Scholarships may bring fiscal woe

Pressure is growing on the government to reconsider the design of its national scholarship programme after warnings that the proposals would perpetuate the problems that dog the existing bursary scheme.

The government has said that universities charging more than £6,000 a year should fund a year of tuition for undergraduates who qualified for free school meals as pupils. A second year of tuition would be funded via a £150 million national scholarship fund.

In a briefing published last week, the Institute for Fiscal Studies (IFS), an influential think tank, said the plan would create a financial incentive for universities to not accept the poorest students. It said the proposal "reintroduces the undesirable features of the bursary scheme" because universities attracting a greater proportion of students from poorer backgrounds will face additional costs.

Million+, which represents a group of new universities, is lobbying against the plan, calling it "unworkable and unacceptable".

Data from a parliamentary question reveal that of the cohort of 15-year-olds in English maintained schools and in receipt of free school meals in 2002-03, 10,670 had progressed to higher education by 2006-07.

Just 25 of them ended up at the University of Oxford, the universities of Cambridge and Bristol each accepted 20, and 15 went to the University of York. In contrast, 15 other universities each taught more than 200 such students.

This means that, even if universities with high numbers of undergraduates from free-school-meal backgrounds charged fees of £7,200, they would have to spend millions of pounds each year supporting those students.

If the University of Westminster were to set its fees at £7,200, for example, it would face an annual scholarship bill of more than £3 million, whereas Cambridge could charge fees of £9,000 and pay out just £180,000 under the scheme.

One vice-chancellor said he would have to increase annual fees by £1,000 or more in order to get back what the university would lose.

The IFS analysis of the new fee system finds that the lowest-earning 20-25 per cent of graduates would be better off, in terms of starting repayments, than under the current system. However, when the system is examined by students' parental income, a different picture emerges, with the poorest 30 per cent paying "significantly more" than they do now, the IFS says.

It points out that students from households earning £42,000 - the cut-off point beyond which undergraduates are not eligible for grants - will be left with larger debts than others, as they will need to take on larger maintenance loans. The IFS calls this "hard to justify".

Last week the government published a draft copy of a guidance letter to the Office for Fair Access, the access watchdog, which says that no changes will be made to the organisation's statutory powers.

Universities wishing to charge above the basic level - £6,000 from 2012 - will be able to do so only if they reach an agreement with Offa on the measures they will take to encourage applications from students from low-income homes. However, this is an agreement that institutions are already obliged to make.

The ultimate sanction available to Offa if a university fails to meet its agreement will also remain the same - the power to impose a fine of up to £500,000 and to refuse to renew an access agreement. This would effectively withdraw the university's right to charge fees above £6,000.

The new agreements would require universities to make progress towards benchmarks each year, and would have to be renewed annually rather than every five years.

Graeme Atherton, executive director of Aimhigher West, Central and North London, questioned the effectiveness of the plan. "Why is there no minimum requirement for investment in outreach?" he asked.

rebecca.attwood@tsleducation.com.