Higher tuition fees and direct government funding are needed to halt a growing deficit in England, a group of 141 UK universities says.
A fee rise linked to inflation and more government investment would ensure the sector “does not slide into decline”, according to proposals from Universities UK, seen exclusively by BBC Radio 4's Today programme.
The Department for Education says it will create “a secure future for our world-leading universities”.
The call comes as record numbers of home students begin courses this month - but the number of international students is down.
Tuition fees for home students have been capped at £9,250 in England since 2017.
Universities UK's recommendation of a rise is focused on England. Education is a devolved matter and fees are different in Wales, Scotland and Northern Ireland.
About 40% of universities are expecting to return a budget deficit this year, according to the higher-education regulator, the Office for Students.
“Universities lose money teaching UK students - and that deficit has grown year on year,” the Universities UK proposals say.
“We have to halt that.
"If investment in teaching students had kept up with inflation, funding per student would be in the region of £12,000-£13,000.”
'Harsh reality'
Newcastle University vice-chancellor Prof Christopher Day, who chairs the Russell Group of universities, says they are having to "do more for less”.
Unless we want to see "bigger class sizes, less lectures, less nice buildings to teach in and less equipment for the practical subjects, then there has to be some more money put into the system", Prof Day says.
“The harsh reality is that unless the student and/or the taxpayer pay some more, the sector will shrink or the quality will go down," he says.
"There are no alternatives.”
But a rise in fees would make freshers Grace Clarke and Libby Callaghan, who start their course in Manchester this week, “really annoyed”.
“I'm not in lectures every single day," Ms Clarke says.
"I am getting a lot of teaching - but I’m not getting £10,000-worth."
Ms Callaghan says: “Accommodation and commuting is already a huge cost.
"[A rise in tuition fees] would definitely put me off.”
One senior lecturer, who asked to remain anonymous, tells BBC News there is "a black hole that grows" at her university, which is “massively under-resourced”, and her workload has significantly increased.
“I am teaching more lectures, more seminars, there’s more marking, so the time available to see students is significantly squeezed - we used to have an hour for discussion with students, now it’s 20 minutes,” she says.
'Going bust'
Earlier this month, Education Secretary Bridget Phillipson told university leaders she was looking at "all of the options" to solve the "complex problems" they faced.
Prime Minister Sir Keir Starmer promised to support scrapping fees - during his Labour leadership campaign, in 2020 - but later abandoned his pledge.
It would now be “politically very difficult to put up tuition fees”, Rose Stephenson, from the Higher Education Policy Institute (HEPI), says.
But there “needs to be a decision” about how universities are funded, as doing nothing “is going to result in universities essentially going bust”.
Other options include raising taxes or “some kind of levy for employers” who benefit from skilled and trained graduates, she says.
Other recommendations in Universities UK's plans include:
- raising maintenance loans in line with inflation and reinstating grants for students from the poorest backgrounds
- ensuring by 2040, 70% of the population will have a Level 4 qualification or above by the age of 25
- ensuring access to child and adolescent mental health services for students up to the age of 25
- working to secure well managed, sustainable international student numbers.
Universities have recruited more international students - who pay higher fees - in recent years, to make up for the fall in income due to frozen fees for UK students.
But changes to visa rules, and a currency crash in Nigeria, mean the applications for UK study visas between January and August were about 17% fewer than during the same period last year.
Meanwhile, recent research shows university students now need about £18,000 a year to live on - compared with the maximum loan of about £10,000.
Pearl Pooley, 19, from Harlesden, north-west London, told Today she had found it “impossible” to find a job she could do alongside her coursework.
She dropped out of her law course last year, after becoming very isolated.
“I don't think it was the university or the course, more just the general outside life that made me leave,” she says.
Ms Pooley is going back to study law at a different university this month, as she feels it is worth it .
But her friend Theo Staniforth, who dropped out of his product-design course to become an apprentice carpenter, feels differently.
“The expectation is that you get this piece of gold after three or four years and it's going to lead you on to better things in life - there's just that big number at the end of it and, for me, it’s a debt too big," he says.
A spokesperson for the Department for Education in England said it had "inherited a challenging set of circumstances in higher education".
"The education secretary has taken the crucial first step of refocusing the role of the Office for Students on key areas such as monitoring financial sustainability, to ensure universities can secure their financial health in the longer term," the spokesperson added.
