The debt debate: is the current student finance system failing our students?

The UK’s Higher Education (HE) sector has undergone major changes in the past few years.

The advent of increased tuition fees, the marking of students as ‘consumers’, the growing importance of university-industry collaboration, and the internationalisation agenda aimed at ensuring UK competitiveness are just some of the evolving issues that have brought about new competition, opportunities and challenges for the sector. Announcements from Osborne’s 2015 Budget have confirmed that more changes are yet to come.

In a market which sees continued forward momentum in terms of student, staff and institution numbers, what does this mean for students?

The student price tag

Since the 2012 HE funding reforms, attracting students to support an institution’s financial sustainability has become vital. HESA statistics highlighted that tuition fees contributed to 40% of the overall income of UK HEIs in 2012-13, generating over £11 billion.

In addition, figures published in April 2015 highlight that a record number of funds (£807m) was secured in the 2013-14 academic year from alumni, charities and other active contributors at more than 120 British universities. This substantial growth in cash income depicts an increasing reliance on HE fundraising and an attempt to generate profits at a time when there is uncertainty around future Government revenue flows.

What’s clear is that students now come attached with a price tag. Every student lost costs a university £33,000, placing huge pressures on student recruitment and retention. With a growing number of students (particularly in England) looking to the continent to receive their education at a much-reduced cost, UK universities are at risk of losing out to an increasing trend of degree mobility. In most European countries, the same financial conditions often govern undergraduate and postgraduate courses – the Netherlands, for example, charges the same fees all the way through – making an appealing case for UK students looking to undertake postgraduate studies to travel abroad. European funding programmes such as ERAMUS+ reinforce this idea, encouraging cross-border mobility through financial support.

The current picture – recent financial developments

Now, post-General Election, comes the reality of policy changes. On the 8 July 2015, George Osborne presented his 2015 Budget outlining the Government’s plans to replace student maintenance grants – worth over £3,000 for students from lower-income families – with student loans. Delivering the first ‘true blue’ Budget in almost 20 years, the chancellor described the current maintenance grant system as ‘unaffordable’ and added that it was a ‘basic unfairness’ to use the taxpayer’s money to fund such student support. This change, to be made available for the 2016/17 academic year, will provide future students with a repayable loan of up to £8,200.

Such changes present problems to fairer access and widening participation agendas as students from lower-income households are statistically the most likely to be deterred from debt. This is backed by a number of critics, including Sir Peter Lampl, chairman of the Sutton Trust and the Education Endowment Foundation and National Union of Students (NUS) vice president Megan Dunn, who commented: ‘This is yet another unreasonable barrier to accessing higher education.’ The Office of Fair Access to higher education has noted that it will monitor the impact of the change in what could mean a student backlash for the HE sector.

Added to this, an interview in June 2015 also saw new science and universities minister Jo Johnson decline to rule out raising tuition fees further, noting only that the Conservative manifesto included a government commitment to ensure a ‘stable and sustainable funding regime for our universities and HEIs’. Osborne acknowledged this in his Budget delivery, confirming that university tuition fee caps would be linked to inflation for those institutions which offer excellent teaching. Labour had previously predicted that tuition fees could increase to as much as £11,500 a year.

NASMA – at the forefront of student finance

The annual NASMA (National Association of Student Money Advisors) Conference brought together over 200 student financial advisors from institutions across the UK, united towards a common goal of discussing student finance and enhancing the support available.

This year’s event – held in Solihull, Birmingham – highlighted a prevalent concern for the sector: namely, trying to support students with limited (and potentially decreasing) financial means. A reluctance to accept payday loans, coupled with sessions aimed at tackling student debt, gambling problems, ‘fitness to study’ and financial sensitivity offered insight into some of the issues students may be facing during their studies. Hiked tuition fees are clearly not the only concern on the student radar.

A number of delegates expressed their need to turn towards funding portals such as Idox’s  Open 4 Learning tool, which sits on institutions’ own websites and houses information on thousands of funding opportunities to help students finance their studies. Providing information on more sustainable options such as grants, scholarships and bursaries was welcomed by advisors faced with supporting students through their financial worries.

