One of the main aims of the government’s 2012 reforms to higher education was to create a more marketised system. By increasing the tuition fee cap in England to £9,000 per year, the hope was that universities would compete on cost. The attempt was fruitless; little variation in fees emerged and the average cost of university remains stubbornly close to £9,000. However student financial aid has become marketised over the past decade. This has resulted in huge variation and vast inequalities in the amount of financial support received by students. And with the recent abolition of maintenance grants, these inequalities are set to deepen.
This is because of the nature of the higher education bursary scheme. Unlike the other major forms of student support (maintenance loans and, until recently, grants) bursaries are devolved to the institution level. Universities themselves decide which students to target and how much cash to give them; they effectively decide what constitutes a poor student. Universities spent some £300 million on bursaries in 2015, a figure that has remained roughly constant over the past few years. Universities have also embraced the relative autonomy the system allows; their approaches to spending vary widely, with some spending as much as 40 per cent of fee income on bursaries and others almost nothing.
While tuition fees have been endlessly debated, this has not been true of bursaries because the amounts involved tend to be lower and poor students can access other national forms of government aid. But from September 2016 the national system of maintenance grants will be abolished, making bursaries the main source of non-repayable financial aid for poor students. It will mean non-repayable aid has been effectively devolved to university level.
To explore the consequences of this, I used a unique administrative dataset collected from 22 English universities comprising individual-level data on UK and EU undergraduate students enrolling between 2006 and 2011. The dataset includes the university and course each student attends, the bursary they receive each year, their background characteristics and prior academic attainment, and their outcomes at university.
Two main findings emerged from this research. First, as a direct consequence of the decentralized nature of the bursary system, there are vast inequalities in the level of aid received by poor students. Since bursaries are targeted predominantly at poor students, it stands to reason that those universities with high numbers of poor students have to spread their limited resources more thinly. Hence students attending these universities (usually less elite, non-Russell Group institutions) get less than their counterparts at more prestigious universities.
Although my research covered the period between 2006 and 2011, this result still holds today. Consider students at the prestigious Imperial College London. This year those from families with household incomes of £25,000 or less hit the financial jackpot. They were eligible for £6,000 per year in bursary aid. At the other extreme, students at Liverpool John Moores University from the same parental income group got substantially less: just £500 per year. The system can also result in poor students receiving less aid than better-off students; at Imperial, students with parental incomes as high as £55,000 get £600 per year, while those whose parents earn £37,000 receive an annual bursary of £1,200.
But perhaps what really matters is whether bursaries are going to the students most likely to benefit from them: not necessarily the poorest students, but the brightest poorest students. According to my unique dataset, the bright poor (as defined by their A-level or equivalent scores) do tend to receive the most bursary aid. This occurs almost by an accident of the system, rather than by design; because bright students are more likely to gain access to more elite, wealthier institutions, they will, on average, get more in bursary aid. To the extent that I believe that these students stand to benefit the most from university, this suggests that although the bursary system may not be equitable, it is at least reasonably efficient.
Given that the bright poor, on average, get the highest rewards, maybe the system is fine as it is. But there will always be high attaining, low income students who do not end up at the most elite institutions, not least because students from poor backgrounds tend to be less well informed about university and often choose their closest institution, regardless of quality. The national system of maintenance grants ensured these students had access to an equitable amount of aid which did not depend on the university they chose. The decentralised bursary system comes with no such guarantee.
This article first appeared in HE from Research Fortnight.
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Economics of HE 