Funding

College funding in 2026

There have been several changes and complicated decisions on college funding in recent months. Key points

16-18 funding

• 16-19 funding rates. DfE will be increasing funding rates by 0.55% in 2026-7. This is below current inflation forecast. 16-18 rates rose by 1.9% in 2024-5 (below inflation) and 5.4% in 2025-6 (above inflation).  The headline (band 5) rate rises to £5,133. DfE calculate that average funding per 16-18-year-old will be £6,874 in 2026-7, compared to £6,765 in 2025-6 and £6,129 in 2024-5.
• The 16-18 funding formula provides higher funding for higher cost courses and for disadvantaged students. Programme and disadvantage weights cover additional costs and also provide incentives. DfE increases programme weights and English and maths rates in the 2025-6 academic year. 
• DfE announced funding rates in March 2026, having stated in the Post-16 white paper that the 16-18 budget would be £800 million higher in the 2026-7 financial year than 2025-6 and also that funding per student would be maintained in real-terms. There is limited information about the overall budget but total 16-18 spending was £7,248 million in the 2024-5 financial year, has risen to around £7,800 million in the 2025-6 financial year and appears to be around £8,600 million in the 2026-7 financial year.
• Numbers of 16-18-year-olds in publicly-funded education is rising as a result of population growth and rising participation rates. Colleges, schools and post-16 providers enrolled 50,000 more 16-18 year olds in 2024-5 than in 2023-4, a 4% increase which increased funded 16-18 places from 1,226,600 (for 2024-5) to 1,274,700. There is no published information yet on 2025-6 numbers but officials report a 40,000 increase (3%). There has been a shift within these numbers towards FE colleges where 16-18 numbers have risen from 557,000 in 2023-4 to 598,000 in 2025-6 (a 7% increase) and 630,000 in 2025-6 (a 5% increase).
• DfE's student number forecasts stop at age 16 but the 2025 spending review settlement agreed with HM Treasury anticipated 65,000 extra students by 2028-9, of whom 20,000 were anticipated in 2025- 6
• Student number growth has exceeded expectations and budgets in two successive years and resulted in a changes to the exceptional in-year growth funding formula in both 2024-5 and 2025-6. DfE applied a one-third affordability reduction in March 2025 and a one-quarter reduction in March 2026. DFE spent £83 million on this funding in 2025, half of which is being charged to its 2024-5 financial year. DfE made its 2026 announcement in April 2026 and is expected to charge the full £87 million to its 2026-7 accounts.
• There is no information on in-year growth funding rules for 2026-7. Colleges start the application cycle 9 months before the start of the academic year and anticipate 22,000 extra students in autumn 2026. Colleges are concerned about whether they will have the funding, the staff and the space to accommodate them.
• Colleges report substantial growth in demand from students for construction, engineering and digital courses. Young people are responding to messages from government and employers. 
• One issue that may be contributing to the overall rise in 16-18 student numbers is the introduction of VAT on private schools from in January 2025. Just before the tax started, HM Treasury predicted a transfer of 3,000 pupils from private to state education mid-year (2024-5), 14,000 (2025-6), 20,000 (2026-7) and 37,000 long-term. rising to settle at 37,000 long-term. HM Treasury said that these transfers would take place at 3 age-points "Where this change occurs, the government expects much of it to take place at natural transition points, such as when a child moves from primary to secondary school, or at the beginning of their GCSE or A-Level years.". This was the government assessment in November 2024. Eighteen months later, in June 2026, DfE published data showing a reduction of 4,000 16-to-18-year-olds in private schools. The HMT forecast is that the extra VAT will raise around £1.5 billion a year in current prices in a full year and that extra pupils in state education would cost £270 million a year in 2024-5 prices. There is no indication that this money has been allocated to pre-16 or post-16 education budget.
• There is increasing direction from government about how funding should be used. New English and maths rules in 2025-6 run to 7,500 words which is a 40% increase in the volume of guidance. There is also a more restrictive set of tolerance rules. The tolerance for English and maths condition of funding tolerance reduces to 2.5% in 2025-6. T level tolerance will be removed in 2026-7.

Adult skills funding

By contrast with 16-18 education, there are cash cuts to adult skills. 

