Higher Education: an evolving crisis
The year is 2026, it has been 24 years since Tony Blair’s “education education education” speech to which he promised 50% of kids would go to university. I was 2 years away from being born at the time of this speech, it therefore has had a dramatic impact on my life and the vision Tony Blair had for Generation Z’s educational prospects. Gen Z were born in the midst of the New Labour and Coalition governments (1997-2012) and have been profoundly affected by the encouragement to go to university. Many working and middle class families aspired to give their children a better education, therefore sending their children to university seemed like a dream come true. However, diluting the number of children heading to our higher educational institutions lacked foresight and analysis in order to predict what would happen to the value of a degree when the aspiration for 50% of the population would have attended a university and obtained a degree would be achieved. In this article I hope to walk you through the background of the previous state of universities prior to the New Labour Governments, how the financing of student loans allowed for easy access to education, the knock-on effects of diluted degrees on the job market and how we are heading for both a financial and employment crisis resulting from pushing university attendance. I will round this off by introducing a radical solution to restructure Student Loans in England, how they’re offered and knock on effects in wider academia.
The golden pavements of university:
Universities have existed since medieval times, with Oxford and Cambridge heralding back to 1096 and 1209 respectively. They have always represented the pinnacle of global if not western thought and discovery which has traditionally invited the nobility or landed gentry to be educated at such prestigious institutions. It has been a necessary rite of passage for most of the British, and later, global upper class who would attend the finest prep schools in the land and then “go up” to Oxford or Cambridge. From their founding to the marketisation of universities under Blair, university education was a privilege, a status symbol and a key to the corridors of power and wealth.
Widening the net of educational access has been a key goal of policy development within governments and society. In the early 1900’s the “red brick universities” in growing industrial towns of Liverpool, Birmingham and Manchester were founded to meet the need of educating a work force to a technical standard. Funding for university attendance came directly from local authorities. This meant the costs were covered for bright kids to obtain higher education. In 1998, Tony Blair’s government introduced tuition fees which meant students had to contribute to their education. In tandem with this, the Student Loans Company (SLC) then introduced a repayment scheme based on income. Before 2012, repayment began when income reached £18,330 which rose to £25,000 in 2012. When Tony Blair sought re-election in 2001, he introduced a target to send 50% of kids to attend university by 2010, a goal that wasn’t achieved until 2019. This is where the seeds of destruction were sewn.
Cracks in the yellow brick road
To put it simply, Tony Blair increased a supply of otherwise rare degrees and linked payment of those degrees to the supply of jobs which exclusively catered for those degrees. This is essentially a bubble waiting to burst. According to the Financial Times, as of 2024 the higher educational entry rate was at 36.4% with 445,000 people graduating with a degree in 2022/23. This is figure is in a single year. Those people are entering the same jobs market which has dramatically shrunk since 2021, with graduate vacancies dropping by 60%. Mix this with the introduction of Artificial Intelligence and ChatGPT which can fill a lot of entry level jobs such as writing lengthy reports and analysing documents that graduates go to university to do. U.K Student debt is now approaching £270 billion. This collectively makes up all graduates who have student loans from 1998 onwards and have yet to repay. The Department of Education’s spending on student tuition and maintenance (est £15.5 billion) loans dwarfs both research (£4 billion) and teaching (£2 billion). According to the Student Loans Company 2024 financial report, in the 2024 financial year, student loan repayment totalled £5 billion. This is barely enough to cover research and not enough for teaching costs.
This is also why many universities are running on budgetary deficits and have had to produce vast cuts to university funding to meet these fiscal challenges. In a Higher Education Statistics Agency 2024 income and expenditure report, total U.K university income totalled £54.5 billion with £28.7 billion of this income being from student loans alone. Compare this with the £45 billion total expenditure from all U.K universities on staff, estates and research. Now in an ideal world where everyone is repaying at a clinical rate, the reliance on tuition fees would not be such a problem. However given the statistics on repayment I have laid out to you, the reality of the financial situation of these institutions and public spending on student loans becomes all the more dyer.
