Cost of higher tuition fees system ‘six times higher’ than savings

The system of higher tuition fees introduced by the government with the aim of saving money is likely to cost more in the longer term, a new report has warned.

The system of higher tuition fees introduced by the coalition could cost the government six times more in the long-term than the previous system of Higher Education Council (HED) funding, a report out today warns.

The overall costs incurred by the government as a consequence of the new system of higher tuition fees could be £7 billion pounds more than the expected savings, according to the report from think tank million+.

Following a shift from direct funding of teaching through the HED to higher student loans, the overall reduction in treasury expenditure for the 2012/13 cohort is estimated to be approximately £1.166 billion compared to the 2010/11 cohort.

According to the report entitled ‘Are the changes to higher education funding in England cost-effective?’, this would mean that the overall costs incurred as a result of the new system of fees and funding could be 6.5 times greater than short-term treasury savings.

The report points to significant costs associated with higher tuition fees resulting from the much higher student loan book and the higher write-off of student loans (estimated to rise to almost 40%).

It also says higher tuition fees will be accompanied by reduced earnings and taxation revenues from the smaller number of graduates entering the jobs market and postgraduate education.

On top of these effects, there will also be a significant inflationary impact.

Combined, these factors will likely result in longer term costs far outweighing short term treasury savings, the report says.

The University and College Union (UCU) general secretary Sally Hunt said the taxpayer was “already footing a massive bill to cover student loans“, and she called for a “serious rethink from the government”.

“We warned that fees close to £9,000 a year would be the norm and the government’s calculations for repayment by graduates were flawed,” she said.

“We take little pleasure in being correct, but it is clear that shifting the burden of paying for university education on to students was an ideological move, not a financial one.”

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