seen already, between different types of individuals, for example by parental income,
or by the level of lifetime earnings as graduates.

10. Conclusions

11.

This paper has shown that the reforms to HE funding in England which were first
introduced in 2006 and which will fully come into place in 2008, will result in a
significant increase in transfers from graduates and taxpayers, directed both towards
the funding of universities, and student support. A closer inspection reveals a more
nuanced picture than this, with a relatively small overall net increase from the private
sector, but with important distributional consequences of the reforms.

Individuals from the lowest part of the parental income distribution will typically find
a substantial net reduction over their lifetime in the cost of their higher education, due
to the new grants and bursaries. On the other hand, individuals whose parents come
from the middle to high parts of the parental income distribution will typically end up
seeing the costs of their higher education increased.

Grouping people by where they end up in the lifetime graduate earnings distribution,
rather than by their parental origin, another interesting picture emerges: women with
the lowest lifetime earnings will again see a reduction in the cost of HE as a result of
the reforms (so long as they defer all possible payments through the subsidised loans
on offer), while higher earning graduates will indeed in general pay more of the cost
of their own HE as a result of the reforms. Our findings suggest that income-
contingent nature of loans under the new system do provided some level of insurance
against low realized returns from HE for graduates.

Looking to the future, any cost reductions achieved by the possible removal of the
zero real interest subsidy would hit hardest those men in the 2^nd - 4^th lifetime earnings
deciles, and women in the 6^th and 7^th earnings deciles. The lowest earners would in
general be protected by such reforms, because of the provision for debt write-off.

We conclude by stressing that our analysis highlights the varying distributional
impacts of different HE funding policies. It does not represent a prediction of the

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