Page last updated at 02:32 GMT, Thursday, 18 March 2010

More students, but who will pay?

By Sean Coughlan
BBC News education

There are record numbers of students graduating from university

Going to university used to be reserved for a small minority - a privileged group of young people generously maintained by the taxpayer.

But what happens when a university education becomes the expectation of a majority?

This year an unprecedented number of people are seeking places at university in England - up 23% on last year.

Hundreds of thousands of applicants are set to be disappointed - a problem made even deeper by the funding cuts being announced, with student leaders forecasting a "summer of chaos".

It is not as if there has not been expansion in higher education. The system is just struggling to keep up with the surge in demand.

Doubled in a decade

More people are at university than ever before, in what has been a quiet social revolution.

graph on student spending

There are four times as many people leaving university now with degrees each year than were getting five O levels in the 1950s.

Across the industrialised world, the number of graduates has almost doubled in the past decade.

There are parts of the UK in which two-thirds of young people are now going into higher education.

But who is going to pay for all this? What are the funding options?

Tuition fees in England, Wales and Northern Ireland have been a first symbolic step towards making students pay towards the cost of university.

An option which will be seriously considered will be to push tuition fees much higher - perhaps to £7,000 or £10,000 per year. In the United States, where there are no limits on fees, courses can cost £36,000 a year.

Degree price tags

As well as changing the headline figure, there will be universities wanting to create a market in fees - so that different institutions and courses will come with different price tags.

This will have far-reaching implications. If you pay £10,000 a year for a course, is the degree worth the same as a course costing £5,000? Will poorer but talented students be forced to study at the cheapest rather than the best university?

student finance

If fees are allowed to double or treble, how can you avoid turning higher education into a preserve of the middle classes?

There have been calls for the scrapping of any kind of limit and the creation of a completely free market in fees. A report for the Adam Smith Institute says that setting an upper limit for fees creates an artificial demand for places.

Hand in hand with proposals about raising fees are questions about the cost of student finance.

If you charge students more - will it cost the taxpayer more in terms of cheap loans?

This leads to another key argument, lurking below the headline. Should there still be such generous subsidies on student loans?

The Confederation of British Industry and the 1994 Group of research-intensive universities have suggested that loans should be charged at a more commercial rate as a way of reducing the cost to the taxpayer.

Graduate tax

Rather than paying to go to university, there have been proposals for the burden to be transferred to those who are working - in the form of a graduate tax, which would link repayments to subsequent earnings.

BBC News website is looking at higher education in a series of features:

The National Union of Students has been pushing for such an income-related graduate payment system.

There are countries, such as the education powerhouses in Scandinavia, where the entire burden of higher education is placed on taxpayers.

But according to the OECD, higher education systems entirely reliant on taxpayers struggle to get the scale of funding they need to compete. And they have tacitly accepted the benefits of sharing the cost between state and student.

The UCU lecturers' union has another proposal which avoids increasing direct charges for students. It wants business to pay through the raising of corporation tax, with the extra cash ring-fenced to higher education.

Rather than looking at changing the way students pay, there have been calls for changes to how students go to university.

Instead of three-year residential degrees, there could be more students going to local universities and more studying part-time.

Further education colleges could be where people go to study for degrees rather than university campuses - and people could study for course modules that could be built up into a full degree.

Any decision on fees will also have political implications. All the major parties now support the ambition to increase student numbers.

But there is much less commitment to saying how it would be afforded in the long term.

The review of funding in England has pushed the question beyond the general election, but whoever is in office will still have to wrestle with this political conundrum.

More and more youngsters are expecting a place in university - but who is going to break the bad news to parents about the cost?

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