'Universities are already facing funding challenges associated with the decline in the numbers of UK university age entrants, threats to the fee status of EU nationals, and question marks over future student recruitment levels.
'The radical proposals contained in today's report add yet another layer of financial uncertainty.
'The Education Secretary has tried to pre-empt the likely reaction from universities by warning them not to scaremonger about the state of their finances.
'While a recent report from the Office for Students acknowledges that the sector overall is in reasonable financial health, it also points to considerable variations in financial performance between individual providers.
'Those institutions that are in a relatively weaker financial position will necessarily find it harder to absorb the impact of the reduction in the cap on student fees – particularly if there are no guarantees on top-up funding from the government. Many will have conducted stress tests and will know that in the worst-case scenarios, tough choices await.
'The Office for Students has made it clear that it won't prop up a failing provider. However, we could feasibly see it facilitating mergers between institutions as a means of reducing costs and protecting students. Many universities will also have to consider the impact on the availability of courses, staffing and research budgets.
'Today's report also makes a number of recommendations for creating a more overarching system that will allow students to move more easily between further and higher education. The initial reaction suggests that the FE sector is delighted with the proposals as colleges will benefit from a boost to investment after an extended period of underfunding. This is fine in theory, but it remains to be seen whether FE courses based closer to home will be enough to tempt students away from a more traditional university experience away from home.
'While the report is in favour of lifelong learning, the extension to the period of repayments to student loans could also mean lifelong paying. Under the proposed new scheme, borrowers will have a longer period to repay loans. While it's likely that the lower percentile earners and the highest percentile earners will be better off, an average earner on the 50th percentile would end up borrowing less but paying back more. According to the report's figures, a 50th percentile borrower with a loan of £40,459 would end up paying back £26,667 while under the current system a £57,849 loan would result in total repayments of £14,844.'