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AoC Conference, 18 November 2014

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... EU & Muslim students Implications for colleges Business as usual for a ... weak and small Policy ... workforce development Universities ... – PowerPoint PPT presentation

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Title: AoC Conference, 18 November 2014


1
AoC Conference, 18 November 2014
  • Making loans work in advanced level and h
  • higher education
  • Julian Gravatt, Assistant Chief Executive, AoC
  • Julian_Gravatt_at_aoc.co.uk
  • _at_JulianGravatt
  • http//www.aoc.co.uk/term/funding-finance

2
Making loans work in FE and HE
Two areas of activity Higher education
professional and technical education Further
education for adults Two themes in this
presentation What might change? How colleges
should approach things?
3
What might change - university fee regulation
The politics surrounding fees Labour government
(re) introduced full-time fees in 1998 Coalition
government allowed fees to rise to 9,000 in
2012 Big MP rebellions in the 2004 and 2010
votes Labour party would like to reduce fees to
6,000 Scotland has no university fees (and no
maintenance grants) Non-resident EU students can
access tuition but not maintenance The
timeline General election in May 2015 Long
lead-times for fees (OFFA) and admissions (UCAS)
Parliamentary must decide 2017-18 rules by spring
2016 Existing fee rules apply in 2015-16 and in
2016-17
4
How the HE budget has changed
2011-12 Teaching Student Support Research Total RAB charge
Grants 4.6 1.3 4.6 10.5 2.1
Loans 2.6 4.4 - 7.0
Total 7.2 5.7 4.6 17.7

2015-16 Teaching Student Support Research Total RAB charge
Grants 1.7 1.6 4.6 7.9 6.4
Loans 8.2 6.2 - 14.4
Total 9.9 7.8 4.6 22.3
Source AoC summary of HEFCE grant letters for
2010 2014, BIS annual accounts
5
How the HE budget has changed
Total HE spending in England in 2011-12 and
2015-16
  • Between 2011 and 2015, the overall HE budget has
    increased but there has been a cut in HEFCE
    grants, a freeze in research spending and an
    increase in tuition and maintenance loans.

6
The HE student loan outlays
billions 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Outlays 10.3 12.7 14.4 15.6 16.7 17.4
Repayments 1.8 2.1 2.3 2.5 2.5 2.6
RAB charge_at_ 45 4.6 5.7 6.5 7.0 7.5 7.8

7
HE loans understanding the RAB charge
  • Understanding the RAB charge
  • An impairment charge on loans in government
    accounts
  • Equivalent to 30 years of depreciation in 1 year
  • Charged up front because loan terms are soft
  • ie. Repayment at 9 of income over 21k plus 30
    year write off
  • RAB for highest earning graduates is zero
  • Graduate salary forecasts reduced -gt more
    write-offs in 2040s
  • Interest rate assumptions make a big different in
    NPV calculations

billions Interest rate
What graduates pay RPI 2.3
Cost of capital in RAB RPI 2.2 4.5
UK 30 year gilt rate 2.90
8
HE loans cutting government loan costs
  • Some options to reduce net loan outlays or RAB
    charge
  • Tuition fee loans to cover less than 100 of
    tuition fees
  • Tighter conditions or lower rates for maintenance
    loans
  • Graduates to repay loans faster, earlier or for
    longer (ie a tax)
  • Limit loan access to prime borrowers (via entry
    qualifications)
  • Replace loans with graduate equity contracts
  • or wait and see

9
HE loans - student number controls
2012-13 2013-14 2014-15 2015-16 2016-
Full-time entrants 312,000 345,000 360,000 390,000 ?
Average fee 7,700 7,800 7,900 8,100 ?
  • Official forecasts reported in a PQ
  • Student number controls
  • Student number entry controls (Year 2 SNC Year
    1 SNC)
  • High grades exemption (AAB in 2012, ABB in
    2013, nothing in 2015)
  • Core/Margin policies (20,000 in 2012, 5,000 in
    2013)
  • Flexibility range (3 in 2013, 6 in 2014)
  • Private HEIs and Colleges new to HE (controls
    started in 2014)
  • Removal of SNCs for most HE providers in 2015
  • Expansion before the election, contraction
    afterwards?

