Berea College, Kentucky, is a university with around 1600 students that does not charge tuition fees. This compares to an average of $10,230 per year in tuition for US students who choose to attend a public university in their own state, and $35,830 for those attending private universities. Berea College aims to make US higher education affordable for people who would not be able to afford it otherwise.
The UK does not have a comparable higher education system to the US in terms of the different types of institutions available. Almost all UK universities can be considered public, in the sense that they receive direct funding from the government. The British government – via The Student Loan Company – will also provide loans for any number of students to take a place on a course. As there are so few private universities in the UK – the New College of the Humanities a notable exception – there is no concept of private universities being better than publicly funded ones. This is not the same in the US where many of the best and most well-known universities do not receive funding from either the state or the federal government. The average cost of tuition in the ‘Ivy League’ – a group of some of the best and most selective US colleges- is $53,000 per year.
Almost all UK universities can be considered public, in the sense that they receive direct funding from the government
These figures above do not include living costs either. As it is clear to see, attending university is the US is associated with vast costs. In the UK, loans are available to every first time undergraduate to cover the cost of university fees and at least some of the cost of living. The US does not have such a system in place to finance every student who wishes to attend university. This is why some parents, anticipating the huge costs of university, start ‘college funds’ for their children as soon as they are born. Furthermore, student loans in the UK are repaid like a graduate tax. Currently, graduates pay 9% of everything they earn above the threshold of £25,750 a year. Fall below that income and you stop paying anything. The loan does accrue interest at 5.4% a year. However, the key difference is that unlike almost any other loan that is ever taken, the size of the loan makes no difference to how much is paid off each month. That is determined by a graduate’s earnings which is what makes it more akin to a tax. As things stand, students offer no collateral for the loan. Nothing happens if someone is unable to pay off their loan. After 30 years it is written off. According to the IFS, 83% of students from England with student loans do not repay their loan.
Currently, graduates pay 9% of everything they earn above the threshold of £25,750 a year
The US system is very different. Students may be eligible for government loans known as FAFSA and they may also look for private loans. Both of these loan types must be paid back in full. There is also a more complex system of grants, scholarships and work study programmes available to try and fund college students. But there is no avoiding the fact that a higher education in the US is very expensive. Students will also rely on parents and family to help with the cost.
Berea college is different. The mean income of the parents of students there is less than £23,000. These people are not from families where they can afford to contribute to the cost of higher education. Berea college charges no tuition fees, meaning all students enrolled are effectively given a four-year scholarship. Part of this condition is that all students enrolled at Berea college are involved in a unique labour programme. All the students work a minimum of 10 hours per week for the university. Jobs can range from cafeteria roles to gardening to assisting in the residences.
Berea college charges no tuition fees, meaning all students enrolled are effectively given a four-year scholarship
However, the real reason Berea College can afford to fund its university students is due to a huge endowment. Endowments work through investing funds. An initial lump sum is continually invested and grows. The interest it earns can be used to finance every day spending. Berea College’s endowment this year reached £930 million. This fund has been growing for 165 years. Put simply, the college has the funds available to finance tuition fees because of an investment which started in around 1855. It also has a very small undergraduate body of 1600 students. This college is not providing 20,000 students for example (roughly the number of students at Warwick) a year with a free higher education.
For this reason, whilst Berea College may be able to provide free tuition it does not operate on a model which all US or UK universities can follow. Other universities, public or private, do not have such sizeable endowments. It does perhaps offer some good advice though. Berea College focuses on the teaching and learning experience first. Whilst the campus is in an old collegiate style, it is not trying to attract students through constantly building new sports facilities and lecture halls. These cost saving measures do not compromise the education students receive and mean there are more funds available to subsidise students.
Whilst the campus is in an old collegiate style, it is not trying to attract students through constantly building new sports facilities and lecture halls
Financing of student loans in England may not be able to follow to model used by Berea college. I would also argue that the problems associated with student debt in the UK versus the US differ. In England a student loan is easily available. What financially prevents people from studying is the cost of living because the maintenance loan is means tested. Luckily for us the way student loans are repaid in England makes university generally more affordable than for those living in the United States. On an individual level, students are far better financed in the UK. An interesting question though is to consider the long-term sustainability of this financing. Until 2018, student loans were not recorded on the government’s deficit (how much more the government spends in a year compared to what it receives in income from taxes). Adding the loans to public finance records increased the deficit by £12 billion. Given that up to 83% of students will not repay these loans in full, the government is paying a huge amount towards university education.
University fees were first introduced by the Blair Government in 1998 when the Teaching and Higher Education Act was passed into law. Initial fees were £1000 per year and means testing meant around a third of students did not pay. They were then raised to £3000 in 2004. The idea behind this was that students should contribute something to the cost of their higher education- the fees charged should “top-up” the state funding of universities. Introducing a top up system should mean that ultimately more students are able to attend university because the government can finance more university places if it is not bearing the full cost. The tripling of fees to £9000 for students starting university beyond 2012 meant students took on a much greater proportion of the cost of going to university and as such a much higher debt. At the same time though, the cap on the number of places the government was willing to fund was removed. As such more places on degree courses are available and more young people go. In 2017/18 for the first time more than 50% of young people went to university.
University fees were first introduced by the Blair Government in 1998 when the Teaching and Higher Education Act was passed into law
So, whilst student debt is definitely an issue on the minds of many students. There is no doubt that raising the fees has enabled more people to go. In the case of Berea college, it is providing a free education for a tiny proportion of people and not offering a system which can radically reshape how higher education is funded. The question for the British government will be how long it continues to offer loans to an almost unlimited number of students who gain a place on an undergraduate course, when these loans will probably not be paid back.