Can you explain the financial crisis in universities to me as if I’m a 6 year old?

[Fieldmousebonnet]

We are currently living in Ireland but may return to the UK once teenage DC are finished school. They are considering going to uni in the UK and I am aware in a basic way that many universities have financial issues, are cutting staff and courses etc. I don’t feel I have a decent grasp of why this is or what it would mean in reality if they studied there. In Ireland I am not aware of similar issues but there is a much smaller number of universities to choose from and admission to many courses is highly competitive due to the numbers applying rather than the demands of courses themselves. My DC would have more options to choose from in the UK, which is a major reason for considering it. Can anyone explain the situation to me in a simple way?

Just to add, we have a slightly complicated situation in terms of being partly in Ireland and the UK, but regardless of what we decide to do in terms of our location, studying in the UK would still be a potential option and I am keen to try to understand the situation with universities in the UK as well as I can.

There's a long running thread on the Higher Education Boards. The website WonkHE is also a good browse, if a bit geeky. But essentially:

University fees and therefore funding for universities have not kept pace with costs and inflation. Income from fees is not enough to cover the cost of running all courses.

Universities carry other loss making activities such as research.

Universities countered this by recruiting international students at a higher fee. International student numbers are collapsing.

Brexit hasn't helped!

We are now in a period where universities are having to make efficiencies / contract / cut costs etc.

No one knows where it will end up. Public sentiment and public finances do not support more public funding for universities. Student debt is high and graduate salaries are stagnating (on average).

No one can really advise on what this means for your choices, and that of your children. Choosing where or whether to go to university is a complex decision based on very personal, specific factors.

Good luck.

Oh, and it's likely that some posters will say that it's the fault of greedy incompetent universities run by overpaid vice-chancellors. And that all young people should just become plumbers because everyone always needs a plumber. That's an attractively simple argument. The reality is complicated. If there was an easy solution, we would have sorted it out by now.

The people who run universities have never run a business

Universities are now businesses

The end

Thanks that’s really helpful. So when I was in uni in the UK 20 years ago the numbers of foreign students kept universities going financially? I just find it hard to understand how there has been this enormous change in the years since I was a student. I guess my biggest concern is that a course or even a university will fail during the time one of my DC is there.

To be positive… having viewed a lot of unis in the past few year or two, many remain vibrant, inspiring places with amazing buildings and facilities that are much nicer than when I went! You just need to pick a course that the uni is known for and perhaps avoid the more niche. Doing tours and really talking to people there will help you work it out

The big, high ranking universities won’t fail.

Cambridge and Oxford will barely feel this. Russel group will be ok, although smaller programmes and modules might be cut and it will be very unpleasant for staff. Expect lots of industrial action. Anything below the Russel group is much more risky.

The reason it changed from 20y ago is that they are now not properly funded. The tuition fees from students have not kept up with inflation, the Government is unwilling to either fund them or allow them to raise tuition fees. And yes, the management is overinflated, overpaid, and stuffed full of failed academics.

I am not sure how this would affect the student experience. Most academics are still incredibly strong internationally and very passionate about their subjects. The incompetent managers don’t tend to go near the classrooms…

Not quite for a six year old, but for a 16 year old:

When you were at university the government was funding a much larger portion of costs directly rather than through tuition loans.

The Office for Students predicts that by the next academic year over 70% of British universities will be in debt. This does lead to cutbacks and cutbacks lead to industrial action.

Before the new fees came in it is true that a number of British university estates were somewhat run down and improvements were needed. Does this mean that everyone was expected to charge the maximum fee and that all or even most of the new building projects have been necessary and executed wisely? We all know the answers to those questions. So there has been greed, yes.

The universities are taking undue stick in respect of the anti-immigrant sentiment in the UK. Yes, Brexit, but it is also a big problem that students here temporarily are counted as immigrants and can no longer bring dependents. Very few UGs are affected by the last but they perceive it as hostile and Overseas numbers are down.

A silver lining of Donald Trump’s policies is that America may now be even more hostile. In practice Overseas applications are still open, with a few exceptions, so we could yet get a late surge.

@GinForBreakfast nailed it.

International students have long been a vital source of income for universities in order to balance the books - now more than ever.

Also -pre-fees - universities used to get direct government funding.

Home tuition fees have been stagnant for years but all costs associated with running a university have risen.

Many institutions are reliant on international students as they pay much higher fees, but markets are unpredictable/ competitive, they won't always get the numbers they need to make their budgets work.

Poor accounting and business practices.

