Student preferences over fees, grants and loans

Political debate over Higher Education financing in England is dominated by the headline fee charged for undergraduate courses, references to ‘low value courses’, and the amount of debt that students graduate with.

However, the complex system of income-contingent repayment for loans covering tuition fees and maintenance (living costs) means that the link between certain aspects of the system (such as the headline fee, or interest rate) and the financial reality faced by most graduates is very weak. Belfield et al (2017) estimate that 83% of graduates will have some part of their debt written off, and 45% of the total value of loans will be written off, or alternatively stated, underwritten by taxpayers. The system also means that nominally popular-sounding policies may have regressive effects: Reducing the headline tuition fee will only reduce the value and duration of repayments for high earners, for example.

A new project led by MiSoC researchers DelavandeDel Bono and Holford was developed jointly with the University of Essex to help inform the UK government’s Review of Post-18 Education and Funding. A decision on reforms to the system is expected at the next Comprehensive Spending Review. The aim of the project was to give voice to the perceptions and concerns of current university students, who had signed up to and would soon face the repayment implications of the current system, on behalf of future cohorts who will be affected by any reforms. In a survey of final-year undergraduates we first test their understanding of the features of the current system, and then their preferences over hypothetical scenarios for reforms to the current system.

What this project will add to the political and academic debate is threefold:

First, by eliciting students’ preferences over options that all involve tradeoffs – either between students or between their current and future selves – the results will constructively help policymakers constrained by the fiscal environment to prioritise, rather than presenting them with an unobtainable wish list.

Second, we will analyse how these stated preferences change in response to information about the repayment implications of different funding models for graduates with different earnings profiles. This sort of information is a potential tool to reduce discretionary borrowing and increase the sustainability of the system.

Third, we will link these preferences, and the effect of the information intervention, to students’ demographic characteristics, subject of study, expected earnings, and a wide range of non-cognitive traits and information about their political preferences. This will reveal how much preferences are driven by financial self-interest versus matters of principle or empathy for other students. For example, early results indicate that differential fees by subject would be hugely unpopular, even among those set for a fee reduction, and this is not shifted by information about prospective reductions in repayments.