Ten-second summary: not as bad as it looks, at least, not for the reasons that are getting the most press.
The Browne Review of Higher Education funding has been published. In what comes as a surprise to absolutely no-one, it advocates removing the current cap on university tuition fees.
Also unsurprisingly it's been met with heavy criticism, with people claiming that it will double or triple average student debt, and put off people from "middle-class" backgrounds from going to university.
There is a lot to criticise in the review, but the fees model is actually a pretty good deal for students and universities, and the reason is in the unusually favourable terms under which student debt is repaid.
The student finance terms
The Browne Review recommends that all students be given a £3,750 annual maintenance loan, with up to a £3,250 annual grant for those students from less rich families. "Less rich", in this case, starts at £60,000 annual family earnings, with the full grant being available at £25,000 annual family earnings or lower. It also recommends extending provision of loans and grants to part-time students. £7,000 a year isn't a lot of money, but it's enough to fund the typical cheap student lifestyle.
There remain problems here with students whose families are rich enough to be expected to support them, but for whatever reason - LGBT students are often vulnerable to this - don't do so, but the review is unlikely to make these problems worse. There are also problems for students with disabilities, or with dependents, who will have much higher costs than the typical (mostly-privileged) student, but the extension of financial support to part-time study does at least increase their options.
Tuition fees, likewise, will be paid by the government on the same terms as the maintenance loan, as they are now. The difference is that whereas now there is a cap just over £3,000 on fees, this is removed by Browne. Direct government funding for teaching will be mostly withdrawn, so universities are expected to need to increase their fees into the £6,000 - £7,000 range for most courses (comparable, incidentally, to the fees already charged to international students coming to the UK to study).
So, the headline figure is probably about accurate. £7,000 annual fees, plus £3,750 maintenance loan, gives a student debt of over £30,000 for a typical 3-year course. That's really quite a big number. Furthermore, Browne recommends that the interest rate for this debt be the government borrowing rate of 2.2% above inflation, rather than the current inflation rate.
Fake debt
I said this was good news for students, didn't I? The good news comes in from the repayment terms. Student debt is not like normal debt. The repayment rate is not connected to either the size of the debt or to the interest rate - instead it is 9% of any income over £21,000 - and any unpaid debt after 30 years will be written off. Furthermore, the non-inflationary portion of the interest rate only applies to the extent that it does not increase the real (i.e. inflation-adjusted) debt owed. These continue to be incredibly generous terms.
They also give a very odd incentive at a certain point. Because the debt gets written off after 30 years, regardless of its remaining size, there's no difference between a debt that after 30 years has £2 remaining in it, and a debt that after 30 years has £20,000 remaining in it - you pay exactly the same in repayments either way.
So, at the point at which you calculate that your likely future earnings will be insufficient to pay your current debt, there is absolutely no penalty to accumulating any more, which means that you might as well do so. (This is not strictly true: you might become unexpectedly rich, and so end up making more payments than you expected - in which case, you're now rich, so that's fine too).
The key thing about the Browne plans is that the point at which additional debt becomes "free" is actually very low. If your browser supports Javascript, have a play around with this calculator.
Some examples
The expectation is that universities will need to charge £7,000 annual tuition fees just to restore the government teaching funding they'll be losing under the Browne model. Without taking any career breaks in those 30 years, a graduate would need to start on a marginally above-average graduate salary of £25,000, with an average real-terms increase of £1,000 each year, to repay the loan resulting from a three year course. That gives a final real salary of £55,000. Very few people - graduates or otherwise - currently earn that much.
Let's take another (well-paid) example. A student of chemistry, on a 4-year MSci course. They then do a PhD, for another 4 years (so no significant income there), before starting as a post-doc at a university on a salary of around £23,000. After another 25 years, they've managed to become a professor on a generous salary of around £80,000 (but let's say that she took a year of maternity leave somewhere in the middle of this, for five years of career break in total). If the tuition fees for their course were over £8,726; annually, then even this extremely well-off graduate will not repay them all.
A less well-paid example: After a three-year degree, they start work at a salary of £20,000. After five years, in which they only get inflationary rises in pay, they go to part-time work to look after their children, and remain part-time (earning well below the repayment threshold) for the next fifteen years. Once their children are old enough to let themselves back in after school, they go back to full-time work, and get lucky with an (inflation-adjusted) salary of £25,000, which then increases by an impressive £2,500 a year as they quickly rise up through the company. Actual debt repaid - around £14,000, which means any tuition fees over £1,000 are essentially free money. Put a more likely - and lower-paid - job in, and the university has to start paying them for the pleasure of teaching them.
