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Tuition fees: Three quarters of students won’t be able to pay off their debt Tuition fees: Three quarters of students won’t be able to pay off their debt
(about 7 hours later)
The current university funding system is unsustainable because of the high number of students who will never be able to afford to pay off their loans after graduating, according to a major new report.The current university funding system is unsustainable because of the high number of students who will never be able to afford to pay off their loans after graduating, according to a major new report.
Student debt is now so high compared to average salaries that many graduates in respectable public sector professions will be unable to repay their fees even by the end of the 30-year repayment period, the Higher Education Commission warns.Student debt is now so high compared to average salaries that many graduates in respectable public sector professions will be unable to repay their fees even by the end of the 30-year repayment period, the Higher Education Commission warns.
This funding "black hole" is forcing the Government to indirectly subsidise higher education writing off billions of pounds in student debt - even though the point of £9,000 a year fees was to make universities less reliant on the taxpayer.This funding "black hole" is forcing the Government to indirectly subsidise higher education writing off billions of pounds in student debt - even though the point of £9,000 a year fees was to make universities less reliant on the taxpayer.
The commission, an independent body set up to monitor higher education, concludes that the current university fees system offers the “"worst of both worlds" to students, universities and the Government - and warns that some institutions are now at risk of "failure".The commission, an independent body set up to monitor higher education, concludes that the current university fees system offers the “"worst of both worlds" to students, universities and the Government - and warns that some institutions are now at risk of "failure".
"We have created a system whereby everybody feels they are getting a bad deal," report authors warn. "This is not sustainable.""We have created a system whereby everybody feels they are getting a bad deal," report authors warn. "This is not sustainable."
The commission says it is particularly concerned about the future level of student debt with financial experts estimating that 73 per cent of all students will still be unable to pay off their loans after 30 years, when debts are automatically wiped.  The commission says it is particularly concerned about the future level of student debt with financial experts estimating that 73 per cent of all students will still be unable to pay off their loans after 30 years, when debts are automatically wiped. According to the Institute for Fiscal Studies, the average student debt will be £44, 015 - higher even than the US.
According to the Institute for Fiscal Studies, the average student debt will be £44, 015 - higher even than the US.
"The Commission is particularly concerned that middle earners, such as health professionals, teachers or public sector workers who need a degree to enter their profession will not be likely to pay back their loan within the repayment period," it says."The Commission is particularly concerned that middle earners, such as health professionals, teachers or public sector workers who need a degree to enter their profession will not be likely to pay back their loan within the repayment period," it says.
"The Commission fundamentally questions any system that charges higher education at a rate where the average graduate will not be able to pay it back."The Commission fundamentally questions any system that charges higher education at a rate where the average graduate will not be able to pay it back.
"We are deeply concerned that the Government may have created a loan repayment system where, for example, a teacher is unable to secure a mortgage at age 35 because of the high level of monthly loan repayment.""We are deeply concerned that the Government may have created a loan repayment system where, for example, a teacher is unable to secure a mortgage at age 35 because of the high level of monthly loan repayment."
It continues: "The Government is funding higher education by writing off student debt as opposed to directly investing in teaching grants [as happened prior to the introduction of the current system]."It continues: "The Government is funding higher education by writing off student debt as opposed to directly investing in teaching grants [as happened prior to the introduction of the current system]."
Universities, too, are facing an "annual erosion of real terms income" as a result of cuts to the teaching grant and a fixed cap on fees of £9,000 a year, the report warns.Universities, too, are facing an "annual erosion of real terms income" as a result of cuts to the teaching grant and a fixed cap on fees of £9,000 a year, the report warns.
On top of that, the decision to lift the cap on the number of students each university can recruit raises the prospect of some weaker universities which lose students to other institutions facing "financial difficulty and potential failure".On top of that, the decision to lift the cap on the number of students each university can recruit raises the prospect of some weaker universities which lose students to other institutions facing "financial difficulty and potential failure".
The report warns that "institutional failure would have a direct impact on the sustainability of the rest of the sector: if any institution were to fail there would be significant reputational damage to the whole sector".The report warns that "institutional failure would have a direct impact on the sustainability of the rest of the sector: if any institution were to fail there would be significant reputational damage to the whole sector".
"A drop in confidence in UK HE could impact even the most prestigious universities," it adds."A drop in confidence in UK HE could impact even the most prestigious universities," it adds.
