standardisation of publicly funded support for students. In 1962, the Macmillan government placed a new requirement on local education authorities to provide students with means-tested grants, which were not repayable, for their tuition fees and living costs. In 1977, full tuition fee grants were introduced by the Callaghan government for all students.
The political consensus for funding higher education through tuition fee grants broke down in the 1980s. This was in a context of university funding pressures and increasing calls for students, as the direct beneficiaries of higher education, to bear a greater share of its costs.
In 1997, following the introduction of loans for living costs seven years earlier, the Dearing Report recommended loans of around £1,000 should replace the system of tuition fee grants. In 1998, the Blair government introduced means-tested tuition fees of up to £1,000 across the UK. Rather than through a loan, however, students had to pay these fees upfront.
In 2006, up-front tuition fees were abolished, reflecting the policy’s unpopularity with the public and the government’s acknowledgement it was acting as a barrier to higher education. Instead, universities were allowed to set their own fee rate up to a maximum of £3,000 a year, and students could receive a tuition fee loan to be repaid on an income-contingent basis following their graduation.
The 2010 Browne report advocated for a more market-based approach to higher education funding, and recommended the tuition fee cap should be abolished, with a levy collected from institutions charging fees of more than £6,000. Instead, the coalition government kept the cap and, from 2012, set a basic fee threshold of £6,000 a year and an upper limit of £9,000 to be charged “in exceptional circumstances”. Rather than paying a levy, universities charging the maximum fee were expected to meet stricter requirements for improving access and participation. This period also saw significant cuts to the teaching grant and student number controls relaxed.
In 2017, the tuition fee cap increased with inflation to £9,250. Future inflationary increases did not go ahead as planned, with the fee cap repeatedly frozen. The 2019 Augar report recommended tuition fees should be reduced to £7,500 a year (with government funding making up the shortfall), but the main proposals taken forward by the Johnson government concerned student loan repayment terms for new borrowers. The lowering of the annual repayment threshold and the increase in the loan term to 40 years will mean more graduates repay more of their loans.
What are the arguments for and against tuition fees?
Universities use the income they receive to teach and supervise students, undertake research, support the student experience, and undertake outreach work to improve access and participation among underrepresented groups. Most of these activities require paying people, with staff costs making up nearly 60% of the higher education sector’s total expenditure. Whether students/graduates should contribute to these costs through tuition fees, and what level tuition fees should be set at, is an issue that has long been debated.
Arguments in favour of fees
As the main beneficiaries of higher education, particularly through higher lifetime earnings, it has often been argued graduates should contribute to its costs. The Institute for Fiscal Studies estimated in 2020 that male graduates were on average £130,000 better off, and female graduates £100,000 better off, having been to university.
The economist Bruce Chapman, who was the architect of Australia’s student loans system, has argued advocating for ‘free’ higher education is “equivalent to supporting financial assistance going from the poor to the privileged”. This is because if graduates make no financial contribution to their higher education, then the costs are borne by all taxpayers. However, Chapman asserts that while there is a progressive case for tuition fees, any financial contribution made by graduates must be underpinned by an income-contingent loan system, to ensure no one is required to find the money upfront.
Arguments against fees
Historically, arguments against tuition fees have focussed on the role they might play in limiting access to higher education for less advantaged students. In 1963, the Robbins report famously declared that:
Courses of higher education should be available for all those who are qualified by ability and attainment to pursue them and who wish to do so.
Three years earlier, another independent report on higher education, the Anderson report, had considered whether student loans might mitigate the potential deterrence of tuition fees, but concluded repayments would be an inappropriate financial burden for graduates just as they were beginning their careers.
In 2019, the Department for Education published a literature review on the impact of the student finance system on disadvantaged young people. It noted that while a significant proportion of potential students reported anxieties about the cost of higher education, especially tuition fees, and the future debt burden, this has not necessarily translated into declining participation rates, including among those from lower socioeconomic backgrounds. However, it said there were indications that financial concerns are influential among those who could go to university but ultimately choose not to, with prospective students from less advantaged backgrounds most averse to debt.
Tuition fees have also been criticised for hastening the ‘marketisation’ of higher education. In a 2024 report, the higher education sector body Universities UK argued cuts to teaching grants, the 2012 tuition fee increase, and the removal of student number controls have all led universities in England to develop increasingly similar and expensive business and operating models that focus on student recruitment and experience. The report said this had sometimes been at the expense of enhancing an institution’s own unique strengths, developing more creative approaches to teaching, research, and operations, and supporting the provision of highly specialised skills to meet the needs of certain industries.
International comparisons
Tuition fee liability in many countries is complex, and includes variations by subject, course, institution, student circumstances, and whether there is any state support to meet fees. These mean direct comparisons between policies in different countries are not straightforward.
A 2019 report by Ariane de Gayardon and Lucia Brajkovic (PDF) categorised global tuition fees into four different types:
- Free tuition (countries concentrated in Northern and Eastern Europe, Northern Africa and the Middle East, and Latin America)
- Low tuition fees (European countries such as France, Portugal, and Spain)
- High tuition fees supported by a student loans system (England, Wales, Australia, Colombia, Canada, the United States)
- Dual-track systems that offer limited, merit-based entry for free – or a very low cost – and fee-based entry for others (Central and Eastern Europe and countries in Africa, including Russia, Kenya, Uganda, Tanzania, Romania)
In 2022/23, fees for undergraduate courses for home students in public institutions in England were well above those in other OECD countries. England’s fees are also above typical fees at many private institutions elsewhere in the OECD. The exception to this is the US, where fees at independent private institutions average $34,000 a year.
Source: OECD, Education at a Glance 2024 (Table C5.1)