Supplementary memorandum from Dr Iain
Crawford (SS 10)
1. It is unanimously agreed that the current
student support package is too small and needs to be enlarged.
In addition, policy should address two factorsone real
and one perceivedthat additionally and unnecessarily exacerbate
student poverty, and create misinformation.
Student inexperience in financial
management. The lack of experience, knowledge and self discipline,
in handling personal finance of a significant number of new undergraduates
is a contributory factor to student poverty. While accepting that
the state student support package is inadequate, the lack of ability
to manage personal finance makes the problem worse for a large
proportion of students.
Inadequate information. Lack
of authoritative information on available state and commercial
financial support mechanisms means that ignorance and scaremongering
are real deterrents to access and create an unjustified sense
of discontent amongst participants.
2. State Student Loans should be paid monthly
rather than three times per year. Students would give their bank
account details when applying for their loan; loans would be paid
by electronic transfer. It is unreasonable to expect students,
many of whom are without experience of the world beyond school,
to manage their money in the way that it is paid to them at present,
when most adults rely on regular monthly or even weekly payments.
3. It should be administratively possible
to move to such a system. In the new Hungarian system, loans are
paid in monthly instalments, with a double-payment in the first
month to cover such things as rent deposits, new textbooks etc.
4. Such a change would help to remove some
of the "end of term" student poverty. It would also
marginally improve the Student Loans Company's cash flow.
5. It is clear, from research by commercial
banks and others, that there is a lack of knowledge and understanding
of Student Loans Company (SLC) loans among prospective students.
This is partly because of changes since the system was introduced,
partly because of disinformation promoted by opponents of the
system, and partly because of a general paucity of personal finance
knowledge amongst secondary school and sixth form students.
6. There is an urgent need for a campaign
to educate prospective students, their parents and advisors about
all aspects of student financial support, as well as advice on
budgeting and personal finance management. As discussed in paragraphs
75-79 of Nicholas Barr's submission, there are two impediments
to exclusionshortage of money and shortage of information.
That evidence (paragraph 79) stresses the importance of making
sure that prospective students are well-informed about the educational
side of universities; a co-equal element is to make sure that
they are well-informed about the financial side. The activities
outlined below are therefore not a minor PR element, but a fundamental
part of any well-conceived strategy to promote access.
7. Commercial banks spend a great deal of
time and resources trying to address the information gap with
their student customers. The retail banks' motivation is entirely
commercial: they regard the student market as very important,
and spend hundreds of pounds per account on marketing, free overdrafts
and other inducements.
8. It is not in the commercial interest
of banks for students to keep getting into budgeting problems.
It adds to banks' administrative costs and, if they get too strict,
risks losing customers who in the long run would be very profitable.
9. There is, therefore, scope for such a
campaign to be sponsored jointly by the Government/SLC and the
retail banks. Since banks are prepared to expend substantial resources
on the student market, it is likely that they would be prepared
to co-operate with Government in a campaign to educate secondary
school students about state support and personal banking. Indeed
which retail bank could afford to be seen not participating in
such an exercise? In a joint campaign, the Government and the
banks could mutually reinforce their messages.
10. Some commercial banks are already working
on projects in schools. They all have a lot of information on
student spending and borrowing patterns. Through their campus
branches and specialist student centres they talk to thousands
of students and they spend a lot of money finding out what students
want and need.
11. While it should be assumed that banks
will behave in their own commercial self-interest, it should be
recognised that their interests can coincide with those of students
and government, in that they can promote access by explaining
that finance should not be a worry.
12. Substantial financial resources and
research data are available for such a joint information campaign.
This would enable government to bury the disinformation and to
promote the reality of the loan schemein particular the
low interest rate and the income-contingent repayment system which
removes all the normal risks attached to commercial debt. It would
enable the banks to educate their prospective customers to their
mutual benefit. Both banks and government could explain the difference
between commercial rates and the government rate of borrowing!
Dr Iain Crawford