Government announces University tuition fee increase

The Government has announced that it plans to increase the cap on tuition fees for England-domiciled undergraduate students from £9,250 to £9,535 for the 2025-26 academic year. This is in line with the Office for Budget Responsibility’s latest forecast for inflation as measured by RPIX (3.1%).

This ends a long-running cash freeze in the fee cap, which had been increased only once since 2012 (from £9,000 to £9,250 in 2017). Compared to a continued freeze, the increase in fees will spare the higher education sector a further real-terms cut to teaching resources of around £390 million next academic year.

As well as increasing tuition fees, the government has confirmed that maximum maintenance loan entitlements will increase by £414 in the 2025-26 academic year. A student living away from home, outside London and with a household income below £25,000 was able to borrow up to £10,227 for the current academic year, so this appears to represent around a 4% cash-terms increase in entitlements – or perhaps 1.6% once rising prices are taken into account. This does little to reverse the substantial real-terms cuts to the generosity of the maintenance system since 2020-21, leaving the poorest students able to borrow around 9% less in real terms than in 2020-21 (the recent high point).

As a result of the long-term tuition fee freeze, universities’ resources for undergraduate teaching have been eroded in real terms. Increases in teaching grants – which now account for around a tenth of overall teaching resources – have not made up for the substantial real-terms cuts in the fee cap. For students starting in 2022, teaching resources per year were £10,010 – just barely higher in real terms than in 2011, the year before the tuition fee cap was tripled.

Kate Ogden, Senior Research Economist at the Institute for Fiscal Studies, said “University Vice Chancellors will be breathing a sigh of relief that the government is not extending the tuition fee freeze, sparing universities a further real-terms cut to resources of around £390 million next academic year. Of course, higher fees today mean higher student loan repayments in the long run – with graduates eventually repaying around three-quarters of the extra borrowing resulting from today’s announcement.

“Living cost support for students will also be protected in real terms. But crucially, the government has decided not to reverse the substantial real-terms cuts in the generosity of support seen in recent years. Even after the uplift, the poorest students will be entitled to borrow around 9% less next academic year than an equivalent student 5 years earlier.”

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “You don’t need a maths degree to know that going to university is an expensive business, and debts are going to mount thanks to even higher tuition fees next year. This isn’t a massive increase, so it’s unlikely to fundamentally influence whether people go to university, but it will add to the pile of debt they face when they come out the other side.

“Higher maintenance loans may not actually add to the debt pile, because they’d fallen so far behind inflation that an awful lot of students were continuing to borrow to cover their costs, but were looking elsewhere and using overdrafts and credit cards. This is more likely to switch where they borrow from, and how they repay, rather than adding to their overall debts. Because of the way the repayments work on student loans, bigger debts won’t make a difference to the monthly sums graduates pay, but it will mean more people carrying more debts for longer, so they have to repay more overall. For English students in their first and second years, who graduate on middle incomes, it will mean repaying debts for up to 40 years, which will attract an eye-watering amount of interest.”