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…due to the number of unpaid loans. Readers in the UK: is there more information about this? Feel free to add links in the comments.
(Thanks to Shalom Lappin for the pointer.)
For more data, see http://www.theguardian.com/news/datablog/2014/mar/21/explained-triple-tuition-fees-no-extra-cash — welcome to the madhouse.
The danger is that the government will respond not by reducing the fees so that the debts are more likely to be repaid, but by implementing a stricter repayment regime so that they are less likely to be written off.
Another relevant link: http://www.timeshighereducation.co.uk/news/cost-of-new-fee-regime-may-soon-exceed-the-old/2012146.article
I don't know anything much about the recent news in particular, but the general result is (or should be) pretty unsurprising. The UK tuition fee change raises the up-front fee from c.£3K to between £6K and £9K, zeroes the government's baseline £3.5K/student/yr direct grant to universities, and introduces a very generous income-contingent repayment scheme. Back in 2010, the Institute for Fiscal Studies modelled the impact (www.ifs.org.uk/publications/5366) and concluded that for an institution raising its fee to £9K (which pretty much every institution has done) the government would expect only about a 15%-20% decrease in its costs. Since that estimate is sensitively dependent to the predicted earning profiles of future graduates, it's pretty unsurprising that fairly small shifts in the Government's current economic models can reduce that 15%-20% to zero or even something negative.
One thing that's not getting much attention in these discussions is: where did the money go? And the answer, I think, is that it has gone to universities themselves: the tuition fee hike is basically a large increase in universities' tuition income funded by a fairly progressive (though complicated, and in some places unfair, and for many people offputting) after-the-fact charge to students. It's basically a wash for the government and was always going to be. (Quite whether the government actually expected that, or more generally just what its motivations were, is another and fairly perplexing matter. One likely possibility is that it did not expect the near-universal raising of fees to £9K, though it's peculiar that it didn't given both common sense and the previous experience with the £3K fee.)
Now, in parallel, universities' income for research, and their discretionary income for high-cost subjects, has decreased in real terms in the last four years (though by nothing like the levels across the UK public sector more generally). And I think universities are legitimately concerned that the higher-than-expected[by the government!] cost of tuition for the government may lead to further cuts in those areas. (As I've had occasion to stress here before, the last four years of UK higher education funding policy has non-trivially improved the financial standing of the Humanities, both in absolute terms and relative to STEM subjects – quite contrary to what still seems to be the prevailing understanding among UK academics.)
Title should read "England and Wales", Scotland doesn't charge fees (at least, not to home and EU students). This was entirely predictable, I'm not sure that constitutes "more information" though.
Here's more information on how the repayment works (and there are some surprising features to it): http://www.theguardian.com/news/datablog/2014/mar/21/explained-triple-tuition-fees-no-extra-cash
It is also worth noting that there is no government loan system for graduate education in the UK. Graduate students who do not receive studentships from either the UK research councils or their own institutions must pay tuition out of pocket. Most MA/MSc programs have raised tuition in proportion to the sharp increase in undergraduate fees, and tuition for research (MPhil and PhD) degrees has also gone up significantly in recent years. Funding for studentships has effectively decreased across the the research councils due to budget cuts and freezes. We are seeing evidence in departments that I am familiar with of a decline in MA/MSc enrolment. It is reasonable to expect that a similar pattern will emerge in research enrolment. We still need data across the university sector to confirm these trends.
Moreover, because university funding now relies primarily on undergraduate fees (paid up front by the government under the loan system), instead of a block grant from the Higher Education and Funding Council of England and Wales, many institutions are raising their targets for undergraduate enrolment and, in at least some cases that I have observed, they have lowered admissions standards to achieve these targets. This has led to large increases in class size. These pressures will intensify with the government's abolition of funding for capital investment in universities.
This last point by Shalom at 6 is particularly worrying. You cannot get an academic job now without a PhD. It is very difficult to get on a PhD programme without some form of Postgraduate Taught (PGT) degree. There is very little funding for such degrees (including in Scotland, alas) hence you cannot get a PGT qualification unless you, or family or friends, have sufficient money or can borrow it (on top of existing loans).
It's reminiscent of the days when, as I understand it, junior lawyers had to work their apprenticeship virtually for free, effectively excluding the working class from the profession. It might actually be harder for working class people to become academics than forty years ago (at least proportionately, allowing for the rise in the numbers of academic jobs); it would be interesting to know if there are any statistics for this.
Andrew McGettigan's book is indispensable on these issues. See my review:
Starting at 5 minutes in, David Willetts, the universities minister, is interviewed about this here:
http://www.bbc.co.uk/programmes/b03y3lkx
He says that the estimates of the percentage of student loans that will not be paid back are dependent on forecasts of earnings over the next 35 years that "change very much as short-term economic forecasts change."
When £9,000 tuition fees were voted on in 2010, the forecast growth of the economy over the next three years was a good deal more optimistic than the actual performance of the economy turned out to be. The effects of the government's policy of austerity are arguably largely to blame for this poorer actual performance:
Apart from the NHS, higher education was about the only government-supported sector of the economy that wasn't starved of cash during a time when stimulus rather than austerity would have made economic sense. So it's the result of fiscal policies pursued outside of, rather than within, higher education that the cost of subsidizing student loans to lower earners is now higher than was projected in 2010.
Re Jonathan Birch's worry, the government has already been responding by reducing fees in real terms: they've been frozen at £9,000 rather than increased with inflation. Letting the fees be whittled away by inflation is more politically palatable than decreasing the £21,000 earnings repayment threshold (which, under current policy, is set to increase with inflation).
Yes indeed. The UK government policy of budget austerity has been a major factor in generating a disastrous fall in living standards since 2010 (http://www.theguardian.com/business/2014/jan/31/official-longest-fall-wages-living-standards-50-years), and this has undoubtedly contributed to the rising percentage of predicted defaults for student loans.
Moreover, this policy was unnecessary, given that unlike Spain and Greece, the UK has its own currency, and the government could borrow at historically low interest rates. Paul Krugman offers a succinct description of the self-defeating nature of Osborne's economic policies in one of his characteristically incisive NYT columns (http://www.nytimes.com/2013/12/20/opinion/krugman-osborne-and-the-stooges.html?_r=0).
However, even if the NHS was officially "ring fenced" from the deep cuts made in other public services, it is currently in very serious financial shape, both in the hospital sector (http://www.theguardian.com/society/2014/mar/20/nhs-hospitals-annual-loss-first-time-eight-years), and in GPs services (http://www.theguardian.com/society/2014/mar/23/family-doctor-service-brink-extinction?guni=Keyword:news-grid%20main-1%20Main%20trailblock:Editable%20trailblock%20-%20news:Position1).
Sorry, the correct link for the article documenting the fall in living standards in the UK is
and the correct link for the article on a crisis in NHS hospital budgets is
http://www.theguardian.com/society/2014/mar/20/nhs-hospitals-annual-loss-first-time-eight-years
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