The university tuition fees system lets students down so badly that it borders on a financial ‘mis-selling’ scandal, the spending watchdog has warned.
A National Audit Office (NAO) report said too many students pay for low-quality degrees then end up earning less than non-graduates.
It said many may not realise their degree will not lead to a decently paid job and have not considered the impact of a student loan – leaving them with an average debt of £50,000 – on their lives.
The revelation that Dame Glynis Breakwell earned £450,000 a year and living rent-free in a £1.6million townhouse comes as tuition fees for students have risen
The majority of youngsters have received ‘no financial education’ at school, leaving them ‘vulnerable’ to making ‘poor choices’ over student debt, according to the report.
National Audit Office head Sir Amyas Morse said: ‘Young people are taking out substantial loans to pay for courses without much effective help and advice, and the institutions concerned are under very little competitive pressure to provide best value. If this was a regulated financial market we would be raising the question of mis-selling.’
Graduates pay back 9 per cent of their earnings over £25,000 – meaning medium earners supporting families will have hundreds deducted from their pay every month. But they have limited ‘consumer protection’, the NAO said.
It comes after tuition fees rose again this year to £9,250 – while vice-chancellors have been criticised for accepting vast pay packages. The highest paid, Bath University’s Dame Glynis Breakwell, was handed £468,000 this year.
The NAO said a third of students did not think their course gave value for money, down from half in 2012. But it is too hard for dissatisfied students to switch universities, so they cannot use ‘consumer power’ to drive up standards.
The head of the National Audit Office Sir Amyas Morse said young people are taking out substantial loans to pay for courses without much effective help and advice
Students in Bath protest about Dame Glynis after details of her remuneration package became public
The report said: ‘Students taking out loans lack the level of consumer protection available for other complex products such as financial services.’
With other types of debt, financial firms are expected to spell out the risks to potential customers.
The NAO also said there was ‘no meaningful price competition’, as almost every university charges the maximum allowed.
The report pointed out that some universities appeared to be trying to pack students on to courses that cost less to run in order to make more money. It said: ‘The cheaper a course is to run, the more likely a provider is to maintain offers in the face of declining applications or expand student numbers in response to more applications.’
Vice-chancellor’s £800k ‘a sick joke’
A University that paid its vice-chancellor £808,000 last year following a ‘golden goodbye’ agreement will have to ‘justify’ its actions, No 10 said yesterday.
Bath Spa University handed Australian Christina Slade £429,000 – the highest severance package given to a UK university boss.
The severance payment to Christina Slade by Bath Spa University is thought to be the highest made to any UK vice-chancellor
This was on top of her salary of £250,000, pension contributions of £89,000, housing allowance of £20,000 and other benefits worth £20,000.
Ex-education minister Lord Adonis branded the payment a ‘sick joke on students’ and accused Professor Slade, 64, of having her ‘snout in the trough’.
Yesterday, Theresa May’s spokesman said the university will be forced to explain why it made the decision to the new universities regulator. The Office for Students will have the power to fine universities that cannot justify paying their vice-chancellor more than £150,000.
Bath Spa University said the money was paid ‘having taken legal advice’ and was considered value for money.
As all student debt is wiped after 30 years, the taxpayer will pick up the bill for any loans not paid off. Labour MP Meg Hillier, chairman of the Commons’ public accounts committee, said: ‘The Government is failing to give inexperienced young people the advice and protection they need when making one of the biggest financial decisions of their lives.
‘It has created a generation of students hit by massive debts, many of whom doubt their degree is worth the money paid for it.’
Sally Hunt, of the University and College Union, said: ‘It is perhaps not a surprise that fewer students think their course is value for money now they face bigger debts and keep seeing stories about how their vice-chancellors seem to be creaming off any profit.’
Last year, the Institute for Fiscal Studies found graduate earnings for men at more than a tenth of universities and colleges were lower than for non-graduates.
The Department for Education said it had changed the threshold for repayments and would also carry out a major funding review. Universities UK, which represents vice-chancellors, said graduates were ‘increasingly in demand’ and earned an average of £10,000 a year more than those without degrees.