Q&A: Tuition fees

27 June 2011 Last updated at 18:41 GMT From September 2012, universities in England will be allowed to raise tuition fees to up to ?9,000 per year, amid major budget cuts to institutions' teaching budgets.

The controversial policy, backed by parliament in December 2010, sparked angry street protests. It was developed as the government's response to a review of higher education funding by former BP chief Lord Browne.

How much?

The government is allowing universities to charge up to ?9,000 per year for undergraduate courses, raising the cap from its current level of ?3,290.

Universities wanting to charge more than ?6,000 will have to undertake measures, such as offering bursaries, summer schools and outreach programmes, to encourage students from poorer backgrounds to apply.

This access agreement will have to be approved by the Office for Fair Access.

How will students pay the fees?

The government will lend students the money for fees, which will be paid back when they graduate and begin working. The fees will not have to be paid up-front.

The threshold at which graduates have to start paying their loans back will rise from ?15,000 to ?21,000. This will rise annually with inflation.

Each month graduates will pay back 9% of their income above that threshold.

The subsidised interest rate at which the repayments are made - currently 1.5% - will be raised. Under a "progressive tapering" system, the interest rate will rise from 0 for incomes of ?21,000, to 3% plus inflation (RPI) for incomes above ?41,000.

If the debt is not cleared 30 years after graduation, it will be wiped out.

What will happen to grants and loans?

Maintenance grants are set to rise from ?2,906 to ?3,250 for students from households earning less than ?25,000.

But partial grants will only be available to students from households with incomes of ?42,000, instead of the current cut-off point of ?50,000.

Means-tested loans will continue. While loan amounts have been increased, the threshold for those receiving the most generous ones has been lowered from ?50,000 to about ?42,000.

What is the long-term cost?

Students taking three-year courses charged at ?6,000 will leave university with about ?30,000 of debt - if fees go up to ?9,000, debts will be closer to ?38,000.

The government says the lowest-earning 25% of graduates will pay less than they currently do. But most others will pay more - the highest earners almost double what they currently pay.

The Institute for Fiscal Studies says that, for about half of graduates, the plan is essentially a 9% graduate tax for 30 years, because they will not finish paying off the debt by the 30-year cut-off point.

Assuming fees of ?7,500 for a three year degree, plus maintenance loans, its modelling shows that the top 10% of graduate earners will clear their debts, on average, in about 15 years. But a middle-earning graduate would need to earn, for example, an average of ?48,850 a year for 26 years to pay off their debt.

The IFS also says about 10% of graduates will pay back, in total, more than they borrowed.

Is there any extra support for students from low-income families?

Universities wanting to charge more than ?6,000 will have to set out measures to recruit more students from poorer backgrounds - and also to support them when they are studying. This will take the form of means-tested bursaries and fee waivers, with each university offering its own individual scheme.

When will the proposals take effect?

September 2012. Students applying in 2011 who defer entry to 2012 will have to pay the increased fees. But students who have begun their courses before 2012 will not be affected in their later years of study.

Will universities get more money?

Universities argue that much of the money raised from raising tuition fees will simply replace major cuts to teaching budgets, especially in arts and humanities subjects.

Teaching grant cuts of 6% for 2011-12 have already been announced, with a further 16% reduction the following year - although by then universities will be getting income from raised fees. Teaching-related capital funding for universities has also taken a hit - 54% in 2011-12.

Cuts of 40% to the higher education budget over the next four years were announced in the spending review on 20 October 2010.

How are universities funded?

In the UK as a whole, income from fees - including fees paid directly by students such as postgraduates and overseas students - makes up about 29% of universities' total funding, which was ?25.4bn in 2008/09.

Another 35% comes from government funding bodies, while the rest comes from other sources such as research grants, endowments and investments.

In England, the balance of funding is going to change - with much of the cost of university courses switching from the taxpayer to the student.

What does the proposal mean for the rest of the UK?

Scotland does not charge Scottish students fees.

Students from elsewhere in the UK currently have to pay ?1,820 per year to study at Scottish universities.

The Welsh Assembly has announced that fees will rise to up to ?9,000, as in England, but the government will meet the extra cost to Welsh students studying at any UK university. Funding for universities in Wales has been cut by 12%.

A review of the system in Northern Ireland is under way - it initially suggested maintaining the current fee cap, but the conclusion is now being reviewed.

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