8th May 2014 9:00
By Blue Tutors
The Institute of Fiscal Studies has said that the government will not know for decades whether the increase in university tuition fees will save money. A new report has concluded that the public cost of university fees and loans is “highly uncertain”, and will largely depend on how much graduates will earn over generations to come. In 2012 university fees were increased to up to £9,000 a year, sums paid for by students through subsidised loans. Under the current system, graduates only pay back the money when they are earning over £21,000 a year, and loans unpaid after 30 years are cancelled altogether.
Most students are now borrowing around £40,000 to pay for their studies, with the government paying £24,500 per students in teaching and maintenance grants in addition. Current forecasts suggest that 43% of the money loans to students will be lost, if graduate earnings continue along the lines predicted by the Office of Budget Responsibility. The Institute for Fiscal Studies also pointed out that the cost of setting up the new system, and the amount is cost the government to borrow the money it lent to students must be taken into account. Their report showed that taxpayer contribution to university tuition is now only 5% lower than it was under the old scheme, despite the fact that tuition fees have dramatically increased.
.The government defended the new system, pointing out that greater numbers of students from poorer backgrounds were now attending university, and that the amount of teaching funding received by universities had increased. Yet the IFS report has caused concern amongst analysts who claim that the new system will cost more than the system it replaced. The report concludes that although the government contribution has fallen slightly as a result of the reforms, even a small increase in fees would negate any benefits. Whether the scheme will be successful in the long run will depend on the earnings of graduates, a prospect which remains highly uncertain.