Who pays for higher education in England? How the balance has shifted from government to graduates

• The expected government contribution to the teaching and support of English undergraduates studying in England has fallen from 48% of the total (£8.9bn) in 2012-13 to just 16% (£3.3bn) in 2024-25. Students and graduates are now expected to cover the remaining 84%, up from 52%. 
• For each full-time student, the expected government contribution to teaching and maintenance has fallen by 71% in real terms, from £8,840 in 2012-13 to £2,560 in 2024-25. The expected student and graduate contribution has risen by 51%, from £9,160 to £13,800.  
• The per student funding that universities receive for teaching, comprising both the Exchequer and the expected graduate contribution, has also been declining rapidly in recent years. This is due to inflation eroding the value of tuition fees and teaching grants. This funding went down by nearly a quarter (23%) in just four years (2020-21 to 2024-25). 
• As a share of the economy, the expected government contribution to teaching and maintenance has fallen by more than two-thirds, from 0.42% of English GDP in 2012-13 to 0.12% in 2023-24. Total funding for students as a proportion of GDP has held broadly steady at around 0.9–1.0% over the period. This is largely because students and graduates have filled the gap left by government, and that share is now spread across more students than ever. 

Expected balance of contribution to total teaching and maintenance funding 

Total teaching and maintenance funding per full-time student, in real terms (in constant 2025-26 prices)

Funding as a % of English GDP

These findings have significant implications for current and future conversations on the right balance of contribution between the Exchequer and graduates, and more widely on the future of the HE funding model in England. The Treasury Select Committee noted in its Inquiry report on student loans that the government created the current student finance system to be fair. The intention was for the cost of HE to be fairly split between individuals and the Exchequer, as graduates, the government and society all benefit from it.

In England, the system has shifted from a roughly 50:50 split in 2012 to a system where students and graduates are expected to cover 84% of the cost. A key issue our analysis highlights is fairness between generations. A student starting university today attracts less than a third of the annual public investment their counterpart did in 2012-13 (£2,560 against £8,840 per full-time student, in today's prices). They are expected to contribute about 50% more themselves (£13,800 against £9,160). In our 2026 Autumn budget submission, we set out recommendations for government action on student loan repayments. Any changes should ensure fairness, safeguard people on lower incomes from disproportionate payments, and ensure future generations can benefit from a well-funded HE system without bearing more of the cost than previous generations.

Total teaching funding per student since 2020-21 has declined by nearly a quarter. This has contributed to the sector’s current financial challenges. Universities have been taking action to manage costs and operate more efficiently. DfE recognised this transformation in its latest costing study, which found that the full economic cost of teaching each student rose by between 11% and 31% across subject groups between 2016-17 and 2023-24. This was below the cumulative RPIX inflation of 41.2% in every subject group. Nevertheless, OfS data shows that universities in England and Northern Ireland face a collective £1.67bn deficit on teaching domestic students in 2024-25. Our most recent member cost-cutting survey revealed that, faced with continued financial pressure, universities have made significant cuts over the past three years. 79% reported voluntary redundancy, 31% made cuts to academic research activity and 27% cut bursaries and scholarships. Continued uprating of fees and maintenance support with inflation is necessary to prevent further erosion of capacity and ensure the continued success of England’s world-leading HE system. 

How government contributes also matters. A pound of grant is a transparent contribution, counted in the financial year it is spent and any increase raises the government’s share of funding directly and predictably. A pound of loan outlay, by contrast, contributes to the government’s share only through the fraction expected to be written off decades from now. This estimate depends on assumptions about graduate earnings, inflation and discount rates, as well as future changes to repayment terms. Grants also directly increase the teaching resource for universities, whereas changes in the RAB charge would shift the balance without increasing university funding. Should the government move towards the 50:50 split the Treasury Select Committee has recommended, greater investment in teaching grants would be the most reliable and predictable way to achieve it. Government would know what it is contributing, universities would benefit from increased and predictable funding, and graduates would face less repayment-related pressure than under the current system where grants make a dwindling contribution compared to income-contingent loans

The full methodology is set out in the report’s annexes. The analysis covers English-domiciled undergraduate students studying in England. This covers full-time and part-time students, first degrees and other undergraduate qualifications, and all students enrolled in each academic year from 2012-13 to 2024-25. GDP comparisons use ONS data on English GDP, which is available to 2023, so funding as a share of GDP is reported up to 2023-24. The results were re-tested under two alternative sets of assumptions about loan write-offs. The expected government contribution falls substantially over the period in every scenario. This includes assumptions most favourable to government, where the drop is from 60% in 2012-13 to 34% in 2024-25. All figures are in real terms, in constant 2025-26 prices. Per-student figures refer to full-time students.