House of Commons - Education and Employment

Select Committee on Education and Employment Fourth Report

Annex 2: Student Finance

1. Issues related to the financial support of students raised in evidence included:

how financial arrangements may support or impede access,
students' financial hardship,
the relationship of financial support and non-completion rates,
the extent of students' paid employment during their higher education,
the complexity of arrangements for financial support,
and the relationship between the overall level of funding for higher education and students' finances.

The overall funding of higher education

2. The huge expansion of higher education since the late 1980s has put considerable pressure on its public funding. Numbers have more than doubled. Funding per student has fallen by 37 per cent since 1989. At 1999 prices, by 1993-94 it stood at £5,545. On current plans, by 2001 it would have been £4,628. To exclude the fees contributions paid by undergraduate students would have brought this figure down to £4,332. This has led universities to call for an end to the 'efficiency gains' that have hitherto been expected from them. Baroness Blackstone, the Minister of State for Higher Education, told the Education Sub-committee that these have been withdrawn for the first year (2001-02) of the current spending review. Instead of falling by 1 per cent, unit funding has increased by 0.5 per cent.

3. On 16 November 2000 the Secretary of State announced increases in higher education funding for the second and third years of the review period to 'fully fund' further expansion. Despite this increased investment, there remains a funding gap in the resources the CVCP has judged necessary to address problems of human resources and the teaching infrastructure. Lack of confidence on the part of some university leaders that public funding would ever be adequate to sustain mass higher education provision had already generated demands for new approaches to how universities obtain support. These include charging so-called 'top-up fees', even on a full cost basis, but with generous support available from scholarships and bursaries for those unable to pay.

4. Professor Roderick Floud, representing the CVCP (now Universities UK), told the Education Sub-committee that underpayment of staff due to funding constraints was creating recruitment problems, particularly in subjects where there were insufficient graduates to meet overall needs and better pay was offered in the private sector. The National Union of Students shared this concern, and believed it was affecting the quality of students' experience.

Contributions from businesses, alumni and philanthropic institutions

5. The NUS argued that business and industry should make a greater contribution to the cost of higher education and that the Individual Learning Accounts initiative could provide a mechanism to allow business and industry to contribute.[139] The CVCP did not share their optimism. Professor Floud told the Sub-committee that business and industry already contribute to a considerable extent in terms of funding research activities and supporting individual students, particularly those on parttime courses. The CVCP would not expect industry to fund the core activities of higher education institutions, and did not believe substantial extra funds were available to be levered-in for the general purposes of the higher education sector.[140]

6. A number of institutions in the United States, although a relatively small proportion of American universities, receive substantial funding from alumni and contributions from business. The CVCP suggested that one of the reasons why in the UK this had not been the case was different tax regimes in the two countries.[141] One of the comparisons often made between UK and American universities was to look at Yale or Harvard's work in promoting access to students from disadvantaged backgrounds. The CVCP was not persuaded that these comparisons were always valid. Professor Floud told the Sub-committee there was some evidence that, for example, Harvard has a significantly lower proportion of students from working class backgrounds compared to Oxford University.[142]

7. Members of the Education Sub-committee were impressed by the commitment of a number of American universities to develop a long-term relationship with their alumni, including the fund-raising aspects of that relationship. The universities visited by Members of the Sub-committee invested heavily in staff and other resources to develop and maintain alumni relations. It was clear that their success in fund-raising was the outcome of a long-term commitment to working with alumni. There appeared to be a marked cultural difference between the USA and the UK in the likelihood of former students making financial donations to the universities. Universities in the UK also have much more limited experience of developing corporate and individual giving. Members of the Sub-committee were not convinced that apart from a small number of institutions, UK universities currently have the skills or resources to promote the culture change which would enable them to raise funds for university development sufficient to make a significant and sustainable change to their overall funding position.

The current system of student support

8. Arrangements for students' financial support while studying at English universities are available from two main sources: local education authorities and the university or college. Box 2 shows the principal sources of support administered by local education authorities, and Box 3 shows funding sources administered by individual universities and colleges.

9. Additional sources of financial support are available for parttime students (including fee support, loans for course related costs, Disabled Students Allowances and help from Access Funds); NHS Bursaries available for students on some healthcare courses; some students certain may be eligible for social security benefits; and extra allowances may be available if students have dependants. Career Development Loans are available to students who are not eligible to apply for other financial support schemes.

