This site uses cookies to help make it more useful and reliable. Our cookies page explains what they are, which ones we use, and how you can manage or remove them.

Sub menu

Reform for higher education and student finance

3 Nov 2010

Government announces plans for reform of higher education and student finance to maintain England's world class universities

The Government's plans for reforms to higher education and student finance will mean that universities continue to play a key role in promoting social mobility as well as economic growth. The new reforms will offer a more generous package of financial support for students from low income backgrounds to go to university.

The new system will come into effect for new entrants to the university system in 2012.

No eligible student will have to pay up front for their tuition. Students will not be expected to contribute until they are earning over £21, 000.

Read the statement in full

The Government will publish a Higher Education White Paper in the winter with detailed proposals on the wider, long-term issues that arise from Lord Browne’s review.

The new proposals are as follows:

Graduate contribution

Any university or college will be able to charge a graduate contribution of up to £6,000.
In exceptional cases, universities will be able to charge higher contributions, up to a limit of £9,000, subject to meeting much tougher conditions on widening participation and fair access. It will be up to the university or college to decide what it charges, including whether it charges at different levels for different courses.
Any university or college will be able to charge below £6,000. Universities and colleges wanting to charge above £6,000 a year will have to show how they will spend some of the additional income making progress in widening participation and fair access. The Office for Fair Access will be able to apply sanctions in cases where universities do not deliver on the commitments in their access agreements, up to and including withdrawing the right of the university to charge more than £6,000.

Loans and maintenance grants

The Government will lend any eligible student the money to pay the university or college for tuition costs. For the first time, part-time students will be entitled to a loan and no longer forced to pay up-front costs, so long as they are studying for at least one third of their time.
A new £150m National Scholarships Programme will be targeted at bright potential students from poor backgrounds. It will guarantee students benefits such as a free first year or foundation year.
Students from families with incomes of up to £25,000 will be entitled to a more generous student maintenance grant of up to £3,250 and those from families with incomes up to £42,000 will be entitled to a partial grant.
Maintenance loans will be available to all irrespective of income.
Further details of loan rates for students living at home, those living away from home and studying in London, and loans for longer courses will be provided in due course.
Students deferring from 2011/12 to 2012/13, will be able to apply for loans and grants at the 2012/13 rates. Tuition charges for 2012/13 will be determined by individual universities. Details will be available here.

Repayment system

Graduates who have completed their studies and are among the country's higher earners will make a higher contribution towards the cost of their education. As their earnings increase, so will their contributions.

Graduates will not make a contribution towards tuition costs until they are earning at least £21,000, up from the current £15,000. The repayment will be on 9% of income above £21,000, and all outstanding repayments will be written off after 30 years. This means all graduates will pay less per month than they do under the current system.

In order to make the system financially sustainable, a real rate of interest will be charged on loan repayments, but with a progressive taper:

For graduates earning below £21,000, there will be no real rate of interest applied to their loan.
For graduates earning between £21,000 and around £41,000, a real rate of interest will start to be charged, reaching a maximum of RPI plus 3%.
Above £41,000, graduates will repay at the full rate of RPI plus 3%.

Under our new more progressive repayment system, around a quarter of graduates, those with the lowest lifetime earnings, will pay less than under the current system.

The Government is committed to the progressive nature of the repayment system. It will consult on potential early repayment mechanisms so that people on high incomes are not able to unfairly buy themselves out of this progressive system. These mechanisms would need to ensure that graduates on modest incomes who strive to pay their contribution early through regular payments are not penalised.

David Willetts, Minister for Universities and Science said;

“Good quality higher education is important in itself, but also to the economy in the long term delivering highly skilled and well educated employees to businesses. The current system of funding for universities is unsustainable and in need of reform.

“This progressive package will put universities' finance on a sustainable footing with extra freedoms and less bureaucracy. But in return there will be greater choice for students with a stronger focus on high quality teaching.”