NASMA Chair Rob Ellis noted: ‘The aims of NASMA are to support student money advisors around the UK and thus support the students they deal with. The main concerns for members at present are regarding funding being cut within the sector. This has already started to impact on members from a hardship fund point of view but potential changes to student support are also a concern. NASMA will continue to be a key voice within the sector in order to ensure that the impact on students’ finances is reduced to a minimum.’ Student support is – after all – a necessary measure of an institution’s success. Student satisfaction is a key part of student recruitment and retention and, as discussed above, there is money on the head of each student in this process.

The student voice

Aside from advisor opinions, the NASMA Conference aimed to give a voice to students on a number of issues, reflected in a keynote session on student financial attitudes and behaviours led by Jenny Shaw of Unite Students. Jenny discussed the results of Unite’s 2015 student survey which painted – by her admission – ‘a slightly gloomy picture’ of student financial experiences:

  • 51% specified that they relied on family to finance university, 27% on bank overdrafts and 39%, part-time work
  • 36% of undergraduates believe that the financial support currently available is ‘insufficient’ (a rise of 50% in one year)
  • 32% of undergraduates took on more debt than they expected (an 8% increase on the previous year, with fewer students also reporting that they had taken on ‘no debt’)
  • Only 20% of postgraduates feel the current funding system works

When taken as a whole, trends indicated greater financial difficulties in the 2014-15 academic year compared to the previous year. Jenny noted a shift in students feeling less positive about their finances and touched on the lack of funding available to cover living costs. One delegate was prompted to note that this was down to an issue of universities ‘catering for students they want rather than students they have’.

Other recent student surveys have suggested similar trends. Save the Students recent findings from their survey of 1,900 undergraduates concluded that the majority of students are relying on additional income from parents and part-time jobs to get by while at university. Current maintenance loans were cited as leaving university students £265 out of pocket each month, with 80% noting that they worry each month about not making ends meet.

Editor-in-Chief, Owen Burek commented ‘1 in 2 students tell us they don’t understand the loan repayment conditions, yet are signing up for debts which aren’t fit for purpose. Maintenance loans don’t reflect real living costs, regional differences and parents’ ability to contribute – frankly, they’re out of touch with individual circumstances and student needs.’

The future of student finance

The HE sector continues to grow at home, abroad and online. However, there appears to be an increasing need for organisations such as NASMA to support the decision-making of students throughout their HE careers. Attracting students and providing access to HE represents but the first step in the student lifecycle; institutions have a duty to support students on their way through and beyond it, as stressed in the Government’s National strategy for access and student success in higher education.

The advent of tuition fee rises back in 2012 woke a very real debate surrounding the cost of a degree and whether that cost was outweighed by the subsequent benefits or vice versa. The latest Budget announcements add to this concern for the sector. Whilst the political issue stands that allowing a more ‘realistic’ level of borrowing would increase the overall debt level, a more individualised and diverse approach to student finance would contribute towards a more sustainable financial future that moves away from rigid student financial support systems, currently deemed complex and difficult to understand.

Indeed, as the current cohort of students will be all too aware, tuition fees form only part of their financial journey. A more pressing notion of support for living costs has been highlighted, with Universities UK arguing that the focus should not be on reducing fees, but in raising maintenance support. Amid concerns from the NUS that financial difficulty is the ‘number one reason that students drop out of education’, students are at risk of leaving HE altogether or receiving a reduced learning experience as they contend with part-time jobs and other means of securing income to finance their studies. The pressure of future students having to take on maintenance loans instead of being provided with non-repayable grants from the 2016/17 academic year, adds to a growing concern about the financial sustainability of studying.

Critics of the current student finance system have also acknowledged the financial pressures on the wider family when the ‘Bank of Mum and Dad’ is relied upon as a primary source of income. Being above application income thresholds – which results in reduced or often removed government support – does not reflect the truth of parental disposable income and affluence. When asked about parental perceptions, Unite’s Jenny Shaw acknowledged that this would become a key part of upcoming research.

What is clear is that the UK HE landscape – renowned for world-class research and teaching – needs to catch up in terms of its student finance process and strike an equilibrium of student vs. university and state contributions. With pressures on ranking well against our European and international peers in terms of research excellence, teaching, collaboration, profits, etc, there is a growing impetus to go right back to the beginning of the HE journey and place students – their welfare and studies – at the heart of the system again.

By Chelsea Nattriss, Idox


Idox supports universities and students in their bid for funding via a dedicated suite funding solutions including GRANTfinder 4 Education and Open 4 Learning. For further information, please contact us here.

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