Box 2: Sources of financial support administered by local education authorities

TUITION FEE SUPPORT
For 2000-01 annual tuition fees are £1,050. Support is available, on a means-tested basis, for the cost of these fees. Grants are payable to students on the basis on parental/student income. The Government estimates that around half of students will receive grants to cover the entire cost of their tuition fees.

STUDENT LOANS
Loans to students are available to cover the cost of living while completing an approved course of higher education. The level of loan that students are entitled to vary with location of study, type of course, stage of course and the length of the academic year. The student and his or her family may be required to contribute up to 25 per cent of the level of the loan depending in income levels. Repayment of the loan will be triggered once income exceeds £10,000, with repayment amounting to 9 per cent of annual income above this amount collected by the Inland Revenue on behalf of the Student Loans Company. Total repayment costs are the value of the original loan, index-linked to inflation.

SUPPLEMENTARY GRANTS
Supplementary grants are available for some students who require additional support depending on their circumstances. Students eligible for these grants include those with disabilities, those with dependents including lone parents, students with additional travel costs in certain circumstances and those leaving care to enter higher education.

Students' Financial Hardship

10. The NUS told the Sub-committee that there was a mismatch between the cost of being a student and the level of funds available to students via loans, grants and bursaries. The Union found in their Student Hardship Survey the shortfall outside London to be approximately £2,000 per year, with a greater funding mismatch for students studying in London and other cities such as Cambridge and Edinburgh. Mature students needed an additional £1,000 pa, with those in the 31-40 age category requiring additional support of £3,000.[143] Students outside London are spending 84 per cent of their loan on rent, leaving less than £20 a week left in order to live, eat and travel.[144] In the view of the NUS, the abolition of the grant and the introduction of tuition fees, and "the confusion of the new financial system" contributed to the reasons for students not completing their courses.[145]

Box 3: Sources of financial support administered by individual universities and colleges

ACCESS FUNDS
Access funds are normally in the form of a grant to the student from the university or college, and are available to help students who are in financial difficulty. These funds can help with living expenses and course costs including childcare, travel, accommodation, books and course equipment. Students must normally have begun their course before they can apply for these funds. The university or colleges decides which students will receive payments and how much each payment will be, depending on the student's circumstances, how many other applications have been received and the level of access funds available to be disbursed that year.

HARDSHIP LOANS
Hardship loans are available in addition to normal student loans. To be eligible, students must have already applied for their full student loan entitlement. Hardship loans are added to the total sum borrowed via the student loan, and are repaid in the same way.

11. The CVCP said it was undeniable that there was substantial student hardship.[146] This had been recognised by the hardship and access funds which universities receive from Government and disburse to students. The CVCP did not consider that current funding of this kind were fully adequate but contended that the scale of student hardship should not be described as a 'crisis'. The NUS took the view that although students no longer expected the Government to pay every single penny of their living costs, they did expect it to make a decent contribution.[147]

Undergraduate completion rates

12. The CVCP noted that the non-completion rate for UK higher education had stayed essentially stable in the last 15-18 years, and was the amongst the lowest in the world. Approximately 18 per cent of students did not complete their studies. Overall, the CVCP concluded that the picture of students completing their higher education was positive.[148] Professor Gareth Williams argued that increasing non-completion rates pointed to a problem to which UK universities needed to pay careful attention.[149]

13. The CVCP told the Sub-committee that the reasons for non-completion were complex, and included financial pressures, academic failure and personal factors. The NUS suggested that one of the major reasons was financial hardship.

Students undertaking paid employment

14. The NUS surveys and the experience of individual universities show that substantial numbers of full-time students now undertake paid work during term-time. Inevitably, it is difficult to judge the extent to which this work is undertaken to pay for basic necessities, or whether it is mainly for the purposes of sustaining a particular life-style. The NUS argued that the level of paid work undertaken puts many students under considerable pressure, affecting, in many cases, the quality of their academic results.[150] The CVCP also said that some students were so short of money that the amount of paid work undertaken during term time had a serious impact on their studies.[151] For them, paid employment was not a matter of choice. Many students from better-off backgrounds were also choosing to take employment.

