University tuition fees will rise to £9,535 per year in England next year, the government has announced. This is a 3.1% rise on the current level, equivalent to £285 per year. Before this announcement, fees had been frozen at £9,250 since 2017.
The government says the move will bolster the financial stability of universities after seven years of no increases, despite a period of high inflation. It comes after universities have warned they are at risk of running into financial difficulties.
Tuition fees of £9,000 were first introduced in 2012, causing controversy. Since then, they have only increased by £250. This has left many institutions reliant on international students to boost their income, as they generally pay higher fees.
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Earlier this year, the Office for Students said 40% of universities were expected to run into budget deficits this year. The higher education regulator added that “an increasing number of providers [would] need to make significant changes to their funding model in the near future to avoid facing a material risk of closure”.
The latest news has prompted outrage from students. A spokesperson at the National Union of Students called the higher fees a “sticking plaster”.
Despite this, those who are keen to go to university to advance their minds and careers should not be put off by higher fees. Martin Lewis, founder of MoneySavingExpert, was quick to put the changes into perspective by explaining how the student loans system works.
He said on X, formerly known as Twitter: “Higher tuition fees WON'T change what most pay each year. For most, they're paid for you by the student loans company and you repay afterwards only if you earn over the threshold. The amount you repay each year (9% over the threshold) solely depends on what you earn, not on what you borrow.”
Lewis added that higher tuition fees would “only see those who clear the loan in full over the 40 years pay more”, i.e. “mid-high to higher-earning university leavers”. He called the rise “trivial” compared to the changes the last government made for 2023 starters, who had their repayment threshold dropped from £27,295 to £25,000 and their repayment period extended from 30 to 40 years.
We take a closer look at how the student loans system works and what it means for you.
How does the student loans system work?
Most young people take out a student loan to fund their studies at university. This covers the full cost of the tuition fees. Maintenance loans also contribute towards the cost of living expenses, and those from lower income backgrounds are entitled to a larger loan.
The idea behind the student loans system is that it should make university accessible to everyone, no matter their financial background. However, most students find that their maintenance loan is not enough to cover their full living expenses.
One piece of good news that was announced yesterday is that maintenance loans will also increase by 3.1% from next academic year, giving students more money to live on. It comes after research last year showed that the average student was left with just 50p per week after paying for their accommodation.
This should also reduce the burden on parents and grandparents, who generally help with living costs while their children are studying.
“While parents are not mandated to make up the shortfall, the general expectation is that they will,” says Alice Haine, personal finance analyst at investment platform Bestinvest. “This is because household income is considered the barometer for how much a student receives from the maintenance loan, so the implication is that families are expected to help.”
How does the repayment system work?
Those who take out a student loan are forced to navigate a complex repayment system. There are several different plans, depending on when you started your studies. The repayment thresholds, interest rates and loan periods vary depending on which plan you are on.
Many students will never repay the debt in full as it gets wiped off after a certain number of years. As a result, many choose to see it as a sort of graduate tax rather than a regular debt.
Some high earners could end up paying the debt off before it is wiped – in which case it is possible they would have been better off overpaying their loan or accepting help from a family member to pay it off early.
But, even if you are able to do this, it comes with big risks. Nobody knows exactly what their future earnings are likely to be and it is possible that the money would have been better used elsewhere (such as in the purchase of a house).
If you are in a position to make overpayments on your student loan, it could be worth speaking to a financial advisor first.
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