Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The Labour government has announced this week that university tuition fees and maintenance loans for England will increase in line with inflation next year — the first increase since 2017.
The move comes after growing warnings from university leaders that the higher education sector’s finances are becoming unsustainable while student groups warn that the mounting debt load is deterring students from less well-off backgrounds.
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How much will the fees rise?
The £9,250 tuition fee paid by domestic students in England will increase to £9,535 for the 2025-26 academic year — an increase of £285.
In cash terms, this means fees have only increased by £535 since the £9,000 fee was introduced in 2012, while in real terms the value of fees has been steadily eroded by inflation, putting pressure on university finances.
The government also increased the maintenance loans that students can take out for their cost of living expenses by the same 3.1 per cent. This means a student living at home can borrow an extra £267 a year, while one living away from home in London can borrow an extra £414.
The government has not, however, reinstated maintenance grants for the poorest students.
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What does this mean for student loan repayments?
In practical terms, not a lot. This is because, as education secretary Bridget Phillipson was at pains to point out when making the announcement on Monday, loan repayments are based on a percentage of a graduate’s salary, not the size of their outstanding loan balance.
So while this change will increase the total amount of debt that a student accrues, they will repay at the same fixed proportion of their salaries — 9 per cent of their income above a repayment threshold at present set at £25,000.
A graduate who took out loans from 2023 onwards will still pay £22 a month on earnings of £28,000 a year, or £60 a month on earnings of £33,000, according to examples provided by the UK government. Loans are automatically written off after 40 years.
Will this fix university finances?
Not really. Universities are warning that they face a looming financial crunch caused in part by the virtual freeze in tuition fees since 2000 and a sharp drop-off in more lucrative international students whose higher fees were helping to balance the books.
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Calculations by the Russell Group estimated that, before the increase, universities were making a “loss” of £2,500 on each domestic student.
The Institute for Fiscal Studies (IFS) calculates that the tuition fee increase will raise £390mn a year for universities. However, changes to employers’ national insurance announced at the Budget will cost universities £372mn a year, according to analysis by the Universities & Colleges Employers Association, leaving a net gain of just £18mn.
University leaders welcomed the announcement as a “good start”, but Nick Hillman, director of the Higher Education Policy Institute (HEPI), said the net increase, which amounted to £45,000 per institution, or one new member of staff, “was at risk of being oversold”.
How much difference will this make for poorer students?
Not much. The IFS calculates that when rising prices are taken into account, the increase in maintenance loans of up to £414 a year amounts to a real-terms increase of just 1.6 per cent.
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This does “little to reverse” real-terms cuts to the generosity of the maintenance system since 2020-21, the think-tank added.
Analysis published by HEPI last year warned of a “cost of learning crisis” as loans for maintenance were not covering the living costs of students from poor backgrounds who did not receive additional financial support from their parents.
The British Medical Association has warned that the headline increase in tuition fees will deter young people from opting for medical degrees at a time when the government faces a chronic shortage of doctors.
Rob Tucker, chair of the BMA’s Medical Students Committee, said the move would lift total student debt for medical degrees above £100,000 in many cases and “introduce yet another barrier” to students from disadvantaged backgrounds joining the medical profession.
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Are there more fee raises to come?
Phillipson said on Monday that the fee increases were just a “first step” and that more needed to be done to support the sector and ensure that students from more disadvantaged backgrounds were not laden with outsized levels of debt.
“I wouldn’t say for one moment that this is the end in terms of what’s required, but it was a necessary step to make sure that our universities are put on a more sustainable footing,” she told LBC.
Government officials have been careful to note that the new policy only stipulates an inflation rise for 2025-26, and not subsequent years, with further detail on reform due next year.
According to the IFS, if the government continues to increase fees in line with the RPIX inflation measure each year, the tuition fee cap could reach £10,680 in 2029-30.
BANKING giants are paying out thousands of pounds in compensation after closing customers’ accounts by mistake, an investigation by The Sun has found.
We have found a number of cases where banks have shut customers’ accounts in error, but this has only come to light following intervention by the Financial Ombudsman Service (FOS).
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We’ve found that half a dozen accounts have found to have been shut in error just in the past yearCredit: PA
Known as “de-banking”, banks can close an individual or business’s account if they deem that it poses a financial, legal, regulatory, or reputational risk.
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This can sometimes leave customers unable to access their cash for days or even weeks if the bank freezes the account or sends them a refund via cheque.
But the biggest kicker is that banks are under zero obligation to tell you why they shut your account, leaving many customers wondering what they did wrong.
The number of complaints received by the FOS related to de-banking has increased by 69% since the financial year 2020/21, rising from 2,281 to 3,858 in 2023/24 – although these weren’t all related to mistakes by banks.
READ MORE ON BANK ACCOUNTS
But, it has emerged that some banks have closed customers’ accounts by mistake, but had refused to disclose this to the customer until the FOS got involved.
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Sarah Coles, head of personal finance at Hargreaves Lansdown, told The Sun these findings could be “the tip of the iceberg” and that banks need to be quicker at putting things right if they make errors.
“There are plenty of examples in Ombudsman cases of errors that have meant accounts have been closed,” she said.
