Graduates face paying thousands more for degrees under proposals published today – and Business Secretary Vince Cable tells Gary Gibbon many courses will cease to receive government subsidies.
Lord Browne’s review of higher education recommends allowing universities to charge unlimited tuition fees.
The proposals are controversial for the Coalition government, not least because the Liberal Democrats campaigned against tuition fees during the election.
Their favoured option of a graduate tax has been ruled out.
There are fears now that students could face charges of up to £12,000 a year to study at a university in England, although the review suggests that universities which charge more than £6,000 a year will face a further levy, aimed at funding poorer students.
Speaking to Channel 4 News, Business Secretary Vince Cable accepted that he had signed the “NUS pledge” to oppose a rise in tuition fees, like the rest of Lib Dem MPs.
“We were committed – I was personally committed – to try to get rid of tuition fees,” he said.
“I did sign the pledge, I accept that and I put my hand up to the fact that the reality of the situation is that there is no alternative but to increase the level of graduate contribution.”
Pressed by Gary Gibbon on figures in the Browne Report which suggested a reduction from £3.9billion to only £700million in university teaching grants, Mr Cable said these were “working assumptions”.
He added: “I don’t deny that there will be a very substantial reduction in the amount of money that the Government can provide in the form of teaching grants.
“A lot of courses would cease to be subsidised. Those where there is a high cost and a big national interest – science, medical courses – would continue to be subsidised.”
Asked whether that meant the rest would cease to be subsidised, he replied: “That is in general going to be the case, but those figures are guesses.”
Former BP boss Lord Browne said: “Our higher education system is world-renowned but too often it enshrines the power of universities and not the power of students. These reforms will put students in the driving seat of a revolutionary new system.
“Under these plans, universities can start to vary what they charge but it will be up to students whether they choose the university. The money will follow the student who will follow the quality. The student is no longer taken for granted, the student is in charge.”
He told Channel 4 News Political Editor Gary Gibbon that graduates would see a “400 per cent return” on their investment in studying at university.
“People are certainly worried about debt but a lot of people are more interested in the prize at the end,” Lord Browne said.
“A university degree gives you access to all sorts of things for the future and if you want to earn money, the chances of earning a lot more money than you would do if you didn’t have a degree.”
“The top third of graduate earners would pay more than twice as much as the lowest third – that’s fair and it’s progressive.” Business Secretary Vince Cable
He said the debt was not like a mortgage – and would fall entirely on graduates who could pay.
“Students don’t pay a penny,” he said. “It is graduates who pay and they pay according to their success. That is very important – so this is risk free for the student.
“When they are a graduate, they have to pay, but on the other hand they will get a degree and that means that they can earn more money and on average we calculate that it is a 400 per cent return on their investment, and that’s pretty good.”
The Business Secretary, Vince Cable, told the Commons that the government backed the broad thrust of the report but was still open to comments on the issue.
He said: “We do believe it is essential that if the graduate contribution is to rise, it should be linked to graduates’ ability to pay.”
The current graduate contribution currently “acts too much like a poll tax and is not fair” he said.
A £21,000 repayment threshold would mean that “30 per cent of graduates would pay less from their lifetime earnings than they do now,” Mr Cable said.
“The top third of graduate earners would pay more than twice as much as the lowest third – that’s fair and it’s progressive and the Government broadly endorses this approach and will examine the details of implementation.”
But Shadow Business Secretary John Denham accused the coalition of putting “the responsibility for reducing the deficit on to the personal banking accounts of this country’s most ambitious and able young people.”
‘No ideal world’
Mr Cable retorted: “I, like a lot of people, wanted to make sure my children’s and grandchildren’s generations should enjoy a free system of university education.
“In an ideal world, that’s what we would do. We are not in an ideal world. We are in a world where we have inherited a massive financial mess and have to come to terms with reality and it’s time the Honourable Gentleman and his friends did the same.”
The proposals would represent a radical shake-up of higher education funding in England, if they are implemented by the Coalition. Scottish and Welsh universities operate under different systems, as Channel 4 News outlines here.
More from Channel 4 News on Lord Browne's review of university funding
FactCheck: how much does it cost to educate a student?
What did Nick Clegg say about tuition fees during the election?
