Academic journal article National Institute Economic Review

Paying for University: The Impact of Increasing Costs on Student Employment, Debt and Satisfaction

Academic journal article National Institute Economic Review

Paying for University: The Impact of Increasing Costs on Student Employment, Debt and Satisfaction

Article excerpt

The costs of higher education in the UK have shifted increasingly from the state to the student (and students' families). In 1998, a fee contribution of 1,000 [pounds sterling] per annum was introduced for new entrants to full-time degree courses. This paper examines its effect on debt, term-time employment and student satisfaction. The analysis uses data from a survey of two cohorts of students and identifies how the impact varied with student and course characteristics. Fees led to an increase in student debt (particularly for disabled students and for students who did not receive financial support from their families) and a decline in student satisfaction. No general impact on term-time employment was identified, but term-time employment increased for students who did not receive financial support from their families. Whilst for these two groups inequality was increased, fees appeared to lead to greater equality, in terms of term-time employment, between children of graduate and non-graduate parents. The paper discusses the implications for the introduction of top-up fees in 2006.

Key words: Higher education; university; funding; fees; top-up fees; equality; disabled people; ethnicity; gender; finance; social class; term-time working; student; employment; debt; satisfaction; policy; disadvantage.

JEL Classification: 1; 12; 120; 122; 128; 129.

Introduction

Over the past two decades in the UK, the costs of higher education have shifted increasingly from the state to the student (and students' families). Restrictions on access to state benefits were followed by the reduction, then abolition, of grants (which were replaced by subsidised, but size-limited, loans). Redistribution of costs culminated in the reintroduction of a contribution towards fees, reversing a policy of free tuition for fulltime degree course students which had existed for over 40 years. In 1998, new entrants to full-time degree courses were charged up to 1,000 [pounds sterling] per annum as a contribution towards fees. The charge, which has been raised in line with inflation, is means-tested and, for standard age entrants, means-testing is based on parental income and a limited range of parental commitments. The fees contribution represents a large increase in cost to students (or their families), given the median expenditure of full-time students (aged under 25) in 1998/9 was 5,225 [pounds sterling] (Callender and Kemp, 2000). This cost will rise substantially from September 2006, when universities which meet certain conditions will be able to charge fees of up to 3,000 [pounds sterling] per annum.

The mare political interest in the impact of fees on students has been on their effect on participation, with concern that higher costs would disproportionately discourage those from poorer families and nontraditional students from going to university (Education and Employment Committee, 2001b). However, the effects of fees, and the shift of higher education costs to the student, are potentially much wider, affecting the composition of the student body in other ways, affecting students' activities whilst at university (and hence their higher education experience) and affecting outcomes. In terms of participation, the rate of return to higher education decreases with cost and, to the extent that students take this into account, the composition of students will alter towards those with lower discount rates and towards those with higher expected earnings. The composition may also alter in terms of the extent to which non-pecuniary aspects of university are important (although the direction of change is not clear a priori). Thus, as the cost of university rises and the rate of return falls, universities may find that the percentage of students for whom intrinsic interest in the subject is very important changes, as may the percentage for whom higher education is primarily a career tool.

In terms of the university experience, not only may this change because higher costs affect the composition of university students, but also because increased costs alter students' activities whilst at university. …

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