Tuition fee refunds: only highest earners and state coffers would benefit, says IFS

The independent research body has examined who would benefit from reimbursing students for tuition fees

Refunding tuition fees would only benefit the highest-earning graduates and government coffers, The Institute for Fiscal Studies has said.

In a new briefing note addressing the issue of tuition fees refunds, the IFS also argues that there “is no clear case for compensating students but not other young people”.

The IFS observation comes in the week that MPs debated a number of petitions requesting university tuition fee refunds that, between them, have gathered nearly a million signatures.

It works on the assumption that universities would refund tuition fees to whoever paid them – which, in most cases, would be the government-owned Student Loans Company. Basing its calculations on the IFS graduate earnings model, it also looks at three refunding scenarios, based on the demands of the different petitions: paying back a year’s fees to full-time undergraduates domiciled in England only (at a cost to universities of around £10 billion); refunding fees to all fee-paying students – including students from other home nations, international students, part-time students, and those studying for other degrees (at double the cost); and refunding fees for the third term of the 2019/20 academic year only (at a third of the cost).

The IFS’ key points:

  • Only the roughly 10% of students (or their parents) who pay tuition fees directly would receive any immediate pay-out.
  • For the majority, who have taken out the full government-backed Student Loans Company loan, a refund would merely lower their student loan balance.
  • This would only affect high-earning graduates, since mandatory repayments only depend on graduates’ earnings, and all remaining student loan balances are written off 30 years after graduates start repaying. Lower-earning graduates will not repay their loans within 30 years whether or not tuition fees are reimbursed, so their repayments would be the same.
  • The government would be the largest direct beneficiary of tuition fee refunds. Over two-thirds of the total amount reimbursed would end up in the government’s coffers because the lower student loan balances resulting from any reimbursement would reduce the amount of unrepaid student loans the government would need to write off.

An alternative solution would be to pay compensation direct to all students, says the IFS, although this would raise questions of fairness, as young people who did not go to university have arguably suffered more during the pandemic – through unemployment, for example – than their peers who did.

It is hard to make the case that university students are more deserving of such compensation than other young people – Ben Waltmann, IFS

“For the majority of undergraduates domiciled in England, a straightforward tuition fee refund would lower their student loan balance, but would make no difference to their current incomes and no substantial difference to their repayments later in life,” said Ben Waltmann, a research economist at IFS. “If instead the student loan balance stayed the same and students were paid directly, all students could benefit by the same amount.

“But that policy would be more accurately described as a compensation payment rather than a reimbursement. Given the disruption they have suffered there may be a case for compensation. But it is hard to make the case that university students are more deserving of such compensation than other young people. We know that youth unemployment has risen dramatically and those not attending university may well be suffering much worse consequences of the pandemic in the form of unemployment, and indeed poverty.

The paper concludes by stating that there “does not seem to be a compelling case” for refunds or compensation, and says it is therefore unsurprising “that the government has so far shown no willingness to get behind any of the options”.

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