International student levy to fund maintenance grants for disadvantaged British students

More information has emerged about how a proposed levy on international student fees will be used, with education secretary Bridget Phillipson confirming the controversial tax will go ahead and will fund targeted maintenance grants.

At the 2025 Labour party conference on September 29, Phillipson announced the return of targeted, means-tested maintenance grants for higher education, allowing disadvantaged students studying on priority courses to benefit from extra financial support.

“I want to make sure that everyone who has requirements to go onto education is able to succeed and able to do that. We’ll be raising money through the international students levy – we announced that previously,” she later told the BBC.

The government’s immigration white paper, published in May 2025, outlined the Labour government’s ambition to essentially tax UK universities on the income they receive from international students.

“We’ll be putting some of that money towards maintenance grants for less well-off students. The detail will follow but this is a significant change that will make a big, big difference to many young people across the country but is also an important principle that I believe we can build from,” continued Phillipson.

In raising that money through international students, we’ll be able to invest in domestic students, particularly those who don’t have so much money
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“In raising that money through international students, we’ll be able to invest in domestic students, particularly those who don’t have so much money.”

Until now, little has been known about how the funds would be used. Beyond a vague promise that the money would be “reinvested into the higher education and skills system”, the government has offered scant detail.

Although more information on the levy is expected to be set out in the Autumn budget later this year, the technical annex published alongside the white paper suggests the UK government is modelling a 6% levy on higher education provider income from international students. 

The government is assuming that the levy on institutions’ international income stream would be passed onto students as increased tuition fees, hiking the cost of coming to study in the UK. 

A recent report from Public First warned that if implemented, the levy could trigger a sharp drop in enrolments, reducing the UK’s economy by £2.2 billion over five years, and cutting 135,000 university places for domestic students. It said that over 77,000 students could be put off studying in the UK in the five years after the policy is implemented.

Stakeholders have been vocal about their concerns that increased fees could hamper international interest in UK universities, set against an already troubling financial backdrop. According to data from the Office for Students, 72% of providers could be in deficit by 2025/26, with a sector-wide deficit totalling £1.6bn.

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