Once bitten, twice shy: critics fear repeat of 2009 loans chaos

6th April 2012 at 01:00
Colleges and students call for launch of new system to be halted

Colleges, trade unions and students have come together to call for a halt to the introduction of a system of fees and loans for adults in FE, raising concerns that the Student Loans Company will be unable to cope.

They fear a repeat of the delays in 2009, when a botched handover of the application process from local authorities to the Student Loans Company saw tens of thousands of HE students left without financial support. An inquiry found that the Department for Business, Innovation and Skills (BIS) had "underestimated the challenges in centralising this service".

The Association of Colleges (AoC), the University and College Union (UCU), Unison and the National Union of Students (NUS) are writing to MPs to warn that FE is simply not ready and that there is little understanding of the impact the changes will have on potential students. The government's impact assessment is not expected until shortly before the legislation is due to be enacted next month, leaving little time for proper consideration.

FE loans are due to be introduced in 2013 for over-24s studying at level 3 or A level-equivalent and above. Students will borrow money to pay course fees in full, beginning repayments when they earn more than #163;21,000. In the first year, there will be loans for 87,000 students at a cost of #163;129 million, rising to 171,000 learners and #163;398 million the following year. Eventually, about 300,000 students are expected to have their course costs funded by loans.

"The government must halt progress on the introduction of fees for college students," said Toni Pearce, NUS vice-president for FE. "We've all seen the consequences for students when things go wrong with the loans system and the government must not risk that happening again."

Among the challenges that the Student Loans Company will face is having to approve loans for courses starting at any point in the year, not just in September, at a time when it is also coping with radical changes to higher education funding. "Ministers must listen to the concerns of staff, students and colleges before pricing thousands of people out of getting a college education," said Sally Hunt, UCU's general secretary.

A report for the 157 Group, which represents some of the largest colleges, has also raised a series of issues about the loans and called for their introduction to be delayed and phased in gradually. Among the group's concerns was the take-up of STEM (science, technology, engineering and maths) subjects. Unlike the new system of HE funding, FE will have no extra subsidy for these economically important courses, which are often more expensive. The 157 Group said STEM students would face bills that were 30-40 per cent higher than those of other students.

"Making available income-contingent loans for learners in FE will help people to access life-changing opportunities. We are phasing in this change carefully over two years, starting in the 2013-14 academic year, and will provide learners, colleges and training organisations with the information they need," a spokeswoman for BIS said. Most students will continue to be subsidised directly, and an information and advice campaign will begin in autumn, she added.

The 157 Group report also suggested that the loans system made little financial sense. Under the current regime, the government funds only 50 per cent of the costs for over-25s taking level 3 (A level-equivalent) courses. The remainder is charged in fees, though these can be waived in cases of financial hardship.

Under the new system, students will take out loans to pay the whole cost, but the government's own estimates suggest that only 40 per cent will be repaid. In effect, the government will fund 60 per cent of the cost of courses. "It cannot make sense to pay more for a policy that will deter more learners," the report said.

Its conclusions echoed those of the AoC, UCU, Unison and the NUS: that student loans should be introduced slowly and cautiously in FE. It proposed focusing initially on subjects where students are most likely to be able to repay. "We need to slow down, take time to really understand the complexities of FE and the impact on potential students," said Lynne Sedgmore, executive director of the 157 Group.


- FE loans will be introduced for over-24s in 2013, eventually covering 300,000 students.

- Students will only be required to repay loans when their income is above #163;21,000, as with HE loans.

- The government estimates that only 40 per cent of the value of loans issued will be repaid.

- STEM subjects face a 30-40 per cent cost premium compared with other subjects.

- The number of adults in publicly funded learning is predicted to fall from 3,280,000 this year to 2,818,000 in 2013-14.

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