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The ‘Great HE financial swindle’

HE finances in the UK have hit the headlines recently – with the disgusting fat cat approach to pay of senior leaders, the current strikes, where University lecturers are making huge personal sacrifices to try and protect the future of HE in the UK, and then Theresa May ironically calling for a review into university fees.

Image of a student in a libraryIt is the level of tuition fees that I want to focus on in this post, but the other two points are connected and cannot be separated. The title of this post is influenced by the “Great Rock ‘n’ Roll’ swindle” – of the punk revolution in the 1970s, a movement that challenged the then status quo (not the band itself) of the music industry, and I feel that HE needs a similar style of challenge to move forwards, and to break its own historical shackles.

Introduction

Tuition fees where introduced in 1998 under the labour Government, with institutions being able to charge £1,000 per year. Although unpopular at the time there was a reluctant recognition that the cost of HE should partly be funded by the people that directly benefit most from it, and £1,000 per year seems (on hindsight) a fair and reasonable amount to pay. Fees where then increased in 2004, when organisations could charge up to £3,000 – and then again in 2010 to £9,000, and currently sits at £9,250

There are various problems with this model:

Most institutions charge the same

The idea of the introduction of fees, is that organisations can charge up to the set limit – e.g. they have the choice to charge less, and should base the charge on the actual cost of delivery. In reality what happens is just about every single organisation charges the top amount for all courses. It didn’t take a rocket scientist to predict this would happen, which is why I think the current review is so ironic – creating a model that will predictably be abused, and then carry out a review when it is abused – to pretend you are doing something about it!

If organisations where charging based on the actual cost of delivery, then we have 3 options:

  1. They have managed to accurately predict student numbers, manage budgets etc, so every single course costs exactly £9,250 to run.
  2. Courses cost more than this, and they are making a loss on everything they do.
  3. Courses cost less than this,  and the students are subsidising other parts of the organisation – e.g. the fat cat salaries that increase at a significantly higher rate than the salaries of all the other workers.

I think that option 1 is highly unlikely, so if we disregard that, and focus on the other two; it is possible that some courses cost slightly more to run, and some slightly less, and it all balances out – but if that is the case, is it fair that students on the ‘cheaper’ courses are subsidising those on the more expensive courses?

I expect many organisations will argue that option 2, is predominant – and through their good will and generosity they are subsidising the learning from other parts of their activity. This may well be true for some places, and is how traditional universities often functioned, but there are many organisations (e.g. the teaching focused ones) that have limited alternate fund raising ability – they cannot be using this model.

And so the big question is – how many organisations are using option 3 – charging more for the courses, than they cost to run, and effectively profiteering from the students and the system? Having worked with many organisations over the years, I cannot say that I have seen a significant wholesale increase in quality over the last 20 years – there are many good courses, but mixed in with that, there are many courses or units within a course, that are badly delivered, badly run, and not providing good value for money for the students.

The payback methodology is set to fail

The idea that students take out a loan to cover these costs, and then pay this back if and when they are earning enough to justify this, seems on the surface to be a good idea – but charging extortionate interest rates (currently 6%) is simply disgusting, and creates the wrong mentality. If someone studies at HE level, they often do so believing that this will lead to better job opportunities and a better salary. If they believe that they will reach the threshold of having to pay back their loan, then they would be better suited not getting a student loan to cover the cost, but borrowing money some other way, with a lower rate of interest. So why do students take out the student loans? – Because they know that if they don’t reach that threshold then they don’t have to pay it back, or to phrase it differently, they are encouraging graduates to not fulfil their earning potential once they enter the world of work as they will be penalised financially when they do.

Tuition fees hide the additional living costs

Another problem with the excessively high tuition fees, is that it masks the real cost of studying – the cost of accommodation, food, books, sports/lab kit etc. is now often over looked in the media who quote the tuition costs, but miss off the other costs, and many families wanting their children to do well, encourage them to go to HE, without really grasping the size of the debt that they will have on graduation, or the impact that it will have on them for many years following.

It doesn’t represent good value for the tax payer

Possibly the biggest loser in all of this, is the honest, hard working, tax payer. If a student doesn’t pay back their loan (and various predictions suggest this will be significant numbers), then the bill is footed by the tax payer, which isn’t ideal to say the least – but the fact that a large part of that bill will be the unnecessarily high interest rates that are simply boosting the profits of the privately owned loan companies, is quite simply a swindle. It is widely reported and understood that a better educated population, makes a country more profitable, with better output, which benefits all, so we should go back to encouraging people to study not deterring them.

Conclusion

I was lucky enough to attend University when we were given grants to cover most of the costs, and I recognise that model isn’t fully sustainable, and to a certain extent isn’t completely fair – so I don’t have a problem with students making some contributions towards their studies, however the current model is clearly broken. The Lib Dems, made a huge mistake when part of the coalition Government – when they rescinded on their pre-election pledge not to increase tuition fees, yes it is possible that a future Labour Government may change things for the better – but if they do, what do you do with the current set of students that are paying fees? If a future Government does reduce or drop tuition fees, although I would welcome the move, it is a little unfair for the current batch that are saddled with debt – would they get some sort of rebate?

It saddens me, that when I was working at a University full time, I was proud to be part of a system (the UK’s HE provision) that is considered to be one of the best in the world, and highly sought after – and here we now, with a broken system, attracting negative press stories, and punishing the future generations for the current and previous generations, financial mistakes.

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