The head of the Russell Group, a coalition of leading UK universities, Libby Hackett, has proposed that top institutions be allowed to set different tuition fees depending on their reputation and the specific courses they offer. This comes as a government-commissioned report by the accounting firm KPMG found that UK universities are losing an average of £3,000 per domestic undergraduate student they educate. Tuition fees for domestic students have been frozen at £9,250 since 2017, with only a modest increase to £9,790 for the 2026-27 academic year. University leaders argue that this fee level does not reflect the true cost of running certain courses, especially those in science, engineering, and medicine, which require more resources and infrastructure. The KPMG report, which analyzed financial data from 29 universities, showed that operational costs have risen sharply in recent years. Non-pay expenses, such as campus maintenance and administrative costs, have increased by 46% over seven years. Despite keeping staff pay increases below inflation, universities still spend nearly two-thirds of their budgets on direct costs related to student education, such as teaching and facilities. University leaders say that rising inflation has reduced the real value of tuition fees, forcing them to cut back on staff and support services to manage their finances. In the past, UK universities have relied on higher fees from international students to help balance their budgets. International students typically pay much more than domestic students, helping to fund the costs of educating UK undergraduates and maintaining campus facilities. However, recent changes in immigration policies, such as restrictions on dependent visas, and a decline in international student numbers have disrupted this financial model. University leaders say that relying on international fees is no longer a stable or long-term solution for balancing their budgets. Allowing top universities or specific high-cost courses to set higher tuition fees could represent a major change in how UK higher education is funded, similar to the introduction of £9,000 fees for domestic students in 2012. Critics of this approach worry that it could create a two-tier system, where students from less privileged backgrounds may struggle to afford access to prestigious institutions or expensive courses. However, university leaders argue that without significant changes to the current funding model or direct government support, many institutions may face financial crises, leading to reduced course offerings or even the merging of universities. The UK government has stated that it has raised tuition fee caps in line with inflation and provides extra funding for high-cost subjects like engineering and physics, as well as for areas facing skills shortages, such as construction and defense. This additional funding aims to help universities manage the rising costs of delivering certain courses.