Late on a Tuesday afternoon at a community centre in east Newcastle, nine-year-old Lavender is at an after-school group being taught how to link economics to the maths she’s learning at school. This is part of a programme that’s nurturing her ambition to study medicine at university in 2033.

That might sound improbable, to dream so far ahead, but there is good reason for this group existing: while record numbers of young people are going to university, in this part of Newcastle only 15% to 20% of young people go on to study for a degree.

The children at these sessions are drawn from schools where more than half of the pupils qualify for free school meals, so the family’s total income is below £7,400.

Studying for a degree will mean loans not just for tuition fees but for living costs, because for these future students there is no bank of mum and dad.

Some will reduce their living costs by studying locally and continuing to live at home.

But now universities are warning of financial failures being just around the corner and the fear is that among the more vulnerable could be some universities with a higher number of students living with their parents.

If that happens, it is future students from communities like this across England who have most to lose. The former universities minister Jo Johnson has described universities as the only worthwhile levelling-up policy but now there are warnings that several institutions could be close to going bust.

To make sense of what might happen now, you need to go back almost 25 years to when the then-Labour Prime Minister Tony Blair set out an ambition for half of young people to go to university. Talent, he declared, was 21st Century wealth and there was no reason to limit the numbers studying for a degree.

The £9,000 fees introduced in 2012 led to a boom in England’s universities, not least in new buildings on campuses eager to attract students from home and abroad. The limit on the number of students universities could recruit was also lifted.

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The bubble now feels close to bursting, tuition fees have been frozen and so not kept pace with inflation and dozens of institutions are closing academic posts and merging courses to cut spending.

Meanwhile, students say the total cost of studying for a degree is too much as living costs have soared.

A financial crisis at a university requiring a bailout is said to be on the disaster list drawn up Sue Gray, chief of staff to Labour leader Keir Starmer, of things that could potentially go wrong for a new administration.

Whoever forms the next government, there are decisions ahead that can’t be dodged, and none of them are easy because universities in England would have an enormous impact if any were to fail but equally would be costly to bail out.

Molly Smith is the first in her family to go to university and says she wouldn’t have gone away to study for a degree.

She still lives at home in Newcastle so she can afford her course in International Studies and Politics at the University of Northumbria. More than half the students here are from the north-east England and many live at home.

Molly doesn’t think the £9,250 tuition fees can go up any further, because university overall feels expensive to her.

She describes her university experience as “amazing and brilliant” because it has widened her horizons and she says most students think more about the immediate cost of living than the cost of tuition.

“I think if maintenance loans did increase as well as tuition fees, I think more people would focus on the maintenance. It would be more of an incentive to go to university.”

Molly thinks anyone who wants to and can should be able to study for a degree and she has strong views about the importance of having universities on the doorstep that go beyond the issue of being able to avoid paying rent.

“From being being born and raised in the north it’s important to avoid a brain drain of people with these skills, all migrating to the south,” she says.

She wants to work as a civil servant in a big government department.

In some ways Molly is lucky. She’s in her second year so will repay her student loans for up to 30 years out of her graduate earnings, with the bill for any left unpaid picked up out of public money.

It’s different for those who started at university this year in England who will be expected to repay for up 40 years, potentially until their early 60s.

This change, and a recent change to interest rates, means future graduates in England will be responsible for 84% of the total cost of their university education, according to very recent research.

Hold on to that figure because it has implications for what a future government can do.

The new repayment terms also mean lower-earning graduates, including teachers and nurses, will end up repaying more than a banker or a lawyer, because they will repay for longer with loans attracting more interest.

In Scotland there are no tuition fees, and in Wales and Northern Ireland the cost is now split more evenly between future graduates and government funding, according to recent research.

With all of this going on, what has it meant for how many young people go to university?

The participation rate in the north-east of England is 30% compared with 50% in London. Across England around 60% of the most advantaged study for a degree, compared with closer to 15% of the least advantaged.

That’s why the centre in east Newcastle has become one of the more recent additions to a network run by Into University, which supports children from age seven to 18.

Through after-school study and mentoring, the charity aims to encourage more confidence among children of all abilities.

In Newcastle on the day I visited, the primary-aged children were looking at some simple concepts in economics such as supply and demand, as well as practising maths skills.

Throughout this term their study sessions are linked to a potential future degree subject, Politics, Philosophy and Economics (PPE).

Anna, age 10, wasn’t sure exactly what she wants to do when she grows up, apart from working with animals.

“I would like to go to university. I think it would be fun to… spend time somewhere else.”

Family income is clearly one big factor in who goes to university.

Young people from the wealthiest families across England are 11 times more likely to enter a university requiring high entry grades, the most academically selective, than those from the most disadvantaged.

So when anyone says too many young people go to university, whose children are they talking about?

What is noticeable at this voluntary session is that most of the children are from black or Asian British backgrounds. Only a minority are white.

And when you look at pupils that are from the very lowest-income families, who have received free school meals, there are some quite marked and surprising differences.

