Augar review: government reveals student finance shake up

Chief executive of Universities UK Alistair Jarvis has called a plan for minimum entry requirements for undergraduates “madness”

The government has revealed its response to the Augar review nearly three years after it published a report that promised to revolutionise the post-18 education system in England. 

Central to the new plans is a desire, the government said, to put the student finance system “on a more sustainable footing”. By retaining the current cap on tuition fees, cutting interest rates on loans and lowering repayment thresholds for future graduates, ministers say they can make the system fairer for taxpayers and graduates. 

There are also consultations planned on setting minimum entry requirements for undergraduates and student number controls for degrees that do not deliver “good” outcomes. The Department for Education (DfE) has consultations planned on the lifelong learning entitlement – trials for which are underway – and the expansion of level 4 and 5 courses in universities and colleges. 

The Department for Education (DfE) released an interim response to the Augar review in January 2021, with the bulk of its new approach to further education covered by the Skills for Jobs white paper. The resulting legislation, the Skills and Post-16 Education Bill, coincidentally, passed the final legislative hurdle this week, on 22 February, and can now become law.

This latest statement from the DfE covers the more HE-specific elements of the Augar panel’s 53 recommendations for post-18 education. The education secretary, Nadhim Zahawi, and the minister for higher and further education, Michelle Donelan, will “propose a balanced package of reforms” that place “more focus on courses that deliver the best outcomes, for them and the economy”, the DfE says. 

So, what is the substance?

Student finance reform

A decade after the coalition government tripled the student tuition fee cap to £9,000, the current student loan amounts to £161bn. Currently, the DfE says, it is projected that over 40% of student loans will be written off by the taxpayer. If the status quo persists, this figure will reach “half a trillion pounds” in today’s prices by April 2043, the DfE warned. Only 23% of students entering university next year will repay in full, a figure the DfE argues its reforms increase to 52%. 

Undergraduates entering university in 2023/2024 will begin repaying their loans at and above a salary threshold of £25,000. Current thresholds for post-2012 graduates on Plan 2 loans, the last of whom will graduate in 2025, will be maintained at the present threshold of £27,295 “up to and including April 2025”. A change to this threshold may be on the cards, a DfE spokesperson said, but “we’ll update nearer the time”. Outstanding loans will be wiped after 40 years, as opposed to the current 30 years. That change means almost all graduates will likely repay more of their loans over their lifetimes than at present, but high-paid graduates would repay faster and therefore less than a graduate on a middle income. 

Tuition fees are to be capped at £9,250 until 2025, lengthening the current cap to seven years. Undergraduates starting courses in 2023/24 can expect lower interest rates for loans. Currently, loans accrue interest of 4.4% during the study, then equivalent to the retail price index (RPI) plus 3% once graduates begin repayments: in two years, this will be simplified to RPI, plus 0%.

London Economics, a specialist economics and policy consultancy, described the interest fee cut as “retail politics“, explaining: “Removing real interest rates sounds great on the doorstep but only benefits the highest-earning (predominantly male) graduates”, who are the ones statistically most likely to repay all of their loans. 

Minimum entry requirements

The proposal making most headlines is the plan to withhold student loans from applicants without a Grade 4 – equivalent to a C in the previous system – in maths and English GCSEs, in effect barring those students from accessing higher education unless they have private finance. The ban will also include those who fail to achieve two Es at A-level, though exemptions are planned for mature students, the DfE said. 

The proposal could potentially affect thousands of young people. According to Ucas, 91.6% of English 18-year-old offer acceptances met Grade 4 in English and maths in 2020. Citing these figures on Twitter, Mary Curnock Cook, the former head of the Universities and Colleges Admissions Service (Ucas), said the 8.4% of students in 2020 that would have – retrospectively – been denied loans under the rules proposed today account for 8,800 students or £520 million of fee income. 

According to research by MillionPlus, released in December 2021, nearly half of students from the most disadvantaged backgrounds in England – up to 47.5% – would lose access to student loans if a level 4 minimum entry requirement was introduced.

Commenting on the proposal, Lee Elliot Major, professor of social mobility at the University of Exeter, said: “This has to be carefully thought through to avoid damaging social mobility. If this is implemented crudely it will effectively be closing off university prospects at age three for many poorer children – our research shows the depressingly strong link between achieving poorly in early age tests and failing to get passes in English and maths GCSEs at age 16.” 

Student number controls

The other headline-grabbing move would be student number controls for “poor-quality, low-cost courses”, identified as those that do not lead to a “well-paid graduate job”. A DfE spokesperson told University Business the government does not yet have a predetermined view of how these courses should be identified, only that it wants to “identify the highest quality higher education which offers the best outcomes for students, society and the economy so we can strategically prioritise this provision”.

A document released by the DfE, however, implies the scope of student number controls could be broader. “We are consulting on the principle of controlling student numbers in order to tilt growth towards provision with the best outcomes, and in high priority subject areas which are important to the economy.” 

The DfE spokesperson did not deny that the government may consider student number controls on courses that are not a high priority for the economy. 

The Office for Students recently announced a consultation on minimum graduate outcomes for degrees – and Donelan announced that, from the start of the next recruitment cycle, all degree adverts should state these performance figures

Level 4 and 5 courses, the lifelong learning entitlement and foundation degrees

Ministers want to consult the sector on what barriers they face to “offering and promoting” level 4 and 5 courses “and the role of the fee and funding system in affecting provider and learner behaviour”. 

Students pursuing the approved Higher Technical Qualifications (HTQs) part-time will, the DfE says, have access to maintenance loans – and details of further “upfront investment for providers” to support the expansion of HTQs up to 2025 are promised. 

A separate consultation will illicit the sector’s views on the future lifelong learning entitlement (LLE), trials for which are underway.

The government wants to cut the cost of Foundation Year study and will consult on a possible tuition fee cut and a loan limit.

Extra funding

There are promises of the “largest increase in government funding” for universities in a decade, including “£900m of new investment in higher education”. 

Of this sum, £300m of recurrent funding is promised, along with a one-off £450m of capital funding “to support high-quality teaching and new state of the art facilities”. The OfS will distribute this £750m sum via the Strategic Priorities Grant. STEM, healthcare and short-degree alternatives will be the focus for this funding, the DfE said. 

The new funding will also establish “a new national scholarship scheme to improve access for high achieving disadvantaged students” to HE, FE and apprenticeships, the DfE says. A consultation will seek views on the design and eligibility of these scholarships backed by £75m. 

What’s the reaction?

Alistair Jarvis, chief executive of Universities UK, said the plans for student minimum entry requirements were “madness” and would act as a “cap on aspiration”. The LLE could prove “transformational”, Jarvis said – but he warned that the tuition fee cap left “universities under even greater pressure to do more with less”.

Echoing this concern, University Alliance warned ministers that the “real-terms funding cut” meant “something will have to give”. It is estimated that real-terms income from tuition fees will have fallen by a third by 2024.

The Russell Group called for the LLE to be expanded to include master’s-level qualifications.

Bridget Phillipson, Labour’s shadow education secretary, accused the government of “kicking the can down the road”. She suggested government “focus[…] on supporting more students to succeed at school [and] widening access to university”.

Sir Philip Augar, who chaired the post-18 education review panel, said the government response was “consistent with the spirit” of the report he presented to ministers.


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