International and postgraduate student fees survey, 2013

Imagine a (particularly fortunate) prospective student with £20,000 to burn leafing through the pages of UK university prospectuses. What could they get for their money?

The £9,000 undergraduate fee cap has forced the bulk of institutions to charge the maximum for fear of ­looking cheap and thereby losing status

One option – assuming they are based in the European Union – would be to buy just over two years of undergraduate tuition at the current average fee of just under £9,000 a year in England. If they were looking for a bargain, they could pick up five taught master’s degrees at Glyndwr University (and have a little left over). But they wouldn’t get even halfway through a £41,000 MBA at the University of Oxford before running out of cash.

A survey of university fees for the coming academic year, using information provided by universities to The Complete University Guide, shows that prices vary wildly. Moreover, their levels may bear little relation to what it actually costs to teach the courses.

Many in higher education threw up their hands in horror when the 2010 Browne Review proposed ushering in a new era of competition in undergraduate fee levels for UK and EU students from 2012-13. But when it comes to postgraduate courses and international students, universities have long been setting prices based on what the market will bear.

For a UK or EU student, a full-time postgraduate taught course will cost an average of just under £6,000 a year in 2013-14. This is 30 per cent cheaper than the £8,610 average annual cost of an undergraduate programme at an English university.

Part of the explanation is that the £9,000 fee cap has forced the vast majority of institutions to charge undergraduates the maximum for fear of looking cheap and thereby losing status, according to Jürgen Enders, professor of higher education at the University of Southampton.

“It’s very unlikely that we will get an easyJet university,” he observes.

For this reason, the absence of a ceiling on fees for postgraduate taught courses could, counter-intuitively, be keeping costs down. If they were capped at £9,000, it is possible that they would move towards the maximum for the same reason that undergraduate fees have done so, Enders says. “That would be a very interesting experiment.”

Another reason universities can charge UK undergraduates far more than postgraduates is that only the former have access to loans, notes Nick Barr, professor of public economics at the London School of Economics.

The gap is narrowing, however: the 2013‑14 average fee for UK or EU students on taught postgraduate courses is up 7 per cent on the previous year at universities that also provided data for 2012-13, compared with a rise of just 2.6 per cent for undergraduate fees.

“I have to say I’m slightly surprised by that [rise] because we’re all waiting on tenterhooks for home postgraduate demand to drop,” says Alison Wolf, Sir Roy Griffiths professor of public sector management at King’s College London.

International students are an important part of the cultural and academic make-up of university life and should not be treated simply as cash cows

By some measures it already has: the number of UK students starting postgraduate courses was down 4 per cent in 2011-12, according to Higher Education Statistics Agency data. But if customers are fleeing, wouldn’t universities be well advised to lower their prices to entice them back? Not necessarily, says Enders: institutions might simply be raising fees to maintain their income in the face of reduced enrolment.

Despite the cuts to the teaching grant for undergraduate taught courses imposed by the coalition government’s higher education reforms, the grant for postgraduate taught courses has been “broadly maintained” over the past three years, according to the Higher Education Funding Council for England. However, support has been maintained only in cash terms, so fees may have been hiked to make up for the real-terms decline.

There is an equally glaring price differential between UK and EU students and their international peers, who generally have to pay far more for an education in the UK.

The average fee for international undergraduates this coming academic year will be £11,289 for classroom-based subjects (for laboratory and/or clinical-based subjects, the fee is even higher). That is nearly one-third more than UK and EU undergraduates pay. However, the gulf is greater at postgraduate level: here, the average fee charged to overseas students for classroom-based degrees is just under £11,600 a year, which is nearly double the cost facing UK and EU students.

Daniel Stevens, international students’ officer at the National Union of Students, describes this difference as “scandalous”: “International students are an important part of the social, cultural and academic make‑up of university life and should not be treated simply as cash cows.”

According to a recent survey by polling firm YouthSight for Regent’s University London almost a third of international students think that their university is interested only in the fees they pay. But there is no sign they are voting with their feet and deserting the UK: the number of non-EU students in the country has increased steadily from just under 230,000 in 2007-08 to just over 300,000 in 2011-12, according to Hesa data.

There are legitimate reasons why it might be more expensive to teach international students. Universities receive Hefce teaching grants to help towards the cost of courses that are more expensive to teach, such as lab-based ones, but the funding council does not provide grants for teaching international students. In addition, navigating the complex visa process costs the sector £67 million a year, according to a recent report by the Higher Education Better Regulation Group, Cost and Benefit Analysis Project on Tier 4 Immigration Regulation. Enders also points out that such students need more in the way of induction and English-language tuition.

But this cannot explain the full extent of the differential, much of which is simply down to supply and demand, he says. International students “are willing to pay”, and even if they do feel like cash cows, Enders sees no sign of a protest movement developing (although he adds that this might change in the future). He believes the biggest threat to the UK’s ability to continue to charge high international student fees is posed by competition from other countries.

Another key factor is that overseas postgraduates are “very likely” not to have done their first degrees in the UK, explains Wolf.

“They are buying their first UK degree, which is a valuable product,” she says. This explains why universities can charge them far more than UK postgraduates, the vast majority of whom will already possess UK degrees.

International students also benefit from a year of immersion in the English language, Wolf adds. Of course, this does not cost the university anything, but it does make the experience more valuable to the buyer.

Fees for international students have gone up by 3.9 per cent at the undergraduate level and 4.6 per cent at the postgraduate level compared with 2012-13 at universities that provided data for both years. This increase has come despite the academy’s fears that changes to the visa system, including scrapping the automatic right for international students to work post-graduation, will put off applicants.

The changes have not affected demand to an extent that “has led universities to alter their price points. They hope to get away with it,” Enders says.

The apogee of the tuition fees market – or nadir, depending on your point of view – is Oxford’s £41,000 MBA, the most expensive course in our survey.

Peter Tufano, dean of Oxford’s Saïd Business School, said that the price tag – which is the same for home and international students – is not excessive compared with other highly regarded MBA programmes at elite universities in the UK, the US and continental Europe.

The London School of Economics is another institution with fees near the top of the price range, including its £,552 MSc in finance. This figure is also the same for home and international students, although an LSE spokesman notes that on other many courses the university often charges higher fees to the latter on the grounds that UK taxpayers fund the institution’s capital and research grants.

He also argues that the international undergraduate fee (£15,768) is “more representative of the full cost of running courses at a research-intensive institution” than the £9,000 charged to home students, and it “reflects the significant career advantages that an LSE degree gives to our graduates”.

High tuition fees in some areas can also help to cross-subsidise other activities and courses, although there is no publicly available breakdown of how universities do this. One institution with a particularly bank-busting course told THE that it used the fees to help prop up undergraduate and doctoral teaching. However, it then quickly retracted its statement and refused to comment on the record about such “internal operations”.

According to Len Shackleton, professor of economics at the University of Buckingham, cross-subsidisation by high international fees keeps many departments and courses afloat.

“But I do think some of these differentials are very difficult to justify,” he adds.

There is no immediate prospect of students getting to know exactly how their fees are spent and how much it actually costs to teach them. After a review and consultation, Hefce announced in April that it would not release Transparent Approach to Costing data, which could be used to calculate cross-subsidies, either at an institutional or course level, claiming that there was “no demand” for this information from students.

Hence, in setting their fees, universities will continue to use a “mixture of looking at costs, past experience, hopes and fears for the future”, according to Enders. “It’s still very much a gamble.”