Nearly a third of FE loans will go unclaimed because older students are wary of taking on debt, according to the official impact assessment of the policy. Research on the introduction of fees and loans for older adults taking higher level qualifications suggests that only 55 per cent of students formerly supported with subsidised courses would be willing to borrow thousands of pounds instead when loans are introduced in 2013.
This low demand means that from 2014, when all older adults will be on the loan system, only 70 per cent of the pound;211 million available for loans is likely to be taken up. The number of over-24s studying A level or equivalent qualifications in FE would fall by almost a third as a result, from 359,000 to 247,000, according to the assessment published last week.
The fall is larger than the 20 per cent drop predicted in an earlier assessment. Even if every loan was claimed, student numbers would still have to fall by 10 per cent, since the amount of money available for loans is not enough to maintain the current level of demand for qualifications, which this year cost pound;400 million in direct funding.
But despite calls to delay their introduction from the University and College Union (UCU), the National Union of Students (NUS) and the Association of Colleges, ministers said they would press ahead with the loans in September 2013.
"The new loan system will be profoundly unfair and make it harder for people to get the qualifications they need to progress," said UCU general secretary Sally Hunt. "The government's own research shows that the number of learners `definitely' willing to take courses is low and the government has only canvassed the views of people currently in the system.
"If the government is expecting loans to go unclaimed, then it shows that the system is flawed and already in a mess."
Colleges are also in the position of having to plan their programmes and staffing levels for next year without knowing until December how much the loans will be worth, the funding they will receive for each qualification or what their quota will be.
An equality impact assessment, published at the same time as the overall impact assessment, found "little evidence" for concerns raised by bodies ranging from the NUS to the National Institute of Adult Continuing Education that the loans policy would have a disproportionate effect on women, ethnic minorities, those for whom English is a second language and special educational needs students, all of whom were more likely to take level 3 qualifications later in life.
While surveys showed that women were slightly more reluctant to take out loans, the difference was not statistically significant. Respondents from black ethnic minority groups were considerably more likely to say they would take out a loan for learning.
The equality impact assessment also rejected concerns that Muslims and some Christians would not be able to borrow for religious reasons because the loans system would involve interest at 3 per cent above inflation. It proposed using an Islamic financing system known as a "commodity murabahah", a fixed-cost agreement similar to hire-purchase, but where the terms could be set so repayments were identical to the other loans.
"Without loans, there would be a significant fall in learners aged 24 and above undertaking courses at level 3 and above. With loans, thousands of people will be able to benefit from life-changing opportunities," said a spokeswoman for the Department for Business, Innovation and Skills (BIS). "The terms of loans are progressive - access will not be based on ability to pay."
BIS defended its expectation that a substantial amount of the loan fund would go unclaimed. "This reflects that this is a new policy for FE and it is in line with our emphasis on ensuring potential learners have the facts they need to make an informed choice, not on simply driving up learner numbers," the spokeswoman said.
The impact assessment concludes that "pound for pound, loans are better value for money than grant-funded learning", because they can support more learners. But BIS acknowledged that over-40s were more resistant than others to taking out loans and said it would commission more research.
What will it mean?
Conclusions of the official impact assessment:
With no changes, the budget for over-24s would be pound;410 million, supporting 359,000 students. This has been ruled out as unaffordable.
If subsidies were continued on a budget of pound;211 million, 193,000 students could be supported.
With the preferred option of putting the same budget of pound;211 million into loans, the government expects 247,000 students to be supported but 30 per cent of the loans to go unclaimed. This option would mean the number of over-24s studying at level 3 and above would fall by 32 per cent.
Original headline: Nearly a third of loans could go unclaimed by students afraid of debt