• There has been no public announcement on the total adult skills budget but officials say that it is fixed in cash terms. Spending in the 2025-6 academic year was £1,310 million. This was 3% lower than spending in 2024-5 and is lower than the budget nine years ago in 2016-7.
• Following the cabinet reshuffle in September 2025, responsibility for adult skills transferred to the Department for Work and Pensions (DWP).
• The Department for Education issued £450 million in national adult skills allocations in 2025-6. DWP recently issued 2026-7 allocations and, following a transfer of around £130 million to 7 new local authorities with devolved powers, these allocations will add up to around £320 million. DfE is managing education funding operations on behalf of DWP and has published section 31 grant determination letters for the 13 authorities that do not (yet) have integrated settlements. 7 mayoral strategic authorities have integrated settlements which means they more freedom to top up or transfer money awarded for adult skills.
• The pace of devolution is increasing. When Labour came to power, there were 10 mayoral authorities with devolved adult skills budgets which accounted for 63% of the national budget. Two years later, there are 20 devolved budgets, 14 of which are managed by mayoral authorities, 2 by combined county authorities and 4 by county councils. The deals which made this happen all started under the previous government but were completed by this one. In 2026-7, around 77% of the adult skills budget will be devolved while 23% is being handled nationally. The current government's devolution and local government reorganisation plans accelerate the change. There is an intention to set up 6 new mayoral strategic authorities by 2027 and for there to be both mayor elections that year (May 2027) and for adult skills funds to be devolved (for 2027-8). A fair estimates is that this will increase the devolved share of the adult skills budget to 90%.
• National government introduced three new adult skills programmes in the early 2020s: skills bootcamps, free courses for jobs and the multiply programme. DWP handles skills bootcamps separately from the adult skills fund. Total allocations to 40 authorities for the 2026-7 financial year add up to £223 million. Free courses for jobs funding is distributed alongside the adult skills fund as a separate ringfenced figure. The Multiply programme ran from 2021 to 2025 and is now finished. 
• There were several years in the 2010s where adult skills activity fell short of budgets. Tigher eligibility rules, restrictions on sub-contracting, transfers of responsibility to new devolved authorities, Covid-mandated closures and Covid-related restrictions all contributed to underspends which government recycled. DfE also took action to stimulate delivery, for example a promise of additional funds for over-delivery (up to 10%) and a new formula (introduced in 2024-5) that simplified calculations while increasing funding rates for subjects considered more valuable. Colleges responded to the incentives but the budget has not increased.  With DWP now the budget holder, there is some retrenchment. The 2026-7 funding rules  over-delivery on allocations while maintaining clawback if activity falls below 97%

High needs funding

Funding from local authorities and the Department for Education continues to be an important element of college budgets:

• DfE plans an overhaul of the high need system in 2029 which will require legislation, a new approach to assessment and a greater role for schools and colleges in providing support for students in mainstream settings. As often happens, the prospect of a big change means that there will be limited changes to existing systems and rules in the short-term.
• HM Treasury provided additional funds in spring 2026 to maintain local government budget solvency. High need deficits have put this in question. 
• There is a new inclusive mainstream fund to help schools and colleges make changes in preparation for the reforms. Colleges will receive £69 million out of the £83 million allocated for 16-18 education in 2026-7. The allocation formula has targeted funding towards 16-19 providers who enrol students with low prior attainment. This means that the data provides an insight into which colleges educate large numbers of students who have low GCSEs at 16 and which institutions are selective.

Apprenticeships

There have been several recent changes in apprenticeship funding

• Funding is available for new Foundation and Unit Apprenticeships
• Apprenticeship funding for level 7 standards is limited to those aged 16 to 21 plus those with Education Health and Care plans. Changes will take effect from 1 January 2026.
• 16 apprenticeship standards lose their funding in September 2026. There were around 40,000 starts on these programmes in 2024-5 
• Small and medium sized employers will have access to an apprenticeship incentive grant worth £2,000 for each new employee aged 16-24. This is currently due to take effect in October 2026.
• From April 2026, employers need to use the levy funds within their apprenticeship accounts within 12 months.

