Report warns of 'two-tier' university education system if recent trends continue

University education in England is at risk of becoming a two-tier system, with the poorest students attracted to the lowest-ranked institutions due to market factors, a key report has shown.

The National Audit Office (NAO), which scrutinises public spending by Parliament, said an increase in students from poorer backgrounds would not necessarily result in them attending universities with the best reputations.

Its report examined whether the Department for Education (DfE) was maximising the extent to which changing supply and demand signals in the higher education sector supported the Government's drive to offer academic success regardless of background.

The NAO found the proportion of young people from disadvantaged backgrounds entering higher education had increased, but participation remained much lower than for those from more prosperous backgrounds.

The percentage of 18 and 19-year-olds attending higher education from the lowest participation areas of the country, linked to a lack of economic prosperity, increased from 21% to 26% between 2011 and 2016.

But this compared with 59% from the highest participation areas, a difference that was mostly explained by educational achievement at school, the NAO said.

Furthermore, increased participation among disadvantaged students was weighted towards lower-ranked providers, which risked creating a two-tier system, the body said.

The report added: "If recent trends in response to changes in the market continue, a two-tier system may develop between providers that can compete for the most high-achieving candidates and those that struggle to compete at all.

"There is a risk that, as a result, increased participation among disadvantaged students will not lead to better outcomes. Graduates from poorer backgrounds already earn, on average, up to 10% less than peers who studied the same subject at comparable institutions.

"Providers reported to us how they are engaging with communities, locally and nationally, to raise participation among disadvantaged groups. But it is too early to tell whether these activities will offset recent trends."

Between 2011 and 2016, the lowest ranked universities saw an 18% increase in the share of students from low participation areas, compared with 9% in the highest ranked.

Amyas Morse, head of the NAO, said: "We are deliberately thinking of higher education as a market and, as a market, it has a number of points of failure. 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. The Department is taking action to address some of these issues, but there is a lot that remains to be done."

The average graduate on a three-year course leaves with around £50,000 of debt, the report added.

It also identified a lack of careers advice at school for some pupils.

Meg Hillier, Commons Public Accounts Committee chairman, 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.

"There are also worrying signs of a two-tier system of higher education emerging, with the students from less well-off backgrounds siphoned off into lower-ranked universities and then lower earnings in their careers. Instead of looking out for students, the department has taken a hands-off approach to the sector."

A DfE spokesman said: "Our student finance system removes financial barriers for those hoping to go university, with outstanding debt written off after 30 years. We recently announced that the repayment threshold will increase from £21,000 to £25,000, putting more money in the pockets of graduates.

"We will also be conducting a major review of funding across tertiary education to ensure a joined-up system that works for everyone. Our reforms, embodied by the Higher Education and Research Act, are helping students make more informed choices about where and what to study, ensuring they get good value for money.

"Disadvantaged 18-year-olds are more likely than ever before to go into full-time higher education, including record entry rates at the most selective universities. The new regulator, the Office for Students, will go even further to improve access and participation."

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