University fees may fall as students hold out for a better deal

200,000 of this year's A-level candidates are expected to miss out on a university place this year

Most universities will soon have to slash planned fee rises – throwing the plans of thousands of A-level candidates into confusion.

A report by the influential Higher Education Policy Institute (HEPI) today warns that most universities will have to reduce their fees to an average of £7,500 a year as they struggle to fill places.

Its findings come as more than 200,000 of this year's A-level candidates are expected to miss out on a university place this year. Last night it was being claimed many could now decide against re-applying next year when most universities will be charging the new maximum fee of £9,000 a year and wait until 2013 before snapping up cheaper places.

Today, as more than 250,000 young people receive their results, even high-flying students – with three top grade passes – will find themselves looking for a job or contemplating the gap year they had previously turned their backs on in the hope of getting into university before next year's fee rises.

Sally Hunt, general secretary of the University and College Union, said: "The Government's fees policy has been one clumsy disaster after another."

Bahram Bekhradnia, director of HEPI and co-author of the report, said: "What we know so far is that universities are going to have to reduce their fees and therefore students might be better off hanging on for another year."

The report warns that most universities will be obliged "if not immediately then within a year or two" to cut their net fees to £7,500 a year.

"They will become unviable very quickly otherwise, losing 8 per cent or more of their students every year," the report says.

The dilemma comes from the Government's decision to allow universities to expand student numbers as long as they recruited students with at least two As and a B grade pass. The HEPI report says that only a handful of élite universities will be able to expand at will.

Other universities "will be vulnerable to losing some of their AAB+ students to more selective, more prestigious institutions and will at the same time be competing with their peers both to hold on to their existing and to recruit additional students".

That could trigger an "arms race of merit-based scholarships" from other universities as they seek to hold on to their brightest students.

Further down the line universities that traditionally attract fewer top-flight graduates "will be forced to reduce their fees and/or greatly increase fee waivers to bring the average net fee down to £7,500. Some may delay the decision for a year but in the medium term there is no credible alternative."

The financial pressures will create "a more polarised sector" with a small number of universities charging £9,000 and the majority (including Russell Group members) charging £7,500 or less, the report concludes.

The Universities minister David Willetts said the new fees regime meant "institutions will have to work much harder to attract students and be explicit about the quality of their teaching and the type of experience they offer".

Today's A-level results are set to show a rise in the percentage of A* and A grades with academics claiming the A* has already become the new A grade.

The increasing reliance on A* grade passes by universities is opposed by headteachers' leaders who believe it favours independent schools where teachers prepare pupils en masse for getting top grade passes.

Q&A

What are the prospects for this year's A-level candidates?

The number of candidates this year is the highest ever – up 1.4 per cent to 669,956. The number of university places remains the same so the numbers without a university place at the end of the day are likely to increase.

Is entering clearing an option for those still without a place?

Do not dismiss it. Even though a sizeable minority of universities are not entering clearing this year, there still could be about 40,000 places to be filled through it. Get cracking on your applications as soon as possible.

What else could they do?

Study abroad. Maastricht University in The Netherlands has set up a fast-track procedure to enrol UK students (and their fees are cheaper than the UK – £1,156 a year). Also, a growing number of firms are offering apprenticeships or to pay university fees if people sign up with them – notably KPMG. They, too, are bracing themselves for calls this morning. This could be the way ahead for the future. A gap year could be an option – the numbers choosing that are down because people want to enrol before next year's fees rises, so there are places available.

Should disappointed candidates defer for two years before re-applying if universities are going to have to cut their fees?

A difficult one that must be down to the individual student's decision. The Government would argue there are enough safeguards in the system to provide support for those wanting to re-apply next year.

Richard Garner