Higher Education Act 2004 - Details of The Proposed Changes To Funding

Details of The Proposed Changes To Funding

The Act incorporates several key changes to the financial arrangements of higher education students, including many additional terms that were added to convince those who opposed earlier drafts. The changes took effect in 2006, and apply to England and Wales.

• Up-front fees to be replaced by an income-linked deferred payment. Instead of having to pay each year while studying, students are to be loaned the funds by the government and repayments will be made out of income once the graduate is earning more than £15000 per year. The loan is charged at the Retail Prices Index (United Kingdom) rate.
  • The payment rates will be entirely earnings based, so that as a graduate's salary fluctuates, so will their fee payments. If their salary falls below £15000, no payments will be taken.
  • Additionally, any amount of a student's fees still outstanding after 25 years will be cancelled.
• Fixed rate of £1125 to be replaced by variable fees between 0 and £3000. Since different courses cost different amounts of money to run, it is argued that students should pay different levels of fees. Under the new system, universities will be able to set the level of the fees for each course, within a given range.
  • Although the change does represent a significant increase in the level of fees, some universities had called for much higher rates - in some cases up to £12000 a year. Furthermore, the top rate cannot be increased without a motion being passed in both Houses of Parliament, and the government has promised not to propose such a motion before 2009, assuaging fears that it would rise dramatically soon after the legislation was passed.
  • In order to charge more than the basic amount (equivalent to the current fixed rate), a university will have to produce an appropriate "plan", which may have to include details of how students from poorer backgrounds will be encouraged to participate. These plans will be subject to approval and review by a new body called the Office for Fair Access (OFFA, see 'Other Provisions' below).
• Increased levels of financial aid. As part of the "package" of this reform, increased government grants, and bursaries set up by the universities themselves, will be put in place in such a way that the maximum allowance will equal the maximum fee - i.e. £3000 - for the poorest students. Presently, this will come from several sources, making it hard to understand, but plans to combine the various elements may still be introduced during the committee stage.