The lifting of the cap, which comes into force next year, will lead to a three-tier university system: one group, the most selective universities, unlikely to expand as they tend not to want to grow undergraduate numbers"; a second group with a mixture of selective courses and others less popular, expanding as much as they can and a third group, which previously recruited heavily through clearing, facing pressure to keep up numbers.The lifting of the cap, which comes into force next year, will lead to a three-tier university system: one group, the most selective universities, unlikely to expand as they tend not to want to grow undergraduate numbers"; a second group with a mixture of selective courses and others less popular, expanding as much as they can and a third group, which previously recruited heavily through clearing, facing pressure to keep up numbers.
To stave off potential closure, they will recruit students who are "under-qualified or, more importantly, might be more suited to further education or an apprenticeship".To stave off potential closure, they will recruit students who are "under-qualified or, more importantly, might be more suited to further education or an apprenticeship".
"The potential for reduced quality and high non-completion rates would be very real," the report argues."The potential for reduced quality and high non-completion rates would be very real," the report argues.
Conservative peer Lord Norton of Louth, Professor of Government at Hull University, and Dr Ruth Thompson, a former Director General of Higher Education at the Department for Business Innovation and Skills, who jointly chaired the inquiry, said: "The Commission is concerned about graduate indebtedness and the extent of future uncertain liabilities the Government is amassing.Conservative peer Lord Norton of Louth, Professor of Government at Hull University, and Dr Ruth Thompson, a former Director General of Higher Education at the Department for Business Innovation and Skills, who jointly chaired the inquiry, said: "The Commission is concerned about graduate indebtedness and the extent of future uncertain liabilities the Government is amassing.
"So far universities have not taken as much of the strain but the present unstable arrangements create risks for them as well.""So far universities have not taken as much of the strain but the present unstable arrangements create risks for them as well."
The Commission makes a series of recommendations to overcome its concerns - including removing international students from the net migration figures and allowing them to work in the UK for two years after graduation. This, it argues, would enable universities to recruit more students from abroad on higher fees. The Commission makes a series of recommendations to overcome its concerns - including removing international students from the net migration figures and allowing them to work in the UK for two years after graduation. This, it argues, would enable universities to recruit more students from abroad on higher fees. 
Other key points include working out a better strategy to recoup debts from students living abroad.Other key points include working out a better strategy to recoup debts from students living abroad.
The report argues: "Given the lack of sustainability of the current finance system, further work needs to be undertaken to arrive at a better higher education funding model."The report argues: "Given the lack of sustainability of the current finance system, further work needs to be undertaken to arrive at a better higher education funding model."
The National Union of Students warned that "even the Government’s figures show that the prospect of a huge black hole looming over the budget is very real".The National Union of Students warned that "even the Government’s figures show that the prospect of a huge black hole looming over the budget is very real".
Megan Dunn, vice-president (higher education), added: "Forcing debt onto students as a Way of funding universities is an experiment that has failed not just students but our country."Megan Dunn, vice-president (higher education), added: "Forcing debt onto students as a Way of funding universities is an experiment that has failed not just students but our country."
Students are planning a demonstration in London today when thousands are expected to call for an end to the fees regime.Students are planning a demonstration in London today when thousands are expected to call for an end to the fees regime.
A spokesman for BIS said: "We always welcome recommendations from the sector and will look closely at the findings from the Commission."A spokesman for BIS said: "We always welcome recommendations from the sector and will look closely at the findings from the Commission."
£44.035 - the average debt incurred by UK students. The figure would be £24, 754 under the old system.£44.035 - the average debt incurred by UK students. The figure would be £24, 754 under the old system.
73 per cent - the percentage of students expected to be unable to pay off their full loan.73 per cent - the percentage of students expected to be unable to pay off their full loan.
45p - the amount in the £1 of the total debt that will be unpaid.45p - the amount in the £1 of the total debt that will be unpaid.
£8,250 - the real terms value of the £9,000 fee - as it has not been adjusted for inflation,  As a result, universities are facing real term cuts in their budgets.£8,250 - the real terms value of the £9,000 fee - as it has not been adjusted for inflation,  As a result, universities are facing real term cuts in their budgets.
2 per cent - the dip in the number of international students studying in the UK in 2012/13 compared with the previous year (the figure is put down to stricter visa controls and a perception on behalf of the students they will not be welcome).2 per cent - the dip in the number of international students studying in the UK in 2012/13 compared with the previous year (the figure is put down to stricter visa controls and a perception on behalf of the students they will not be welcome).
£21,000 - the salary at which students start repaying their loan.£21,000 - the salary at which students start repaying their loan.