Who Knows Who looks at former BP boss Lord Browne's background
The review also suggests different courses and different institutions could charge different prices, and will have to prove their worth to charge higher figures.
Lord Browne said: “We must not flinch from putting a value on education. Once we do this – and make that value portable – we will allow generations of students to reshape their higher education experience. Their choices will build a vibrant, well-funded and tailored university sector.”
While students will not pay anything for their education until they are earning, they will face a higher rate of interest on loans after they graduate. Higher-earning graduates would pay back their loans at an interest rate equal to the Government’s cost of borrowing, while those earning below the threshold would pay no real interest rate.
The review also wants 10 per cent more university places made available so the institutions “compete” for students.
How progressive is Lord Browne's tuition fee system?
"The total amount a graduate pays off will depend on how long they are paying back for. If they don't earn enough to pay back the full amount after the 30 years, the debts will get written off - the Institute for Fiscal Studies says that those on the bottom 30 per cent of lifetime earnings would pay back less than on the current system.
"If their earnings are £60,000 or over they will pay back more per month (Browne says they'll pay £293 a month), but - and it's a big but - they'll pay it off more quickly and so will accumulate less interest.
"It is the middle chunk of the earning graduate population who will pay more..."
The FactCheck Blog investigates
Channel 4 News spoke to five students from King’s College London to get their reaction to the Lord Browne report (watch the video above). One of the students had a personal pledge from Liberal Democrat leader Nick Clegg that he would not support a rise in tuition fees.
At the moment, tuition fees are capped at £3,290. Students can take out loans to fund themselves through university, which they pay back once they start earning money.
The new system – Lord Browne’s Student Finance Plan – would in principle remain the same, although the repayment threshold would be raised from £15,000 to £21,000. Outstanding loans would be written off after 30 years.
Lord Browne said the new proposals meant that the bottom 20 per cent of earners will pay less than under the current system and only the top 40 per cent of earners would pay back close to the full amount for their degrees.
The new proposals also include grants and loans for poorer students.
Exploring both sides of the university tuition fees debate
Universities are reacting very differently to the proposals outlined in the Browne review, writes Social Affairs correspondent Victoria Macdonald.
The University of Leeds and Leeds Metropolitan University are geographically just several hundred yards away from each other. In their responses to today’s review of Higher Education funding, they could not be further apart.
Up the hill, the University of Leeds welcomed Lord Browne’s proposals. They will, their statement said, enable them to ‘continue to deliver high-quality degrees and provide it with a sustainable future’.
Gary Gibbon on the so-called Lib Dem rebellion
Lib Dem high command doesn’t believe the NUS claims that there are 30 MPs lined up to vote against university reform in six weeks’ time. They hope when the vote comes they could keep Lib Dem votes against down to single figures. One of those self same rebels I spoke to thinks that’s where the numbers might end up too.
The challenge for the leadership is to get others currently thinking of rebelling to abstain. I haven’t heard yet of any Lib Dem ministers threatening to resign to vote against – they will be firmly steered towards abstention.
Read more on the Lib Dem rebellion over the Lord Browne higher education review from Gary Gibbon
There are fears that students will be left with crippling debt after university under the reforms, which they will face paying off for most of their lives.
The review also suggests simplifying the living costs system, so every student is entitled to a maintenance loan of £3,750. It suggests a student taking out £6,000 tuition fee loans a year, and £3,750 in maintenance loans for the three year duration of their degree will owe £30,000.
The National Union of Students (NUS) President Aaron Porter, who wrote a piece for Channel 4 News asking Lord Browne if he would like to start his adult life with debts of £40k last week, said: “If adopted, Lord Browne’s review would hand universities a blank cheque and force the next generation to pick up the tab for devastating cuts to higher education. The only thing students and their families would stand to gain from higher fees would be higher debts.
“A market in course prices between universities would increasingly pressure on students to make decisions based on cost rather than academic ability or ambition. Those already feeling the pinch will clearly be unwilling to take such a gamble and face being priced out of the universities that would opt to charge sky-high fees.
“There is no clear assurance that a hike in fees would improve student choice or quality and the evidence since fees tripled four years ago shows that neither student satisfaction nor quality has improved. Universities have not made the case for what they would do with more.
“Any graduate contributions to universities should be determined by earnings in the real world after graduation, not fixed prices based on unreliable and misleading guesswork about average salaries.”