Watchdog: University tuition fees are like a mis-selling scandal

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 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 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.’

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.

‘Failing to give advice and protection’