I fully admit to not understanding the complexities of this but as the mother of a 1st year student at a fairly good uni, I struggle a bit to see why they struggle so much when I’m paying a fortune for a pretty grotty room. My daughter’s flat alone must make 1650 a week. And of course there are costs to be added to that but still……. I think there are 8/10 flats just in her block.

Happy to admit I’m missing the point though.

Look at the uni’s accounts. Do they have loads of investments? If so they’ll be fine. If not, they going under is not unimaginable. All the old unis have stacks of money. Newer unis don’t and should therefore be avoided.

And how are the unis reacting? Edinburgh has loads of investments but is loss making so is taking action to correct it. Better this than having their head in the sand.

My understanding is that plans are being drawn up in government to protect students in the event of a course being withdrawn when they are already part way through it. In practice, that would mean transfer to an equivalent course at the same or a different university. 8n other words, the financial difficulties being experienced in the HE sector should not be a disincentive to your DC applying in the usual way.

The "here's the simple explanation" people are out in force I see. Please take any definitive statements with the large pinch of salt they deserve.

@Fieldmousebonnet the world has changed immeasurably since you went to university - government, technology, jobs, geopolitics... If people who went to university in the 2000s harked back to the 80s we would have thought them nuts. Try not to use your own experience as any kind of benchmark.

The UK and Ireland both have excellent universities. By the time your children come to decide their futures you will be able to choose between lots of good options.

Is it University owned and operated accommodation? Or is there private sector involvement? Regardless, it's possible the income is going out to pay back the loan they took to build it in the first place...

Sorry - I meant to quote @Tulipvase !

For one factor in really basic terms, look how much your household bills (water, gas, mortgage etc......) have all gone up. Now factor in that in real terms your wages have not gone up since 2017. Most of us would struggle. Unis are the same. Salaries, utilities, interest rates have all gone up massively, and yet students numbers (especially internationals) are dropping very quickly. And also birth rates for the upcoming students are getting less and less. It is a perfect storm. The extra £250 this September increase in students fees is not going to make a blind bit of difference.

Hmm. Am Facebook friends with someone I went to school with who is now a professor at a uni. He is here, there, everywhere, constantly on a plane, posts endless photos of conference halls in India, China etc. with him standing in front of the same boring PowerPoint....you just think, is that really the best use of the university's dime? In this day and age? Multiply by the number of people doing that, on top of their wages. Its a bit of a dreamworld, academia, isn't it? It just doesn't matter...until suddenly it does!

It’s uni owned accommodation and I assume there are building costs involved but I would hazard a guess that her block is about 40/50 years old at least.

But yes, I guess it’s just all an ongoing cost. It just seems like such large amounts of income.

An acquaintance of mine is head of finance at a Russell Group. We were having a chat a few months ago, and they said that the new rise in employer national insurance contributions was going to cripple the university. The tax went into effect this month. We’ll see how long it takes before real issues take hold.

The Russell Group won't be fine as they, by definition, rely heavily on research income and international students in a way that smaller universities don't. If anything they're going to be among the hardest hit: not rich enough to weather the storm and not agile or business minded enough to adapt.

This is it in a nutshell. It's only now that things are so dire that the RG university I recently retired from have started trying to recruit top business people to rescue things. Good luck with that!

Nothing really to add but there’s no way to really know what will be happening in a year or 5. Lots of uncertainty and confusion in the entire sector. My current theory is that they’ll stop having free university (I’m in Scotland and work at a uni here) as that’s just unsustainable.

at the university I work at it’s a whole combination of things happening at once - lower student numbers, the tax increases, global economic crisis after crisis, some really stupid decisions of how to prioritise, huge salaries for academic and central university managers (principal and such), etc etc. But mostly the whole model is flawed and we are having to deal with that.

the students are still having a fabulous time on the whole though! And it’s still an interesting and lovely place to work.

@Rachelhereyour Facebook friend's travels will not be being paid for by their University. It will be the inviting institions or grants. Universities don't pay for anything academics do except teach - everything else is funded by vert competitive grants.

@rachelhere your friend’s Facebook version of academia bears about as much relationship to what working in the academic world is like as any social media curated fantasy does to being a real person.

Many people have a Facebook feed that makes it look like their life is one long round of holidays, romantic experiences; and “making memories” through wholesome fun. You might put up your snaps of Tenerife; you aren’t going to post about how you spent the evening nagging your children to do their homework and then put on a load of laundry and ran the dishwasher. He is hardly going to put up photos of the exam board he chaired, the marking he did, his graduate supervision sessions, or the zillion meetings he went to that week.