Cost of learning: the funding options

Market fees


Allow universities to charge what they want for courses. Would liberate vice-chancellors, allow extra investment, free up money for scholarships for poorer students.

Drawbacks: Expensive for families, many middle class children pay fees out of own pockets already, could also increase instability and competition within sector, forcing some institutions under.

Controlled higher fees


Allow universities to charge higher fees but regulate market. Could allow higher fees in different bands depending on true cost (more for medicine, less for humanities), or on likely rate of return in job market (more for law, less for nursing). Or could simply set a higher fee for all subjects. Would mean more money for universities and possibly for poorer students.

Drawbacks: Could deter some waverers from applying to university and anger middle class voters.

Endowment


End annual teaching grant, give HE institutions one-off payment, say £1bn-£2bn, from which interest used to run courses and provide grants for poorer students and freedom to borrow against assets. Conservative policy at last election. Idea often linked with market fees.

Drawbacks: Expensive initially, estimated at £24bn for top dozen institutions, could only be introduced a few at a time.

Graduate tax


Arguably most progressive option: repayment after graduation of costs of fees and grants through tax system. Can be capped (as in Scottish system) to cover only part of costs, or increased depending on graduate income. Could allow rebates for poorer students.

Drawbacks: Private polling by government shows unpopular. Takes long time for extra money to come through to universities. Could deter undecideds from higher education for fear of being landed with decades of extra tax.

Scrapping cheap loans


Charge real rate of interest on loans to students, ending credit subsidy for rich students, use extra money for grants or for universities.

Drawbacks: Could leave students who take low-paid jobs after graduation disproportionately worse off.

Increased public funding


Most straightforward option. Chancellor signalled more money for universities in forthcoming spending review.

Drawbacks: Competing priorities, eg health. Within the education budget schools remain the priority and further education is if anything even more neglected than higher education.