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

Government plans

Deficit reduction

Real-terms spending cuts

“Year 4 of 9 year plan” (IFS)

Spending review in 2015

More cuts in 2016 and after

20% cut for the unprotected

Loans may be a safe haven

The bigger spending picture

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

University –vs- College income

The past – the 2012 HE reforms

The spending decisionsHE tuition fee loans replace HEFCE grant (switchs £1 bil/year)Control on number of places to manage loan payments

Fee regulationFull-time fees up to £9,000 (with OFFA approval)Part-time fees regulation introduced

Allocation of HE loan budgetStudent 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 decisionsHE teaching grant £2 bil; HE fee loans £7 bilDecisions on HEFCE grants and SNCs notified in March

Fee regulationNo significant change despite new fair access director at OFFA

Allocation of HE loan budget30,000 additional FT entries in 2014 (8% extra)No core/margin bidding processRedistribution of SNCs within a new flexibility range (6%)Off quota Colleges and private HEIs will get SNCsSome 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 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)

BIS budget in 2016-17 and beyond

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

HEFCENew Chief ExecutiveOperating a new HE market with out-of-date laws

SLCNow responsible for £14 billion in HE system cashflowBig new IT system implementation in time for 2015-16System is modular. Easier to make changes in 2016-17

SFANow fewer than 800 peopleNot 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 income-contingent”“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