Government's Contribution to UK Degrees Drops to 16%, Students Bear 84% of Costs

The British government now covers only one-sixth, or 16 percent, of the cost of undergraduate degrees in England, with students and graduates expected to finance the remaining 84 percent, according to a new report.

This represents a substantial increase in the financial burden on students, who previously covered 52 percent of degree costs in the 2012-13 academic year when the government contributed 48 percent. The analysis, conducted by consultancy London Economics for Universities UK, defines government contribution as direct funding including teaching grants, and also accounts for the estimated costs absorbed by the Exchequer from loans that are eventually written off.

Under current student finance arrangements, remaining loans are canceled after 30 or 40 years, depending on the specific loan plan. The findings emerge amid ongoing discussions about student finance in England, with particular attention on a Labour policy concerning Plan 2 loans.

Vivienne Stern, chief executive of Universities UK, stated that successive governments have progressively shifted the cost of higher education onto graduates. She emphasized that the original fee system was designed as a co-payment model and called for a reset that acknowledges the broader societal benefits of higher education, including increased tax contributions from graduates and their role in public services and economic growth.

A separate report from the Organisation for Economic Co-operation and Development (OECD) indicated that the UK has notably decreased its state funding per university student in recent years, a trend that contrasts with most other participating countries. This OECD analysis focused solely on direct government funding to universities and did not include the value of loans canceled at the end of repayment terms.

The OECD figures showed an 8.8 percent decrease in UK government spending on students between 2015 and 2023. During the same period, only Finland and Bulgaria saw larger reductions in their state spending on students. Across the 34 countries examined by the OECD, state spending on students increased by an average of 10.2 percent.

Earlier, former Chancellor Rachel Reeves announced that the earnings threshold for repaying Plan 2 loans would be frozen for three years from 2027 at £29,385. This measure is expected to result in more lower earners contributing to loan repayments and higher earners paying more overall, as the threshold will not increase with wage growth.

Education Secretary Lucy Powell has indicated that ensuring fairness within the student loans system is a priority in her role. A Department for Education spokesperson affirmed the government's commitment to supporting the university sector through measures such as raising tuition fee caps in line with inflation and providing additional funding for high-cost subjects and to address skills shortages. The spokesperson also noted efforts to improve the student finance system, including increasing maintenance loan support and reintroducing targeted maintenance grants, while stressing the need for a sustainable sharing of higher education costs among students, graduates, and taxpayers.