This is an update of a previous article.
Of the 20 universities so far declaring their intentions, 17 have confirmed they will charge the maximum £9,000 annual tuition fee from 2012. Examples include Oxford, Cambridge, Reading, Surrey, UCL, Lancaster and Essex.
The new plans will affect students starting higher education in 2012 and mean a university education could end up costing some students over £100,000 by the time their loans are eventually repaid.
At the moment students must pay up to £3,290 towards tuition fees for the current academic year. The Government had intended this to generally rise to £6,000 from 2012, with up to £9,000 being charged by universities who demonstrate they give opportunities to a wide range of students. But, as we're now seeing, £9,000 looks like being more the norm than the exception. So 3 years at university could cost up to £27,000 in tuition fees alone.
Rather than pay for tuition fees upfront, students can roll these into a loan that's repaid when they start working.
Students from families where total annual income is below £25,000 will get an annual £3,250 non-repayable grant, with partial grants being given where income is up to £42,600.
Students can also take a maintenance loan of up to £5,500 a year (£7,675 in London), depending on family income, to help towards living costs. These loans will be added to the student's overall loan.
Interest is charged from the day money is lent at a rate equal to inflation (measured by the Retail Price Index - RPI) plus 3%, regardless of the student's income. After graduation the rate falls to RPI until the graduate earns above £21,000 a year, at which point the interest progressively increases to a maximum of RPI plus 3% when they earn £41,000 or more (full details yet to be published).
Loan repayments are made at 9% of income over £21,000 a year, with any remaining balance written off after 30 years.
Students who wish to repay their loan more quickly could face a penalty for doing so, as the Government is contemplating an early redemption charge. You'd expect greedy banks to do something like this, but not the Government. It should be encouraging the repayment of debt rather than penalising graduates for doing so.
How much could a university education end up costing?
The decision to go to university will become increasingly debateable for many children, as it could end up costing them a fortune.
The projections below assume average inflation (RPI) of 3%, annual salary increases of 5% and an annual maintenance loan of £5,500 for 3 years:
|£6,000 Tuition Fees||£9,000 Tuition Fees|
|time to repay||total cost||time to repay||total cost|
(£72,284 written off)
(£119,819 written off)
(£24,857 written off)
(£77,371 written off)
||27 years 9 mths
(£30,179 written off)
||22 years 4 mths
||27 years 5 mths
||18 years 11 mths
||23 years 5 mths
With Government finances as stretched as they are, shifting higher education costs onto a more commercial footing is probably an unfortunate price that has to be paid. But these plans risk turning into a farce. Most universities will seemingly charge the highest fees they can and many students could rack up debt they'll never repay within 30 years despite paying lots of interest, leaving the Government to write off vast sums of money owed.
If you want a job doing badly, give it to a politician...