“This can be anything from an error of judgment to human error, or a fault in the systems which meant accounts were incorrectly updated.
“Given that most people give up fighting well before they involve the Ombudsman, this could be the tip of the iceberg.
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“People make mistakes and we can’t expect them to be perfect, but we can expect banks to have processes in place to check these decisions and put things right as quickly as possible when things go wrong.”
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THE CASES
The Sun trawled through dozens of entries on the FOS website and found a number of decisions showing de-banking errors over the past seven months, including from Barclays and NatWest.
In all of those cases, the FOS said the bank should pay disgruntled customers compensation for the inconvenience and distress caused – sometimes as much as thousands of pounds.
In several of those cases, the accounts were closed following what’s known as a KYC (Know Your Customer) review, where the bank can ask a customer for more information.
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If a customer doesn’t return this information by a set deadline, the bank might react by shutting their account.
But some of these reviews have resulted in accounts being closed in error.
In one case we found, long-time NatWest customers known only as Mr and Mrs G complained to the FOS that their accounts were closed without explanation, causing them “inconvenience and worry”.
After initially refusing to provide reasons, NatWest later admitted it had mistakenly closed their accounts after the FOS intervened.
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The FOS determined that NatWest had treated them unfairly, asking the bank to pay £350 and issue a letter of apology.
A spokesperson for Natwest said: “We are extremely sorry for the error we made in closing this account and have apologised and paid compensation to our customer. It is extremely rare for a customer’s account to be closed incorrectly.”
‘Barclays marked me as deceased and closed my account’
IN another case from the FOS we found, Barclays was asked to pay £800 in compensation after applying a deceased marker to account in error before then closing it by mistake.
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The victim, known as “Mrs T”, complained that Barclays Bank UK PLC mistakenly marked her as deceased twice and in the end closed her account because of this.
This caused her significant inconvenience, as she also faced credit file issues and relied on others to make payments.
Barclays acknowledged it made an error, apologised, and initially offered £300 compensation.
But the FOS reviewed the case and found the compensation insufficient, proposing an increase to £800 and reimbursement of credit file monitoring subscriptions paid from September 2022 to January 2024.
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Barclays agreed with the resolution, while Mrs T was asked to accept or reject the decision by 19 April 2024.
In another case, a customer known as “S” complained that Barclays wrongly closed their Business Premium account on 5 September, 2023 during a KYC review.
Barclays admitted the mistake, reopened the account after four weeks and offered £500 compensation for the inconvenience, but refused to cover the significant financial losses S claimed.
The FOS found Barclays should pay £3,850 for loss of profit, £500 for inconvenience, and 8% interest on the account balance.
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Both parties partially accepted this decision.
‘My company accounts were closed even though I submitted everything Barclays asked for’
Barclays was also ordered to pay £200 to a company after it shut two of its accounts in error.
Company B, represented by Mr D, complained that Barclays unfairly closed its two bank accounts without notice during a KYC review.
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Initially, not all the required information was provided, but Mr D fully cooperated and resubmitted a lost KYC form.
In June 2023, Mr D confirmed with Barclays that all necessary information had been provided.
On 19 October 2023, Barclays closed B’s business account, followed by the closure of the USD account on 1 November 2023.
After Mr D’s complaint, Barclays acknowledged the error, apologised and offered £200 compensation for the inconvenience.
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Mr D found this offer insufficient, believing it didn’t reflect the time and effort he spent resolving the issue.
The Financial Ombudsman Service reviewed the case and determined that £200 was fair compensation, as there was no evidence of significant financial loss.
Barclays agreed to pay the £200, and the complaint was upheld in September 2024.
A Barclays spokesperson said of these cases: “We are unable to comment on the details of these specific cases without the consent of our customers.
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“However, we respect the decisions made by the Financial Ombudsman Service and are sorry for any occasions where we failed to provide the usual high levels of service that our customers can expect to receive.”
What is ‘de-banking’ and why might my account be closed?
De-banking is where your account is closed against your will.
Banks should generally allow customers 30 days to make alternative banking arrangements before axing their account, but in some urgent cases you may get no warning at all.
Lenders can suspend accounts if they detect any “suspicious activity”, such as sending or receiving large amounts of unexplained money or transactions don’t fit with the user’s typical spending pattern.
If a bank suspects a customer has been victim of a fraud – where large sums of money are sent – it will also close the account.
Which? Money editor Jenny Ross says: “Under some circumstances, banks are allowed to close accounts without notice and without providing a reason.
“This includes suspected fraudulent use of the account.”
But the government has not yet revealed any plans to enforce these proposals. The Sun has asked for an update when possible.
What you can do if your bank account is closed
Which? says that those who believe their bank account has been unfairly closed should attempt to make alternative arrangements for their payments to avoid fees or charges.
They should then make a complaint to their bank and make a data request to Cifas online to check for a marker, which they can then contest.
If that fails, customers could then attempt to make a complaint through the FOS.
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Customers who successfully make a claim may not have their account reopened, but they could receive compensation and an apology.
But it’s worth bearing in mind that this can be a lengthy process and it might take a long time before you see any compensation.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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