Select Committee on Education and Skills Minutes of Evidence

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 factors—one real and one perceived—that 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 exclusion—shortage 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 scheme—in 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

May 2002

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