Higher education funding

There are several changes to higher education funding

• Fee limits rose by 3.1% in 2025-6 and will rise by 2.7% in 2026-7. This takes the full-time rate from £9,250 to £9,535 in 2025-6 and £9,790 in 2026-7.
• Repayment thresholds for loans taken out before 2023 (Plan 2 loans) has been frozen for three years to 2030. The threshold for newer (Plan 5) loans are due to rise with inflation in 2027 but there are no firm details on this yet.
• From September 2026, students will be able to apply for more flexible loans under the Lifelong Learning Entitlement. These will apply for courses starting in January 2027. Under the LLE, students will be able to access a tuition fee loan, worth up to £39,160 – equal to 4 years of study based on the maximum tuition fee for academic year 2026 to 2027. They can also access a maintenance loan to cover living costs, for courses with in-person attendance.
• There is no information yet from the Office for Students on the £1.3 billion a year Strategic Priorities Grant (SPG). 142 colleges receive a total of £29 million in SPG funding in 2025-6. £14 million of this was high-cost funding and £15 million of which is student outcomes. Just two colleges received nursing teaching funds. The funding to colleges was cut 24% between 2024-5 and 2025-6. The overall budget was cut by 7%.

Measures to ensure financial sustainability of colleges

DfE has taken various measures to support colleges in face of rising costs to avoid redundancies and loss of valuable courses:

• DfE has post-16 National Insurance grant to colleges, school sixth forms and local authorities since April 2025. This was worth £155 million for the 12 months from April 2025 to March 2026 and £165 million for the next year. The formula for the 2026-7 grant links money to16-19 programme funding (2025-6, adjusted for in-year growth) and post-19 education income (2024-5). Officials estimated in summer 2025 that they had money to cover 80% of costs but the use of an income-based formula means that some colleges report 95% of their costs being covered while others just 67%. Although the grant stops in March 2027, it is unlikely that funding will stop absolutely at that point.
• DfE has covered the extra costs of higher Teacher pension employer contributions since 2019. In that year there was a large increase in contributions which was mainly explained by a change in actuarial assumptions. There was a second increase in the contribution rate to 28.68% in 2024. DfE now pays £200 million to colleges via this grant and is making some changes to the Teacher Pension employer contribution grant formula in 2025-6. The results of the Teacher Pension Scheme valuation will be known soon and may result in reductions in employer contribution rates from April 2027. If so, DfE officials say that grant funding will be reduced by a similar amount.

Julian Gravatt
Updated on 5 June 2026

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College funding basics

• Courses free at the point of use: Colleges get funding to keep education and training free or low cost for young people (aged under 19) or for adults to overcome some form of disadvantage
• National and formula-based: A national funding formula has been used for colleges for 25 years
• Funding is a tool of policy: Government uses funding to influence behaviour (eg. Funding is uses to ensure colleges enrol right students on the right course at the lowest cost).
• Education activity drives funding: Who students are and what they do, affects income
• Data: Vast data collection systems make everything work.

There are several funding systems in further education and they differ from the systems used to fund schools and universities. 
 

Main funding lines

• 16-to-18 education: The Department for Education (DfE) pays colleges based on the numbers of students they are expected to enroll using national funding rates adjusted by a weighted average calculation based on their characteristics. Colleges and school sixth forms need to offer coherent study programmes, leading to nationally approved qualifications. Two-thirds of 16-and-17 year-olds take Level 3 qualifications such as A levels, T levels or applied generals such as BTECs while one-sixth take courses at Level 2.  Students without GCSE in English or maths at grade 4 have to resit these qualifications.
• Adult skills fund (ASF): There are different funding arrangements for adults skills funding outside apprenticeships. Four-fifths of the budget is devolved to 20 strategic authorities and county councils, with plans for complete devolution by 2030. ASF is used mainly to support courses at lower levels, including English and maths to Level 2, first full level 2 and first full level 3 up to age 23.
• Apprenticeships:  Apprenticeship funding is driven by employer choice within a tightly written set of national government rules. Levy paying employers get an account and contract directly with approved providers at rates determined by a formula. .
• Student loans: The student Loan Company administers tuition fees on behalf of HE and FE students