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University could cost over £100k

Kids | School Fees

By Justin Modray, published 29 March 2011.
Helpful? 10

University fees are back in the news this week as an increasing number of universities confirm their plans to charge top whack tuition fees. Coupled with loan proposals, the total cost of a university education for many students could top £100,000.

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.

Tuition fees

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.

Living costs

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.

Student loans

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 repaytotal costtime to repaytotal cost
£20,000 30 years
(£72,284 written off)
£62,980 30 years
(£119,819 written off)
£25,000 30 years
(£24,857 written off)
£92,787 30 years
(£77,371 written off)
£30,000 27 years 9 mths £102,719 30 years
(£30,179 written off)
£35,000 22 years 4 mths £82,153 27 years 5 mths £125,290
£40,000 18 years 11 mths £71,875 23 years 5 mths £108,991


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.

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Readers' Comments (1) - To post a comment please register or login .

Comment by webwiz at 11:29pm on 19 Nov 2010:

I have always previously been a supporter of the idea of a graduate tax, but the method of implementation chosen is a disaster. I thought that tertiary education would be funded in the same way as primary and secondary, that is to say that the government decides which courses will be taught and pays for them, but graduates pay more tax than non-graduates to reflect the higher income earning power that their state funded university education has given them.

Instead the government has decided on a hybrid of the loan scheme and a graduate tax. The amount of debt that students will get into is frightening even though it is not like any other sort of debt in that repayment is linked to ability to pay, and in many cases will not actually be repaid.

The only possible reason for this foolish system that I can discern is that it requires more civil servants to operate.