Grants, loans and hardship funds: what we can learn from the long history of student finance

Student finance in England is up for debate once again, with extensive discussion on the perceived unfairness of the Plan 2 student loan repayment system

But concerns about how to pay for a university degree are far from new. Our new book Student London: A New History of Higher Education in the Capital explores the financial challenges students have faced for years – and the activism that has changed the student experience.

Undergraduate degrees in England have long been expensive to provide. One of the key features of the new London University, founded in 1826 as England’s third university, was that the education on offer was ten times cheaper than at Oxford or Cambridge. From the late 19th century, government grants provided universities with income that allowed them to keep fees relatively affordable.

This meant that although only a very small proportion of the population was able to attend university, not all students came from wealthy backgrounds. Students survived on a patchwork of scholarships, loans and family help. Many were able to afford only a year’s study. Memoirs attest to the indignities experienced by poorer students who struggled to pay bus fares, refectory prices or students’ union subscriptions.

Institutions could set their own fees. For example, the rates set by colleges across the University of London varied widely even though students sat the same exams and received the same degree. The 1913 Haldane commission on higher education in London recognised the need for fees to be equalised and called for a national inquiry into the topic. However, national government showed little interest.

Local authorities had begun providing higher education scholarships in the late 19th century, but these were unevenly distributed and the sums awarded varied. Another important source of funding was Board of Education grants for prospective teachers, although students resented having to pledge to teach as the price for the opportunity to study at university. After the first world war, the Scheme for the Higher Education of Ex-Service Students reflected a growing recognition that the wider social value of university justified greater state funding for individual students.

The 1920s was a time of rapid inflation. The hardship caused by rising prices led to the invention of the student discount. The National Union of Students (founded in 1922) secured reduced prices for books, newspapers, insurance and travel. Student unions helped ameliorate the cost of living crisis by opening shops and canteens that bought at wholesale prices and sold to students at a narrow margin.

The second world war disrupted higher education enormously, with institutions facing evacuation and the conscription of both staff and students. One innovative response was the creation of college hardship funds, although lobbying of the University Grants Committee to provide maintenance grants for evacuated students proved unsuccessful.

After the war, a growing proportion of students had their fees paid directly to universities by their local education authority and were in receipt of maintenance grants. However, it was not until 1962 that a new Education Act introduced a national system entitling students to the same level of support, regardless of where they lived or where they chose to study. It was this that enabled students to move away from home and fuelled a boom in the building of halls of residence. But it also gave rise to new stereotypes of students as taxpayer-funded layabouts.

By the 1970s, students were again struggling with the cost of living as grants were eroded in real terms by inflation. Alternative forms of living such as squatting and short-term housing (staying in buildings scheduled for demolition) were part political stance and part pragmatic response. In what many British students saw a moral cause, they also campaigned against “discriminatory tuition fees” for overseas students introduced from 1967.

The introduction of loans

In the face of concerted opposition, the shift from grants to repayable loans took place only gradually. In 1984 students successfully campaigned to halt the introduction of loans but, like differential overseas fees, ultimately this was to be a lost cause. One concession was that rather than have commercial banks run the scheme, the Student Loans Company was set up in 1990 to oversee it.

The 1998 reintroduction of tuition fees at a means-tested flat rate of £1,000 triggered another wave of student protest. Students we interviewed for our research remembered being so angry because the fees had to be paid up front. The campaign generated extensive media interest but this did not stop a fee increase to £3,000 per year in 2006 - although these no longer had to be paid up front. The financial crisis of 2007-8 shaped the context in which the Conservative-Liberal Democrat coalition government again raised tuition fees to £9,000 a year in 2012.

In the 2020s, a key challenge is that maintenance loans now cover just half of students’ costs but still leave them with enormous debt many will never pay off. It is not surprising that over the past decade there has been a 50% increase in students choosing to live at home. This return to older models signals an erosion of the choice that a national system of student financing was supposed to enable. A number of the people we interviewed expressed regret about such changes.

Financial support for students has often been a low priority for governments facing competing budgetary demands. There have been moments of optimism when the value of higher education to society and the economy helped justify investment in individual students – but this is far from the situation today.

Looking back over the history of student finance, it is hard to see successive campaigns against repayable loans or fee increases as anything other than a series of failures. But it is also clear that many of the support systems students today take for granted arose out of such activism, from student discounts to subsidised canteens to union shops and hardship funds.

Georgina Brewis has received funding from the AHRC, the ESRC, the Swedish Research Council, the Society for Educational Studies and the British Academy.

Sam Blaxland received funding from the Arts and Humanities Research Council to study his Master's and PhD degrees.