In this group just 13% of white boys go on to university compared with more than 60% of Black or Asian children.

The north-east of England has five universities, each a major employer in their own area, an important part of the economy.

One in four of the students in the region end up at the University of Northumbria, and one in five live at home.

“They need our university to be successful and importantly they need us to offer a wide range of subjects,” argues Professor Andy Long, so that students like Molly do not feel forced to go further afield or not study for a degree at all.

The university has plans to find more than £12m of savings, to keep ahead of future challenges, and maintain financial stability.

It is in the top 10 universities in England for recruiting international students from the burgeoning middle classes in both India and Nigeria.

This exposes them to more volatile circumstances beyond their control.

International recruitment is down across England, since a rule-change in January stopped international students bringing their spouse or children. A currency devaluation in Nigeria has also made a UK degree less affordable.

Since tuition fees of £9,000 were introduced in 2012, they have increased by just £250. To compensate, universities have become more reliant on attracting international students, mainly for postgraduate study.

Prof Long describes the current funding system as “broken” and also accepts the idea of increasing tuition fees is politically toxic.

While he wants any future government to look at options for increasing funding, he argues support for students living costs is also an urgent priority.

Maintenance grants were abolished in England, replaced with loans from 2016.

While the minimum student income needed to live on is estimated in recent research to be £18,000, the maximum loan is around £10,000.

“So what you end up with now is students from the poorest backgrounds leaving university with the highest level of debt and working the most hours part time while they’re at university. I think that’s a scandal,” says Prof Long.

In England there has been a stark warning that 40% of higher education institutions are predicting a deficit from the regulator.

“There are several institutions that are teetering on the brink of going bust,” says Dr Gavan Conlon from London Economics.

He’s a leading expert in the economics of university education and this year has published research funded by the Nuffield Foundation to inform future government decisions.

He says no new government would allow a university to collapse because, as major employers, it would be “catastrophic for the local community” – which could mean finding many tens of millions of pounds of public money for an immediate bailout.

Dr Conlon also thinks increasing support for student living costs through existing loans or grants has to be looked at as part of thinking in the round about how to pay for university education.

Many of the options are politically tricky, given the huge student protests that greeted the introduction of £9,000 fees in 2012.

Tuition fees in England are frozen at £9,250 for the next year. After that, whoever is in government will have to decide whether to increase them or give public money upfront to universities to support teaching costs.

And remember, England has now loaded 84% of the total cost of studying for a degree onto future graduates, so it’s hard to shift the balance further.

The future bill to the public purse of writing off unpaid loans, called the RAB charge, is now estimated at only 4% in England.

A future government might look at tweaking the interest rates to ensure higher, not lower-earning graduates pay a bigger share.

One other idea that has some support is that of a graduate levy for employers, who benefit from the additional skills in their workforce, which Dr Conlon says could generate “huge” amounts of money.

It’s not clear how that would work for big public sector employers like the NHS.

The number of international students could be allowed to grow further, but that brings greater uncertainty because of factors outside universities’ control.

Ultimately this is about political choices.

The money either has to come direct from government, from future graduates or from other forms of taxation such as the proposed graduate levy on employers.

Given the size of universities, their importance in some regions and the state of their finances, some decisions will have to be made in the next parliament.

It may be that universities are deemed too big to be allowed to fail, especially where they are a big part of their local economy.

The big expansion of the last decade also means more students, graduates and their families than ever before have a stake in their future.

The less academically selective universities take on the majority of students from poorer backgrounds, offering social mobility and the potential of higher earnings.

In the last decade, researchers have been linking big data of everyone taking GCSEs in England from 2002 onwards, with student and then tax records, giving an insight into the economic benefits of degrees.

For women graduates, compared with non-graduates, this data is unambiguous. Based on their earnings at 30, it pays to go to university. For men the difference is slightly smaller because of better-paid non-graduate work.

On average university pays, although not all benefit equally, and a not insignificant minority don’t gain financially and might do better just on this measure going through a technical or vocational route.

There has been a great social experiment playing out through the expansion of England’s universities, with no limit on student numbers.

So far only the Greens have called for tuition fees to be abolished. They also want to bring back maintenance grants and look in the longer term at reducing existing graduate debt.

As tuition fees are the major source of income for universities in England, that would have to be replaced with public money.

Labour has confirmed it won’t scrap tuition fees and has said the funding model isn’t working.

The Lib Dems have promised to review higher education funding and to reinstate maintenance grants for disadvantaged students immediately.

The Conservative manifesto does not mention tuition fees directly, but it does say courses with the worst outcomes would be closed.

In its manifesto which it calls a contract, Reform says it would extend the repayment on the capital of student loans to 45 years, while scrapping interest. It also wants to limit the number of undergraduates and require minimum entry standards for all university courses.

Whoever forms the next government, they will have to decide whether or not they are willing to let universities shrink, packing in students to ever bigger classes, or even fail completely.

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