Artikkelit
04.06.2025
Who pays for higher education and research in the UK?
Funding of higher education is based on two policies which largely determine the way universities are run. The first one is tuition fees, which were introduced in 1998 for both home and international students, and the second being the government-backed student finance system. Student loans are the main method of direct government support for higher education. Money is loaned to students on subsidised terms to help towards their maintenance costs and to cover the cost of tuition fees. Universities in the UK also get government funding for teaching, formula-allocated research funding as well as national and international competed research funding. The sources of funding sound familiar from the Finnish perspective, but the structure of the funding pie and the vast amount of different funding organisations point out some of the differences between the university funding in the UK and Finland.
Funding follows the students
Before university tuition fees for home (UK) students were introduced in 1998, university studies were free of charge for students. Since 1998, however, the tuition costs have been steadily increasing. Tuition fees were capped at £9.000 since 2012 and at the same time the straight government funding was reduced. Another important change in 2012 was the removal of full-time undergraduate student number controls in England and a bit later in Wales, too. These policy changes have led to an increase in student numbers and higher tuition fees. In the late 1990s the cost of one year was around £1.000, a number which is comparable to present-day tuition in many other European universities, the tuition has been hiked up several times since, reaching £9.250 in 2017. Higher education institutions have been urging for increase in maximum tuition to ease the dire financial situation of many UK universities. The maximum tuition fee for home students will be raised to £9.535 from the beginning of Autumn term this year. There is no doubt the maximum will become the normal.
At the moment, there are no caps for international students and their tuition fees. Universities utilise this and cover the deficit caused by home student fees by charging higher fees from international students.
The university students from the United Kingdom can to apply for funding to cover both tuition costs as well as maintenance loan (which is similar in purpose to that of Finland’s Kela-backed student loan). Despite the seemingly simple loan system, many students are faced with decades of paying off student loans after graduating, due to the lack of pardoning systems or interest-free loans. The average student who finished their course in 2023 had £45.600 in debt. Monthly repayments are calculated depending on the person’s monthly income, which is why university graduates in low- and middle-paying careers face the struggle the most, especially when the interest rate of post 2012 loans is currently 7.9%, their highest ever level. As the loan expires 30 years after first repayments were made, many now refer to loan repayments as a ”university tax” due to almost lifelong repayments. Latest amendments extended the threshold to 40 years after graduation for students who have recently started their studies.
Currently £20 billion per year is loaned to around 1.5 million higher education students in England. The value of outstanding loans at the end of March 2024 reached £236 billion. The Government forecasts the value of outstanding loans to reach around £500 billion (202324 prices) by the late-2040s. The Government forecasts that around 65% of full-time undergraduates starting in 2023/24 would repay their loans in full.
Recent struggles and talks of reforming the higher education funding
Despite a well-established funding system, in recent years a number of UK universities have struggled with securing funding, which has affected the selection of courses offered, the ability to hire new staff and even maintaining whole departments. According to the Office for Students (OfS), as many as three quarters (or around 72%) of higher education providers could be in deficit in 2025-2026. As universities are trying to save money in every turn, often the first thing to go are cost-heavy courses that require lots of specialized facilities and equipment, such as chemistry. This has led to some universities overrepresenting essay-based and mainly lecture-led subjects, such as humanities. This is particularly the case at universities that lack the funding or prestige that would keep the flow of international students coming and secure higher income.
The reason why UK migration and border policy is so intrinsically linked with UK universities is the vast amount of cash and expertise that international students bring into UK universities every year. According to the House of Commons, the annual net economic benefit of UK international students is around £37 billion (2022). Hence the noticeable drop in student visa applications from 2019 to 2020 and declining again since 2022 has been a source of major concern to many UK universities.
Universities have already faced the financial consequences of declining number of international students. Universities are worried after the Labour Government introduced its White Paper on Immigration in May 2025. Labour Government proposed reducing the ability for international students to remain in the UK after graduation to a period of 18 months instead of 24 or 36 months, as it is at the moment. This might deter students from choosing the UK as a study destination. The White Paper introduces also several other measures, like levy on international student tuition fees and strengthening sponsor requirements which both might have a negative effect on universities possibilities to recruit international students.
Struggles and possibilities in research funding
Research funding forms another crucial part of UK university funding. The largest proportion of funding is UK public funding, the majority of which is delivered through what is known as the ‘dual-funding system’, formula-allocated funding which can be spent on any research, and funds that universities competitively bid for, which are then tied to the research outlined in that bid. Each part of the UK, England, Scotland, Northern Ireland and Wales have their own funding councils for the purpose.
According to Higher Education Statistics Agency HESA, total income for the UK higher education sector (300 providers) was £52.3 billion in 2023/24, excluding eighteen HE providers who did not finalise their financial data by the deadline. As much as 52% of the sector’s income came from tuition fees with international students’ fees accounting for 23% of total income. £6 billion came from funding body grants, £7.5 bn from research grants and contracts, £9.3 from other sources £1.3 bn from investment income and around £1 bn from donations.
The three largest sources of research funding are eight UK research councils under the national funding agency UK Research and Innovation UKRI, national funding councils and the UK government, in that order. UK government funds public universities with around £22 billion a year, part of which goes to teaching grants. UK research councils are each dedicated to a specific subject area, some of the best-known ones being Research England and Innovate UK. Hundreds of UK Charities like Wellcome Trust, Leverhulme and Nuffield Foundation complement government funding.
Universities spend more on delivering research than they receive from public and private sources. Again, international students’ tuition fees are used to cover the deficit. Despite the dire situation of many UK universities, research funding has seen some positive developments. The UK associated to the Horizon Europe and Copernicus programmes in 2024 and since March the UK has officially been able to join EU-funded Horizon funding schemes for space and quantum research. Data does not yet provide the whole picture of the UK’s first year of association, but we can already see that the UK is back in track: within 95 first calls in 2024 budget, UK comes in 5th position after Germany, Spain, the Netherlands, and France. UK has performed extremely well in European Research Council calls, coming third after Germany and the Netherlands. UK did extremely well in Marie Skłodowska-Curie Actions, ranking the first. UK universities have more to do with pilar II calls, based on large partnerships.
Most recently, the EU-UK summit held in London on May 19th also resulted in some positive developments: UK is open to start negotiating on association to the Erasmus programme and on Youth Experience Scheme to facilitate the participation of young people from the European Union and the United Kingdom in various activities, such as work, studies, au-pairing, volunteering, or simply travelling, for a limited period of time.
At first, a decision to enhance youth mobility may not sound a matter related to UK university funding. And there is no direct connection. Still, European programmes and closer links to European higher education institutions could create a positive feedback loop which could attract more European students to the UK and generate more international research collaboration.
Counsellor, Education and Science, Birgitta Vuorinen and Intern Salli Sarvela, London
Sources:
Funding – Universities UK
https://ifs.org.uk/education-spending/higher-education
https://wonkhe.com/blogs/higher-education-is-big-business/
https://commonslibrary.parliament.uk/research-briefings/sn01079/
https://www.ukro.ac.uk/news/uk-researchers-access-more-quantum-and-space-horizon-funding/
https://commonslibrary.parliament.uk/research-briefings/cbp-10037/
https://thetab.com/2024/12/02/all-the-uk-universities-forced-to-cut-core-subjects-in-2024
https://www.hesa.ac.uk/data-and-analysis/finances/income
Credits: A great discussion on University funding and international cooperation between representatives of seven Finnish higher education institutions and Universities UK International. Thank you Franziska, Oscar and Iona for hosting us. Credits:Universities UK International