UK graduates face 50% jump in university costs since 2012

Students are now facing education costs that are around 50% higher than they were in 2012, as the UK government increasingly shifts the financial burden of higher education away from taxpayers and onto graduates, according to new analysis that has renewed calls for changes to the university funding system.

Research by consultancy London Economics estimates that graduates now cover more than 80% of the cost of higher education, compared with around half previously. The shift reflects reductions in government funding for teaching and student maintenance, alongside repeated increases in student loan repayments.

Ministers argue that graduates will ultimately shoulder a smaller share of higher education costs. However, even the government’s own preferred calculations point to a significant reduction in taxpayer support, fuelling debate over how the cost of university education should be divided.

Growing concern over repayments on Plan 2 student loans, taken out by undergraduates who began their courses between 2012 and 2022, has added to the political pressure surrounding university funding. The issue presents another challenge for Chancellor John Healey ahead of next month’s Budget.

London Economics estimates that teaching grants have fallen sharply in real terms, from £4.8 billion in 2012-13 to £1.3 billion in 2024-25. Maintenance grants, which were worth £2 billion in 2012-13, have also been phased out completely, according to a report by the FT.

At the same time, repeated freezes to student loan repayment thresholds have meant graduates are paying back a larger share of their tuition fee and maintenance loans.

Total funding per student, including government-backed loans, has declined by 9% in real terms. The taxpayer contribution has fallen even more sharply, dropping 71% from £8,840 per student a year in 2012-13 to £2,560. By contrast, graduate contributions through loan repayments have increased from £9,160 to £13,800 annually, meaning graduates now cover 84% of the overall cost, compared with 52% in 2012-13.

The analysis also predates last year’s decision to freeze the Plan 2 student loan repayment threshold at £29,385.

The latest freeze in the repayment threshold “drew attention to the way the government has been changing loan terms over time without stating the intention to deliberately shift the balance of who pays because they thought it would attract little notice,” according to chief executive of Universities UK, Vivienne Stern.

“The balance has now got out of whack and should be adjusted,” she added.

Ministers recently rejected a recommendation from the House of Commons Treasury select committee to restore a 50-50 split in higher education costs. The government argued that graduates benefit financially from obtaining a university degree and said it was unwilling to take on the “substantial fiscal cost” of shifting more of the burden back to taxpayers while public finances remain under pressure.

With the 28 October Budget not expected to bring any changes to student loan repayment thresholds, Stern said it would be a “fundamental error” for a government committed to expanding technical education to overlook the role of universities.

This risked losing “something which the UK ought to fight to retain, which is a university system which is widely regarded as one of the best in the world,” she said.

Government estimates indicate that taxpayers will ultimately cover between 30% and 40% of the cost of a university education. These calculations use more pessimistic assumptions about future graduate earnings than those applied by London Economics, resulting in lower projected repayments on student loans.

Using a comparable methodology, London Economics estimates that the proportion of higher education costs borne by graduates has increased from 40% to 66% since 2012, when Plan 2 student loans were introduced.

“Politicians have thought for years that they would get away with treating young graduates as cash cows but it is clear that they have now been found out,” stated Oliver Gardner, founder of the Rethink Repayment campaign.

“By piling the costs of university education overwhelmingly on to graduates, politicians have burdened a whole generation with huge student loan debts that most are struggling to even make a dent in.”

The findings highlight how sharply the balance of university funding has shifted over the past decade, with graduates now carrying a far greater share of the cost while taxpayer support has fallen. With student loan repayments and university funding likely to remain under scrutiny, the debate over who should ultimately pay for higher education is set to remain a key issue for the government as it considers the future of the UK’s university funding system.