Call to fund degrees via ‘advance’ on future student earnings

A crisis in UK sector funding could be resolved if students were to pay their fees and living costs via an “advance” on their “future higher earnings”, making the system “self-funding”, according to a higher education data expert.

Mark Corver, co-founder of the dataHE consultancy, former director of analysis and research at Ucas, offers the solution in a note on sector funding published by the Higher Education Policy Institute (Hepi).

“The funding system for undergraduate teaching in UK universities has drifted into crisis,” he writes. “Bolder changes might now be worth the risk.”

Dr Corver advocates the recasting of the system “as students investing in their education through an advance of their anticipated higher pay. Graduates would pay much more than now, but for a much shorter time.

“Universities [would] price courses in terms of this future salary share and share in the financial risks of things not working out.”

Government would provide “the infrastructure and working capital, together with targeted tax relief, but with an aligned and broadly self-funding system can be relaxed again about leaving universities to grow opportunities as they see best”, he adds.

Dr Corver continues of his proposed solution: “For students it takes away the sense of unfairness from decades of debt made unpayable by interest running ahead of repayments, whilst giving them maximised opportunity to go to the broadest possible range of university places. For universities it removes destructive underfunding and frees them to grow students on academic potential as they judge it. For government it removes the problem of uncontrolled spending and gives them new mechanisms to achieve national policy objectives.”

He writes: “For students, tuition fees, interest and decades of debt disappear. Instead, if you think you will earn more from going to university then you can get a salary advance of your anticipated future higher pay, and use this salary advance to invest in the teaching and living costs needed to get there. Higher pay would be anything over the average of what non-graduates in their early twenties earn (likely currently around £22,000).”

Students could “choose between a university offering a three-year first degree at a 25 per cent share of those future higher earnings, or another course that requires 40 per cent”, for example, while the “share of higher salary advanced for fees and living costs would be very much higher than the 9 per cent loan repayment rate now”. But graduates would “only repay the salary advance if [they] earn more than non-graduate peers, so it has the chance of being seen as fair”.

Meanwhile, if a university “sets the price at 30 per cent of the higher salary advance, then the annual fee might be £12,000”.

And “if a university gets 60 per cent up front from the government, then it would get 40 per cent of the stream of repayments its graduates go on to make”.

Dr Corver acknowledges that “change on this scale would no doubt carry large risks. But with universities being one of the UK’s relatively few world-class strategic assets, and the consequences of under-funded places hitting young people, letting the current funding crisis drift on is perhaps risker still.”

Asked why his solution was a better bet than other potential funding reforms, Dr Corver told Times Higher Education: “Higher education is unlikely to fare well competing against other calls on public resources; with current subsidy going into write-offs raising fees simply mean more subsidy; and a graduate tax incentivises people to contribute elsewhere.”

His proposal was aimed at “looking to give universities and policy makers a broader set of options to consider”.

He continued: “Completing the transition to a mass participation in higher education at time of pressed public resource was always going to be difficult, but it can’t be wished away.”

john.morgan@timeshighereducation.com