HE Funding Threshold Changes – September 2021

Practice area: Education and Labour Markets | Higher education | Public Policy
Client: N/A
Published: 26 September, 2021
Keywords: modelling quantitative analysis Education and labour markets LE report

In light of the upcoming Comprehensive Spending Review, London Economics undertook some modelling of higher education fees and funding arrangements. Based on the current system of repayments facing the 2020-21 cohort of undergraduates, we were modelled the resource impact on the Exchequer of a change in the repayment threshold for graduates to £23,000. The analysis illustrates the significant savings can be achieved by the Exchequer although there are significant differences in the distributional effect on different graduates depending on their expected earnings. We also modelled another Scenario – consisting of an increase in real interest rates and a 5 year freeze in the repayment threshold. Although graduates in general contribute more under either scenario than currently the case, there are very important distributional effects. In Scenario 1, the burden of additional repayment falls on low and middle income graduates, whereas under Scenario 2, a greater share of the burden falls on the highest earning (predominantly male) graduates. The full analysis is presented