This is precisely why various governments have either raised tuition fees (plan 1 and 2), raised the rate of interest rates on loans alongside Retail Price Index (plan 2 and 5) or raised the amount of time until loans are written off (plan 5). Despite this, existing debt still outpaces repayment rates. Which leads us in the direction of a very big financial iceberg. There is still reason to be optimistic, graduates still enjoy a larger employment rate then non graduates with graduate employment at 6%. Compare this to the 14% overall youth unemployment rate, this is less than half. Combine this with 77% of student feeling that their degree matched their current job according to the graduate outcomes survey and 80% of graduates acquiring a “high skilled job” according to 2025 graduate labour market statistics. Time will tell whether those high skilled jobs recent graduates have taken up result in increasing repayment in the coming decade. However, if the current pace of technology increases, many graduate jobs risk facing redundancy which will result in debt ballooning even further. Raising the question whether student loans even have a future with the current rate of repayment.
Restructuring of Student Finance England and the Student Loans Company:
Before I begin this segment, I will state that I am a graduate. My solution will seem like I am “pulling the ladder up.” However, I am going to do so, not in the phrase’s traditional malicious sense. I am pulling the ladder up because there is a big scary monster up here and I don’t want future generations to partake in a growing educational fiscal crisis.
For too long we have tokenised debt as something relatively minor and good for society, student loans play a massive part in giving future generations a pretty bad example of how we should treat and repay debt to each other and to the wider economy. Debt matters, if you take out a loan, the goal should be to repay it. This is why I believe the SLC should drastically reduce student loans offers. This should be done by reevaluating and restructuring of what “mortgaging” of student loans looks like. Like most mortgages, most people are assessed on their credit scores in order to secure better mortgage repayment periods. Inspiration must be taken from this but incorporating a radical step of assessing the student’s grade attainment, desired degree, the field’s average job salary and background parental income. All of the 4 factors will have equal weighting. Once these factors are incorporated then the student is given a score from A to F. Grades ABC are given varying loans. While D to F will not qualify.
Understandably this will put the income of parents’ or guardians’ disadvantages those of lower income backgrounds. However, this is absolutely necessary in order to reduce the volume of graduates entering into the job market and therefore returning the economic and societal value of the degree. This will mean more kids will be able to attend technical colleges because student loan funding will slowly be rerouted into technical colleges to provide specialist skills to enter into the workforce, reducing the number of pupils taking on masses of debt and not being able to repay while providing kids with those technical skills to counteract the rise of AI.
Another knock-on effect will be drastically reducing the funding for universities. I see this as a net gain. For too long universities have had an incredibly inefficient funding model of relying of risky student loans which have had a decreasing rate of repayment, leading to increased overleveraging of university budgets. This will be a dramatic reassessment of academia as an industry which has been fed on loans, a fluctuating international student market and real estate in some campus universities in order to keep the music going. Undoubtedly, with the massive cut in student loans, many universities will have to close as research grants are the 2nd highest income for most universities but pale in comparison to the income via student loans. For example, going back to the HESA university income and expenditure survey, Oxford, Cambridge and specific research institutes such as the London School of Hygiene and Tropical Medicine have higher incomes from research grants than tuition fees in the U.K. Most tuition fees far outpace the often 2nd place research grants for net income. Universities who are unable to wean themselves off relatively free money will close their doors.
Maintenance loans will also be completely abolished, meaning the Student Loans Company will just be dealing with tuition fees. This also reduces universities’ incomes from real estate which intern, will return universities back into research bodies rather than a 3-year hotel stay which only serves to fuel the tourist economy. Not to mention housing in cities such as Bristol, York, Bath and Exeter will drastically increase as the indulgence of landlord HMO’s will also no longer receive funding as a knock on from a lack of maintenance loans. For the landlords that remain in business, the tricky business of securing student tenants will cease to be a particularly common occurrence since the renters reform bill increased the foresight that landlords have to search for tenants and vice versa.
This is not to say that increasing the scrutiny of student loan offers will create a rainbow paradise for students and remaining institutions. What this is meant to do is to reset the balance between higher education, public debt and youth employment outcomes. university does work for some people, however now is the time we reset the boundaries as to its value and attainment which made university education so special and not just as an extended college or sixth form.
Comments