Grade requirement for student loans would cut a financial lifeline for English universities

If universities thought a Labour government would quickly revive their financial stability, those days are over. The vibes may have improved but little else has, with rising costs remorselessly squeezing their budgets and universities having to cut or close departments.

Prestigious universities such as Nottingham were hit after tougher visa restrictions skewered their strategy of relying on overseas students paying higher tuition fees.

But the latest policy out of Whitehall – introducing minimum grade requirements to qualify for student loans in England – is set to hit a different group of universities: those that take on students with no formal or recognised qualifications.

Last year 33,000 domestic students enrolled in full-time, first degree courses without a single GCSE or equivalent qualification – just over 6% of the total signing up that year. A policy of restricting access to student loans to those with at least a single pass at GCSE level could cost the sector more than £200m a year in forgone fees.

But some students will not neatly fall into qualified or unqualified categories. Some were students who have taken foundation courses, which are designed to prepare those without qualifications for university.

In other cases they may have been UK residents with diplomas or certificates from overseas that were not easily recognised.

With or without qualifications, a university in England receives the same tuition fee – £9,535 a year – for each student, paid through student loans in the vast majority of cases.

But educating students is an expensive business – so some universities have gone into franchise or subcontracting arrangements with private, for-profit providers, who recruit the students and do the day-to-day teaching.

The university oversees the curriculum and assessments, with the final degree certificates validated in its name. In return, it gets a proportion of each student’s tuition fees each year, in some cases as much as 30%, according to the public accounts committee.

For universities struggling or unable to recruit in the more lucrative overseas markets, this was a new source of income closer to home.

A recent analysis by the Financial Times found that six institutions in England admitted more than 50% of their UK-based student intake without qualifications such as GCSEs in 2024-25, including three that took on more than 60% – Ravensbourne University London, Bath Spa and Leeds Trinity.

Restricting student loans would cut off a funding stream for those universities but it would also narrow the choices of people who really want to go to university and can’t afford it without student finance.

Bath Spa University – which lists nine educational partners on its website – told the FT that it was “committed to widening participation and creating flexible pathways into higher education, particularly for those returning to study later in life or changing careers”.