Britain’s student loan scheme is the worst public-sector project in modern history. It has put the nation’s graduates £100bn in the red, currently predicted to rise to £330bn by 2044, of which three-quarters will not be repaid. The rest is dumped on the taxpayer. This cannot go on. Extravagant, distorting and unfair, the existing loans system was transformed by Tony Blair’s introduction of tuition fees in 1998, then privatised, then sent through the roof by David Cameron in 2012. It is the unacceptable face of privatisation. It has turned graduates into cash cows for loan collectors, and turned universities into fat-cat peddlers of cheap courses for inflated fees, guaranteed by the Treasury.
Why now?
It has been on the cards since the Conservatives promised a major review of funding across tertiary education in their election manifesto. With graduate debt running at £50,000 upwards, there has been growing concern about the cost of going to university and whether it represents value for money. Fees in the UK are among the highest in the world, and some doubt there will be a return on such a huge investment in terms of graduate earnings.
What will the review look at?
The government is promising a wide-ranging review of the whole of post-18 education and funding, including the divide between vocational and academic qualifications and the decline in lifelong and part-time study. Most of the interest will be in undergraduate tuition fees, which stand at a hefty £9,250 a year at all but a handful of universities.
What are the options?
The government will not seek to match Labour’s promise to axe tuition fees altogether, which the Conservatives regard as unaffordable and regressive. The review could recommend cutting or freezing fees. One of the most controversial options is the introduction of variable fees for different courses, depending on the cost of putting a course on, potential graduate earnings and the economic value to the country. So some universities might for example cut their fees for social science and humanities courses, which generally attract lower graduate earnings than engineering or maths.
Will that make the system fairer?
Many fear it will result in the most disadvantaged students applying for cheaper courses with the poorest graduate outcomes, hindering rather than boosting social mobility. Senior Tories would prefer to see alternative measures including a cut in interest rates on student repayments, which currently stand at 6.1%, and increased financial support for disadvantaged students. There is widespread support for the return of maintenance grants for poorer students, which were scrapped in favour of loans by the Tories, making it even more expensive for those students to go to university.
How quickly are things likely to change?
Not very. With the review set to run for a year, reporting in early 2019, the government has been accused of kicking the issue into the long grass. If you are applying to start university this September, nothing will have substantially changed.
So far, so clear. In her speech today, Theresa May is right to criticise the “pricing” of every course at £9,000 a year, plus maintenance. She wants variegated courses, better integrated with vocational training, and variegated fees. This is fair and sensible, as far as it goes. Labour wants everything as now, but with no fees and grants for all. This would be so expensive that the Treasury would drastically curb numbers, and thus restrict access. Both paths lead in the same direction, to ever greater Whitehall control of higher education. There would be dirigiste manpower planning of courses, and endless rows over prices. Universities would be like schools, mere agencies of central government.
There is no sensible way Whitehall should be trying to discriminate between students and between courses. Like its current attempts to measure teaching quality and quantify research, it denies academic autonomy – and is chaotic. As for attempts to relate course “value” to future earnings it is absurd and obscene.
The former education secretary, Justine Greening, has finally added her name to those calling for the one fair way to finance higher education, as existed before the 1990s. Fees should be abolished and universities receive direct grants, financed by a graduate tax coding. Economists are increasingly sceptical of the real value of universities to the national economy. It is unfair for those not privileged to spend three enjoyable (and supposedly remunerative) years at university to have to pay for those who are. By collecting high graduate earnings through the tax system, interest is not spent on loan sharks. Yes, the rich would end up paying more over a lifetime, and university numbers would have to be capped. But it is fairer that way, and university is not compulsory. So why do education secretaries have to leave office before they dare propose sanity?
Either way, non-graduates should not be funding graduates, and rich graduates should not get off lighter than poor ones, as happens under loans. British income tax is not so burdensome that a graduate surtax would be a deterrent to higher education. It would be fair, and it would be simple.
• Simon Jenkins is a Guardian columnist
