Budget 2021: Why we need to look at fee loans

With no guarantee of significant funding for post-18, proposals based on fee loans deserve attention, writes Mark Corney

Mark Corney

Budget 2021: Why we need to look at fee loans in education

The Budget is only a day away and hope rests on rapid growth reducing the deficit and stabilising national debt as a share of GDP. Even so, tax rises are expected going forward.

More revenue is required for population-driven public spending, such as pensions and health, and extra 16- to 18-year-olds in further education. More still is needed for public health and social care, let alone levelling-up funding rates between 16-18 and secondary education.

There is, it seems, no guarantee of significant funding for post-18 education. For this reason, proposals based on fee loans deserve attention.


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Both the FE White Paper and the Interim Conclusion of the Review of Post-18 Education and Funding feature the proposal of Lifelong Loan Entitlement (LLE). They also explain that the LLE is part of, rather than separate from, the Lifetime Skills Guarantee.

A consultation on the LLE is timed for early 2021, with consultations on further education funding and accountability, the national skills fund (NSF) and higher education reform (HER) published in the spring.  

The HER consultation is likely to include the easing of the equal and lower qualification rule so that fee loans can be extended to fund reskilling at level 4-6.  Additionally, the consultation is expected to outline different approaches to credit-accumulation across a single system of level 4-6 higher education.

On present plans, the LLE is due to be implemented in 2025, the same year that the grant-based National Sills Fund is due to cease.

Under the Fixed-Term Parliaments Act, the last date for the UK general election is 2 May 2024. Effectively, the Lifelong Loan Entitlement is the Conservatives' response to Labour’s National Education Service and the Liberal Democrats’ Skills Wallet.

One challenge is to identify where fee loans will – or should – apply on grounds of fairness to certain groups of adults and the taxpayer. Another is to identify where a LGE should be available to adults where the LLE is not appropriate.  

The LLE is defined as equivalent to four years of full-time study in higher education for everyone. Assuming that the entitlement is restricted to the cost of provision and funding is capped at the regulated fee of £9,250, it could be worth £37,000 over a lifetime.

The LLE is also expected to be the sole source of fee loans for upskilling and reskilling at level 4-6. Assuming adults upskilling at level 3 can do so through fully funded fee grants after 2025, adult learner loans would be limited to reskilling at level 3.

Fee loans or fee grants?

The idea of a lifelong loan entitlement also provides the government with the opportunity to assess whether funding takes the form of fee loans or fee grants.

Adults who have recently achieved a first level 4-6 have done so through fee loans. Suppose, today, they wish to reskill at level 2. The cost of the course would attract a proportion of grant funding in return for a cash contribution.

The government might reasonably conclude that level 4-6 are certainly not averse to fee loans. If they need to reskill at level 2, they should use their lifelong loan entitlement.

Both the FE and HE sectors seem to be assuming that the lifelong loan entitlement will be restricted to upskilling and reskilling at level 4-6. If this is the case, then the LLE is certainly not for everyone.

About 44 per cent of 19- to 64-year-olds have at least a level 4 qualification. Towards the end of the decade, the state pension age increases to 67. Even with credit-accumulation across a single level 4-6 system, the proportion of adults aged 19 to 67 with a level 4 or higher qualification is unlikely to reach 50 per cent by 2030.

Estimates also suggest that 5 million adults will need to reskill by 2030. Presumably, however, only some will be level 4-6 graduates, and surely a proportion of them will need to reskill at level 3 if not level 2.

Delivered by colleges

It would appear strange to say to adults who have achieved a first level 4-5 – potentially at FE college – that they cannot use any remaining lifelong loan entitlement to reskill at level 3 on courses delivered by FE colleges.

Of course, level 4-6 graduates deciding to reskill at level 3 could access feenloans through adult learner loans. But FE funding simplification equally leads to the conclusion of preventing graduates from accessing adult learner loans altogether.

Perhaps, however, Whitehall has a wider goal in mind. Consider adults who have achieved their first level 4-6 and subsequently suffer a life-changing event; a mental health problem, for instance. No longer able to hold down high-skilled jobs, they might want to use any remaining lifelong loan entitlement to fund reskilling and lifelong learning at level 2 or below.

Perhaps, the plan is for the LLE to be a wellbeing mechanism as well as skills intervention.

If the lifelong loan entitlement is used to fund upskilling at level 4-6 alongside reskilling by level 4-6 graduates at all levels throughout life – from level 6 to level 1 – the target audience for adult learner loans diminishes considerably. They would only be available for adults with a level 3 seeking to reskill at level 3.

Extending the use of the LLE to adults with a level 3 needing to reskill at level 3 would do away with adult learner loans altogether, simplifying the FE funding system. In addition, adults reskilling at level 3 could use any unspent lifelong loan entitlement to upskill at level 4 and 5 later on at FE colleges.

The Conservative government, it seems, could be asking the FE sector some extremely searching questions about the future role of fee loans and the lifelong loan entitlement. Likewise, the FE sector should ask the Conservative government some searching questions over the case for a lifelong grant entitlement.

Two elements of the LGE are well known and related to upskilling. The first is the continuation of fully funded first level 3 through fee grants after 2025. The second is an entitlement to fully funded first level 2 through fee grants irrespective of economic status.

But there is a third. Adults with a level 3 or level 2 as their highest qualification should be entitled to fully funded reskilling at level 2 through fee grants. No fee loans here, please!

Mark Corney is a policy consultant

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