AOC Finance 3 June 2014 Loans

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College Finance Conference, 3 June 2014
Workshop on Growth opportunities in higher and
further education? fees, loans and courses
Higher education
Advanced level further education
Where next?
Julian Gravatt, Assistant Chief Executive, AoC
Julian_Gravatt@aoc.co.uk
The bigger spending picture
800
Government plans
Deficit reduction
700
Real-terms spending cuts
600
“Year 4 of 9 year plan” (IFS)
500
Spending review in 2015
Taxes
400
More cuts in 2016 and after
RAME
300
20% cut for the unprotected
Loans may be a safe haven
PSCE
RDEL
Deficit
200
100
0
-100
University –vs- College income
130
125
120
115
110
105
FE Colleges
100
Universities
95
90
85
80
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
Figures from published accounts & forecasts indexed to 2009-10
Universities – science ringfence, higher tuition fees, overseas & residential
Colleges – government funded students, relatively low fee income
The past – the 2012 HE reforms
The spending decisions
HE tuition fee loans replace HEFCE grant (switchs £1 bil/year)
Control on number of places to manage loan payments
Fee regulation
Full-time fees up to £9,000 (with OFFA approval)
Part-time fees regulation introduced
Allocation of HE loan budget
Student number entry controls (Year 2 SNC = Year 1 SNC)
High grades exemption (AAB+ in 2012 then ABB+)
Core/Margin policies (20,000 in 2012 then 5,000)
Now – the 2014-15 HE round
The spending decisions
HE teaching grant £2 bil; HE fee loans £7 bil
Decisions on HEFCE grants and SNCs notified in March
Fee regulation
No significant change despite new fair access director at OFFA
Allocation of HE loan budget
30,000 additional FT entries in 2014 (8% extra)
No core/margin bidding process
Redistribution of SNCs within a new flexibility range (6%)
Off quota Colleges and private HEIs will get SNCs
Some justifiable concern about practices in some private HEIs
The future – 2016 and beyond
Could general election change things?
“Young people feel they have no control because they are going to get
into mountains of debt if they go to university…We do want a radical
offer on tuition fees because the future of our young people… is a
massive issue that our country faces,”
Ed Miliband, ITV interview, March 2014
..but Ministers would need to act quickly
“There are some decisions, however, that can’t wait. We do need to set
out in the next few weeks the way forward for graduate contributions
and student support if we are going to have any chance of
implementing changes for the Autumn of 2012 …..It is rather like A. J.
P. Taylor’s thesis that train timetables determined the outbreak of the
First World War”
David Willetts, October 2010
The future – 2015-16
The spending decisions
More cuts/savings in BIS
Division of HE and 19+ FE budget for 2015-16 unclear
HE maintenance grant would normally set by summer 2014
Fee regulation
2015-16 proposals by 1 May 2014. OFFA decisions by 31 July
Allocation of HE loan budget
Removal of student number controls but no details as yet
30,000 additional FT entries in 2015 (another 8%)
Expansion before the election, contraction afterwards?
HE full-time entries
Entry numbers
Average SLC fee loan
2012-13
312,000
£7,700
2013-14
345,000
£7,800
2014-15
375,000
£7,900
2015-16
390,000
£8,100
Source: Derived from PQ answered by David Willetts, 24 Feb 2014
BIS budget in 2016-17 and beyond
BIS revenue budget £13.2 billion in 2015-16
Treasury spending plans imply 20% cuts to unprotected depts
IFS scenarios on BIS departmental spending for UUK
1. Breach the science/research ringfence (£4.6 bil budget)
2. Allow fees for Medicine & STEM to exceed £9,000
3. Switch from HE maintenance grants to HE loans
4. Reduce number of FT students
5. Cut 19+ FE/Skills budget further (35% ASB cut 2009 to 2015)
College capital projects
The spending decisions
Biggest cuts happen in first full year after an election
Options on fees, loans, maintenance and teaching grants
Fee regulation
Any change to OFFA role needs legislation (contentious)
Allocation of HE loan budget
Expansion of HE is necessary but needs lower cost per place
Plausible that entry qualifications may apply to HE loans
The big new SLC IT system makes future reform easier
National agencies
HEFCE
New Chief Executive
Operating a new HE market with out-of-date laws
SLC
Now responsible for £14 billion in HE system cashflow
Big new IT system implementation in time for 2015-16
System is modular. Easier to make changes in 2016-17
SFA
Now fewer than 800 people
Not very engaged on HE side of colleges but cover FE loans
The HE market
Supply
Inertia (heritage, three-year degrees etc)
Longish lead-times to respond to demand but shortening
Fees rising towards the £9,000 cap
Evidence of increasing University competition at all levels
Demand
Applicants need to be qualified to make a choice
Degrees are positional goods
Higher fees covered by loans with grants + bursaries on offer
Living costs loom larger than fees to many students
College HE provision
Characteristics
Local and/or employment linked
Progression from Level 3 courses
Lower FT fees since 2006
Partnerships with Universities significant issue
Opportunities & Threats
2012 recruitment was difficult but some are expanding
2013 recruitment was even harder
Expansion opportunities that exist now may not be for ever
College HE strategies
Some tips
A longer-term HE plan , owned by Governors and SMT.
Scheduling of key decisions.
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)
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
FE loans – the positive messages
Eight positives for students and colleges
“Loans will help students change careers or make progress”
“Fees are higher but are paid after completion and are incomecontingent”
“Government covers the cashflow and handles repayments”
“The systems are complicated but there’s lots of support”
“Individuals rather than government officials become the
customer”
“There’s government funds to expand provision”
“Many College HE students start on Level 3 courses”
“Government may extend loans to more students after 2016”
College capital projects
Eight areas for action
Curriculum re-design
Pricing
Communications
Advice
Learner offer
Processing
Bursary
Attendance, withdrawals and complaints
Increasing loan activity
Some questions
A new fees regime requires different thinking about markets
Vocational Level 3s and 4s
Worth analysing data on 2013-14 take-up
SFA encouraging new providers (eg HEIs, existing providers)
Could colleges identify new partners?
Would development funds help?
Employers shouldn’t be ruled out
January starts as well as September starts?
Pricing for loans can differ from 19-24 fees
Needs a cross-college approach
Future FE loan developments
FE Loan policy
Option for BIS to extend FE loans in 2016-17
Loans could be offered for
- 19-24s at Level 3
- 24+ at Level 2
- 19+ for all courses exc entitlements (eg basic skills, first L2)
Not automatic that loans must cover 100% of fees
Vince Cable suggested national FE maintenance loans
RAB charge on FE loans 60% which is an inhibitor
Political interest in developing higher vocational education
Could any changes be introduced for 2015-16?
Some final thoughts
Rethink adult learning
Changes to public spending permanent
These are long-term trends which take time to implement
Loans are a way to make fees more palatable
Fees were a bigger part of the mix in the 1980s
There’s still considerable demand for education and training
People are working longer/need to retrain
Employers still think about workforce development
Opportunities exist
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