15. In Scotland, the Cubie Committee had concluded that many students were damaging their studies by undertaking excessive levels of paid work.[152] Mr Cubie noted that although there was much concern politically about the issue of tuition fees, there was probably as much anxiety within the university sector and those involved in it in regard to the living costs of students in Scotland.[153] The Committee had concluded that there was a need for a higher level of funding to be available to students.[154] Mr Nicol Stephen MSP told the Sub-committee that the debate in Scotland on student finance was much wider than a concern with tuition fees. The message from students and student organisations was that tuition fees were important, but there were many other issues in relation to student hardship that needed to be addressed.[155]

16. Professor Floud argued that universities were responding to the needs of students who undertake employment. He noted that at London Guildhall University, course provision was being adapted to the commuting patterns of students to take advantage of off-peak travel costs and modular course and flexible structures were developed to allow parttime and fulltime students to combine study with work. The teaching day at ran from 9.00am to 9.00pm, and the university was increasingly putting on courses at different times of the week and at weekends both for the full-time and the part-time students in order to accommodate changing patterns of student attendance.[156]

Concerns with the administration of student loans

17. The NUS told the Sub-committee that in the 1999-2000 academic year there were problems with the administrative system for student loans which had an impact on student hardship. A significant number of students did not receive their student loan payments on time, including some who had not received their payment by January 2000.[157] These problems were adding to the financial burden on students. Mr Scott Rice, President of the King's College London Students' Union, noted that in some cases students were unable to receive access funds disbursed by universities until they paid their tuition fees. Students who were waiting to receive a student loan payment were often not able to pay their tuition fees and therefore were unable to receive access funds.[158]

18. Baroness Blackstone accepted that there had been "one or two blips" in the administration of the student loans system, but argued it was a huge system with very large numbers of individuals applying for loans, which had worked "pretty well".[159] In 1999 the Education Sub-committee took oral evidence in public about the administration of student loans.[160]

Tuition fees and support for mature students

19. The NUS argued that, with applications to full-time undergraduate education falling, tuition fees present the single largest obstacle faced by students, particularly mature students[161]. The Union agreed with the Cubie Committee's conclusion that tuition fees were a barrier to students from disadvantaged backgrounds thinking of going into higher education, even though these students were not being required to pay fees. The NUS said that this was a problem of perception of the true costs of higher education.

20. The CVCP confirmed that their policy with regard to tuition fees was 'unchanged'[162]. The CVCP had supported the Government's introduction of tuition fees, and were engaging, at the suggestion by the Secretary of State,[163] in a reconsideration of the whole issue of funding. The CVCP believed that a proposal for topup fees should be seen within the overall context of the proper funding for higher education and proper funding for students within higher education.[164]

21. Professor Maggie Woodrow had argued in her report for the Cubie Committee that the common assumption that mature students are financially a disadvantaged group was unfounded. Those most persistently under-represented come from lower socio-economic backgrounds.[165] She believed the main weaknesses in student finance were lack of co-ordination between the different aspects of student funding, failure to look at the system as a whole and the tendency to regard fees, loans, access funds and grants as separate elements, instead of from the perspective of parents and of the student from a low-income family.[166] UCAS data showed that applications from UK based students under the age of 24 had declined marginally in 1999-2000 compared to the previous year, but that applications from UK mature students (over the age of 25) had declined by five per cent.[167]

22. Baroness Blackstone acknowledged that there had been a small fall-off in numbers of full-time mature students entering higher education. She noted that the DfEE had some time ago started working on a package of measures to provide additional support for that group[168]. Although 85 per cent of mature students did not pay any tuition fees, many did not appreciate this when the system was first introduced. The Minister told the Sub-committee that the DfEE had worked hard to get the message across that the majority of mature students were not liable for tuition fees.[169]

23. The Minister noted the decline in fulltime mature students was approximately eight per cent since the funding system was introduced. This should be seen against an increase in parttime mature students of about five per cent. The overall decline was only about one per cent, which the Minister described as "a very small reduction".[170] The principal reasons for the reduction in mature student numbers were:

a buoyant economy, particularly in the kind of jobs that many mature students in the 21 to 30 age group want;
a decline in the number of people in that age group;
a large increase in the numbers of full-time students in the system at a conventional age, so that the pool of people wanting to come forward to study full time at a later age has reduced.[171]

139 Q. 80. Back

140 Q. 106-107 Back

141 Q. 108. Back

142 Q. 130. Back

143 Q. 58. Back

144 Q. 97. Back

145 Q. 90. Back

146 Q. 110. Back

147 Q. 55. Back

148 Q.124-127. Back

149 Q. 228. Back

150 Students at Work Survey 1999. Back