Higher education finances and funding in England

This page is a short summary of the full PDF report Higher education finances and funding in England. Summary data on income and expenditure for the sector as a whole can be downloaded in the accompanying reference table.

Concerns about the financial stability of higher education providers

The financial sustainability of the higher education sector has come under increasing strain following reductions to government grants and tuition fee caps not keeping pace with inflation over the last fifteen years. Recent inflationary and cost of living pressures have also placed demands on universities in relation to pay settlements, energy costs, and building projects.

Continued uncertainty about student recruitment and the forthcoming international student levy, which is predicted to cost the sector £300 million a year from 2028-29, may place more pressure on the operating cashflow and liquidity levels of providers. Many providers are consequently announcing redundancies and course closures, reducing investment in research, and cutting back on repairs and maintenance.

Higher education sector income and expenditure

In academic year 2024/25, the total income of higher education providers in England was £46.1 billion. The income of all UK providers has increased by 200% in real terms over the 30 years to 2022/23 (as shown in the chart below), while over a similar period the total (headcount) number of students has increased by 83% and the number of academic staff by 113%.

Sources: HESA, Consolidated statement of comprehensive income and expenditure 2015/16 to 2025/25 (and earlier editions); HM Treasury, GDP deflators at market prices, and money GDP, June 2026

The main change in the make-up of this income over time has been the increasing share from tuition fees and the falling share from direct government funding through the higher education funding bodies. Fees made up 24% of income in 2005/06 and increased to more than 50% from 2019/20 onwards, while funding body grants fell from 39% in 2005/06 to 11% in 2024/25.

Income from fees paid by home and EU students increased after the undergraduate fee cap was raised to £3,000 in 2006 and £9,000 in 2012, but its share of total income has fallen in recent years. The share of income from non-EU overseas fees has increased steadily since the mid-1990s and more rapidly from 2018.

In 2024/25, 48 publicly funded universities in England (40% of the total number) had a financial deficit: their total expenditure was greater than their total income. This rate fell in 2024/25 after increasing in each of the previous three years.

Public funding of higher education in England

Public funding to higher education providers is delivered directly through the two funding bodies (the Office for Students and Research England) and indirectly through tuition fee loans. The Office for Students will allocate around £1.2 billion for teaching in 2026/27. The majority of this was for courses which cost more to provide than can be met through tuition fees alone.

Most direct funding for teaching was removed when the fee cap was raised to £9,000 in 2012. Total direct government funding for teaching has fallen by more than 80% since 2010/11.

Direct funding for research through Research England, which supports research capacity and infrastructure (rather than specific research projects), broadly maintained its real value between 2010 and 2024, but has been reduced in real terms in the two years since then.

The proportion of public funding for higher education through each route is shown in the chart below.

Sources: DfE, Guidance to the Office for Students on Strategic Priorities Grant recurrent (programme) funding for the 2026-27 financial year and associated terms and conditions (July 2026) (and earlier editions); DFE, Guidance to the Office for Students on Strategic Priorities Grant capital funding for the 2026-27 financial year (July 2026);  DSIT, Specific guidance to UKRI, from DSIT, regarding the operation of Research England for 2026 to 2027 (and earlier editions); Student Loans Company, Student loans in England: 2025 to 2026 (and earlier editions); HM Treasury,GDP deflators at market prices, and money GDP, June 2026

In 2025-26, almost £12 billion was lent to students in England in undergraduate fee loans and postgraduate loans. This makes up the bulk of all public financial support to higher education providers. However, the long-run cost of these loans to government is less than their value to providers, as most graduates will repay some of their loan. The estimated long-run cost to government of funding these loans is currently almost £4 billion a year.

Total estimated public expenditure on higher education in England, including direct funding, long-run cost of fee loans, plus long-run costs of maintenance loans and targeted support for students, was £11.8 billion in the 2025-26.

Alternative funding models

According to the Institute for Fiscal Studies (IFS), the simplest way of improving the financial position of the UK’s higher education providers would be to raise the tuition fee cap for undergraduate students and/or increase the amount of funding provided through teaching and research grants.

More significant reforms to the higher education funding model have also been proposed and modelled by the consultancy London Economics as part of work commissioned by the University of the Arts London, the University and College Union, and in a collection of essays published by the Higher Education Policy Institute. These include:

• A specific tax paid by graduates
• A graduate employer levy paid by organisations that employ graduates
• A reformed student loan repayment system, with stepped repayments that mean higher-earning graduates make repayments at a higher rate than lower earners

The IFS’s student calculator for England allows users to look at the potential impacts that changes to the student finance system would have on public spending and graduate repayments.

Local area data

Higher education funding data is not broken down by local area. Information on the income and expenditure of individual higher education providers, including breqakdowns by type and key financial indicators can be found on the Higher Education Statistics Agency finances open data pages.

Further reading

• Higher education in the UK: Systems, policy approaches, and challenges
• Higher education around the world: Comparing international approaches and performance with the UK
• International students in UK higher education
• Students and the rising cost of living