The effect of this should be fairly clear. If, in practice, almost all graduates - even the well-paid ones - will not clear their student loan before it gets written off, at relatively modest tuition fee levels, then the cost-benefit curve actually starts going backwards for a while. If given the choice between a university offering a course at £6,000 tuition a year, and a different university offering the same course ay £12,000 tuition a year, then given that it is unlikely to make a difference to the actual amount of money repaid, it makes sense to pick the more expensive one (which presumably is spending at least some of the difference on providing a better degree).
Breaking cost-benefit
The effect of that, of course, is that if there's no economic incentive for students to choose the cheaper universities, there's no economic incentive for universities to choose to be a cheaper university.
So, every university puts its tuition fees up to £12,000 or more. The Browne review recommends that there be no cap at all1, but that an increasing proportion of fees taken above £6,000 annually must be paid back to the government to compensate it for the risk of non-repayment. There's still no incentive for either university or student not to go up to whatever the cap is, though.
The end result is that for 30 years after graduation, graduates essentially get an extra income tax band that appears at £21,000.
Browne's proposals have been criticised quite heavily, with a graduate tax often being suggested as a better alternative. In practice, this looks very much like a graduate tax, but on far better terms than are usually suggested for graduate taxes...
So, universities are happy, and once students understand that their giant debts are mostly fake, they should be happy too (explaining this in a way that overcomes the general aversion to running up five-figure debts will take a little doing, but should be relatively easy to do).
The government, which is left holding the actual money that backed up the fake debt, on the other hand, is not going to be happy. Or perhaps it is - the amount of money it puts towards funding universities is not going to change that much, but it's now much less obvious that it's being funded by general taxation because in theory it's being paid back by the graduates (who will - in a graduate tax way - pay more towards this repayment than non-graduates).
As with the current system, it's the potential students who don't have the repayment mechanism explained to them who lose out.
Politics
The chances of the Browne review actually being adopted wholesale are relatively small, of course. The ministers are already talking about a £7,000 cap on fees, which, if they implement the rest of the review's proposals as-is, will definitely result in every university charging that for every course.
The Lib Dems, of course, all signed up to an NUS-sponsored promise to vote against tuition fees. Back then, they probably didn't expect to end up in government having to implement it, so putting in a low fee cap makes political sense for them - "look, it wasn't as bad as it could have been", they can say.
Stealth recommendations
The big change as a result of Browne is not going to be in the fees - which even at £7,000 run to the level of "fake debt" for most students - but in the less-discussed recommendation that regulation of student numbers is removed. At the moment, universities are given an annual quota of UK-origin undergraduate2 students. Universities that under-recruit lose funding because they don't have as many students. Universities that over-recruit also lose funding, firstly because they only receive government funding for the allowed students, and secondly because the government takes even more back as punishment.
Combine this with most applications being made before the student or the university knows whether the student will get the grades to meet the offer, and it's a tense time in university admissions trying to guess how many offers to give out to hit the narrow window around the quota.
Not being required to hit a narrow window like that will certainly help universities plan, but it also allows many universities to offer far more places than they currently do. The only limit becomes the size of their facilities and the population of applicants. (The housing availability in the surrounding area also becomes a consideration, but not one that the university has to directly manage).
This deregulation is likely to be a much more significant and disruptive change to the higher education sector in England than any of the fees questions, and so far, it has received relatively little attention - it doesn't come with big numbers, and the intricacies of student admissions processes are not well known.
It's a natural consequence of the fees change - if the government isn't providing funding for students (except via the oblique student loans mechanism) then there's no need for it to enforce particular levels of student numbers. The long-term effects of it, though, are extremely complex, and I expect several universities to end up collapsing or merging as a result.
Feetnotes
1 In practice, at some point, the government is going to have to put a hard cap in place, because otherwise a university can charge £1 billion in fees. Sure, most of this gets taken back by the government, but the university still gets £100,000 per student, and the student's debt is almost entirely fake. Universities start competing on fees measured only in scientific notation, and the economy collapses into massive hyperinflation. So, there's going to be a cap at some point, and probably a relatively low one.
2 There is already, because the government does not fund these places - or at least not in the same way - no quota for postgraduate students or for international undergraduate students. Universities that have reached their UK undergraduate quota have been focusing their recruitment and expansion on these areas instead, which are generally more profitable for the university. Expect the universities that have done well with this area of recruitment to also do well in an deregulated UK undergraduate market, and vice versa.
