A think tank has claimed that the current funding model for Scottish universities is holding many students back, and called for a commission to be set up to explore future options.

Reform Scotland has raised questions over the viability of the Scottish Government's flagship free tuition policy, in light of increasing pressures on the sector.

Tuition fees for Scottish students are paid by the government, with the Scottish Funding Council allocating each a number of ‘funded places’, placing an effective cap on the number they can recruit.

Universities can charge up to £9,250 per year for students from the rest of the UK and more for international students, with no cap on the number they can recruit.

The latest figures show that while the number of Scottish domiciled students rose 1.6% between 2020-21 and 2021-22, the number of students from the rest of the UK rose 3.5% and non-EU students saw a 37.1% increase. The number of EU domiciled students fell 16.6%.

According to Reform Scotland since 2006, while there has been a 56%  increase in domestic applicants, there has also been an 84% increase in the number refused entry due to this cap.

It's argued that could both a financial impact on students if they have to move to the rest of the UK to study, where fees go as high as £9,000, and to the economy in the form of the loss of skilled workers if Scots students do not then return.

The call for a commission is part of the think tank’s contribution to a new report by The Higher Education Policy Institute, How Should Undergraduate Degrees be Funded? 

The report explores a range of potential funding models for undergraduate education, against a backdrop of financial sustainability concerns for higher education institutions across the UK.

The report includes research by London Economics, which estimates that the average debt held by Scottish students on graduation from Scottish universities is £32,600, with average lifetime repayments of £33,200 and £22,000 for male and female graduates, respectively. This is based on current maintenance grants.

Alison Payne, Research Director of Reform Scotland, said: “More people want to go to university, but the fiscal arrangement is holding ambition back. Reform Scotland believes that the current funding arrangements are unfair and unsustainable.

The Herald:

"There needs to be a better balance between the individual graduate and taxpayers, with graduates contributing towards the cost of their tuition through a graduate contribution, to be paid once they earn more than the Scottish average salary. The amount paid would be based on the amount you earn.

"If a graduate does not gain much financially from going to university, they will repay little or nothing. In addition, given the demographic challenges and skill shortages that Scotland faces, the Scottish government could then look to introduce schemes that cut or scrap payments for graduates who remain in Scotland working in certain sectors for set periods of time.

“We suggest that a commission is set up to examine what the graduate fee should be, and whether it should vary to take account of differences in course costs. However, for the purposes of modelling and a starting figure, we suggest the commission could start with £5,500. This uses the Cubie report’s suggested figure - 25 years ago - of £3,000, which would be about £5,500 today.”

Rose Stephenson, Director of Policy and Advocacy at HEPI, said: “Higher education institutions across the UK are under financial strain. In England, the cost of higher education is disproportionately borne by graduates, and in Scotland, it is disproportionately borne by the state.

"This report aims to breathe new life into the debate on university funding, analysing different options, including how the cost of higher education could be split between graduates, the state and employers.”

A Scottish Government spokesperson said: "The Scottish Government is resolute in its commitment to free tuition. The latest data shows since this policy was put in place, the number of Scottish students entering university has increased by 31% and Scotland’s student debt levels are currently the lowest in the UK, almost three times lower than in England. 

“The recent report by the Commissioner on Fair Access also confirms that the number of entrants to university has increased across all SIMD cohorts, and we are seeing record numbers of young people aged 19 and under securing a university place including record numbers of students from our poorest communities, as a result of the Scottish Government’s commitment to Widening Access.”