10
HE loans HE spending options
  • BIS revenue budget 13.2 billion in 2015-16 (8
    billion HE)
  • Spending plans imply 30-40 cuts in BIS after
    2016
  • IFS scenarios for UUK to cut RDEL (back in
    October 2013)
  • 1. Breach the science/research ringfence (4.6
    bil budget)
  • 2. Cut Medicine STEM funding (involves raising
    fee cap)
  • 3. Switch from HE maintenance grants to HE loans
  • 4. Reduce number of FT HE students
  • 5. Cut 19 FE/Skills budget further (on top of
    35 cuts 2009-15)
  • A Scottish style HE maintenance grant cut means
    more debt


11
HE loans my predictions
  • A starter for five
  • 6,000 fee only if Labour use this promise to get
    into power
  • Some cuts to HE maintenance grants for 2016-17
  • Reintroduction of some controls on HE numbers for
    2016-17
  • No big HE student loan changes but changes at
    margin
  • Actions on postgraduates, EU Muslim students
  • Implications for colleges
  • Business as usual for a couple of years to come
  • Opportunity to expand in 2015-16 could be for one
    year only
  • Changes in the long-term as data becomes available


12
College HE provision
  • Characteristics of English College higher
    education
  • 100,000 students in 280 colleges (range 100 to
    3,500)
  • Local, employer-led, technical, some niche
  • 50 full-time, 50 part-time
  • c50 apply for one course/one institution (UCAS)
  • 70 live within 25 miles of campus
  • Student cohort more disadvantaged than HE average
  • Partnerships with Universities long-standing
    important
  • The core/margin policy caused a shift to direct
    control

13
English College HE trends
2008-9 2012-3
Full Time Direct 31,000 44,000
Indirect 28,000 24,000
Full Time Sub-total 59,000 68,000
Part Time Direct 24,000 20,000
Indirect 33,000 18,000
Part Time Sub-total 56,000 38,000
117,000 106,000
Direct 47 60
  • Overall College HE numbers have remained stable
    but there has been an increase in directly
    controlled full-time numbers

14
College HE strategies
Some tips A longer-term HE plan , owned by
Governors and SMT. Understand your market the
rules Progression up from Level 3 courses and
access courses. Progression out to work or degree
level study. Courses fees influenced by
marketing analysis. Look at FT, PT together.
Avoid generic courses. A clear plan on
validation (university relationship, DAPs etc)
15
Breaking the mould
Analysis English post-secondary higher-level
skills system weak and small Policy history
biased towards full-time residential three-year
degree model Proposals Re-balance the system
Technical Education Accreditation
Council Accredited colleges award Levels 3, 4
5 Colleges/universities to work on progression

16
24 Advanced Learner Loans
Where we are now Successful implementation of
systems in autumn 2013 220 mil allocated by
SFA. Perhaps 150 mil used. Apprenticeships
bombed. Access maintained. Some vocational Level
3s strong. Low use for Level 4s A few colleges
have expanded but picture is mixed. Colleges
offered 27 growth in 2014-15 (doubling
activity) SFA officials considering ways to grow
activity
17
FE loans why theyre a good thing
  • The positives for students and colleges
  • Loans help students change careers or make
    progress
  • There are no upfront payments or credit
    checking
  • Repayments are income-contingent and handled by
    govt
  • Access students get a write-off on degree
    completion
  • The systems and rules are fairly
    well-established
  • Individuals not government is the customer
  • There are currently no caps on expansion
  • The obvious negatives
  • We only have loans because fees have replaced
    funding
  • Some people wont borrow - fullstop
  • Higher fees has meant fewer students and fewer
    courses

18
The consultation about FE loan extension
  • The proposals set out in
  • Option for BIS to extend FE loans in 2016-17
  • Proposal in June, consultation response by
    December 2014
  • 19 for all courses
  • Entitlements (100 funding) stay basic skills,
    first L2 L3
  • Transfer of higher nationals from HE to FE system
  • Include FE loans in any sharia-compliant scheme
  • Will this happen?
  • Political interest in developing higher
    vocational education
  • 60 RAB charge (reflects low pay) and the
    election are obstacles
  • Likely that Ministers will be seeking quick
    savings after May 2015

19
Increasing loan activity now and in 2015-16
Some tips A longer-term Level 3 4 plan , owned
by Governors and SMT. Understand your market
the rules Different thinking internal
development funds Necessary to analyse data on
2013-14 and 2014-15 take-up SFA encouraging new
providers (eg HEIs, existing providers) Could
colleges identify new partners? Employers
shouldnt be ruled out January starts as well as
September starts? Pricing for loans can differ
from 19-24 fees Needs a cross-college approach
20
Increasing loan activity now and in 2015-16
Cross-college activities Curriculum
re-design Pricing Communications Advice Learner
offer Processing Bursary Attendance, withdrawals
and complaints
21
Some final thoughts
  • Rethink adult learning
  • Changes to public spending permanent
  • HE, FE, AE different routes funding but same
    ages
  • Loans are a way to make fees more palatable
  • Fees were a bigger part of the mix in the 1980s
  • .. but were now in an Aldi / Amazon world with
    big income gaps
  • Demand exists but it is changing
  • People are working longer/need to retrain
  • Employers still think about workforce development
  • Universities need roots in the community
  • Colleges can make loan-funded courses work but it
    wont be easy
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