Are headline writers getting it wrong on fees?

This piece was originally published by WonkHE on July 6th 2017.

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Yesterday’s briefing by the Institute for Fiscal Studies (Higher Education Funding in England: Past, Present and Options for the Future) was covered in the same way by most of the national press. “Three quarters of graduates will never pay off student debts” ran the headline the Independent. Coverage in the Times was almost indistinguishable. The Mirror did little more than capitalise its NEVER, and the Telegraph headline merely framed the 77.4% figure as “almost eight in ten.”

For journalists, it’s the obvious way into a complex story, a hook that ostensibly captures the current system’s flaws and rank unfairness. What better evidence of a broken model than millions of graduates weighed down with debt they’ll never earn enough to repay?

 

But there’s a danger that the terms of the much-anticipated national debate (as called for by Damian Green last week) will be shaped too narrowly by this statistic. While some evidence suggests that students graduating into higher levels of debt feel more anxiety than those in previous generations, the report offers other kinds of evidence that should arguably have a greater bearing on public thinking.

Indeed, to some extent, the unrepaid bit of a graduate’s debt embodies the funding model’s most progressive element. Because it kicks in when a graduate’s earnings are too low for repayment to be deemed possible, it’s effectively the government’s subsidy for HE, a solitary concession that universities might just be a public good as well as a private one. Jo Johnson hints at this when he talks about “a vital and deliberate investment in the skills base of this country”.

The problem is that the more substantive defects of the current system are trickier for newspapers to distill into a few big-font words on the front page. Take the “back-door” freeze on graduates’ opening repayment level. This not only contravened assurances that the threshold would rise with inflation, but we now learn that it costs students an average of more than £4,000 each. As the IFS briefing note explains, this is because the impact of the freeze is permanent. Over the five year period to which it initially applies, the long-run taxpayer cost is reduced from £7 billion to £5.9 billion. If extended for another five years, the government saves a further £700 million. Middle earners are hit hardest.

The 6.1% interest rate that some graduates will face come September is equally difficult to justify. For high earners, the use of RPI + 0–3% (rather than CPI + 0%) increases lifetime repayments by almost £40,000 in today’s money. A blog from Million Plus’s CEO uses adjectives like “staggering” and “usurious”.

We also need to be more mindful of those who don’t fall into the government’s go-to definition of a ‘student’. While recruitment holds firm among the young, full-time cohort, the same cannot be said of part-time or mature students. Many commentators have explained why we should avoid looking at HE participation through such a conveniently narrow lens, but policy discourse doesn’t budge, and the sector’s part-time and mature students remain largely invisible.

Claims about the graduate premium, such as Jo Johnson’s that “a degree is worth on average £250,000 in higher lifetime earnings for a woman”, should always be accompanied by an acknowledgement that subject-by-subject differentials are enormous. Other broken promises – on maintenance grants, on nurses’ bursaries – must be central to any national debate. Perhaps IFS’s most damning observations is that “incentives for universities to provide high-quality courses in return for the money they receive are surprisingly limited.”

As David Kernohan notes, the briefing should allow the sector to take a more nuanced and long-term view on HE funding in the aftermath of a heated election campaign. Our students deserve nothing less. The immediate focus of the press has been on the proportion of graduates who are projected never to earn enough that their debt is paid in full. But beneath the headlines lie a series of issues that more directly impact on equity, and potentially present greater long-term threats to students’ participation and the sector’s sustainability.

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The University Game

I’m looking forward to giving a Sarah Fielden seminar on May 11th at the University of Manchester. All welcome. Further details here.

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Who gains from the grumbles?

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Note: this piece was originally published by WonkHE on January 11th 2016.

“My students have paid £9,000 and now they think they own me” runs the headline. It’s one of those anonymous pieces, so the wider context is difficult to figure out, but the author seems troubled by a message that reads “all I’m asking for is a little respect seeing as I pay you £9,000 a year”.

It’s the “blunt, consumerist language” that offends the author, and a number of anecdotes follow, each reinforcing this interpretation. “If you ask me,” quips a colleague in the car park, “all universities are going to need a customer services department before long”. Another claims a student once told them: “I pay you to teach me what’s in the article, not the other way around”. The author recalls how very different they had “acted and spoke” when at university – assignments were completed punctually, guidelines followed diligently, etc. How they wish they could say the same of their students now.

passengers.jpgSuch rhetoric is becoming familiar on English campuses, and the points about unfair workload allocation, expectations of across-the-board excellence, and often counter-productive management culture all deserve to be made forcibly and repeatedly to policy-makers, sector representatives and intuitional leadership teams. But venting at students about how universities are funded is like confronting fellow passengers because your train is running late.

Remember, the student’s plea is not for higher grades, quicker feedback or the guarantee of a graduate job, but for “a little respect”. Is this really a case of neoliberal higher education policy coming home to roost? Or is it something altogether more localised and petty?

images22Perhaps the student was wrong to mention fee levels at all. But let’s not forget the extent to which the 2012 funding system has driven higher education to “hurl the cost of itself at graduates”, as Jim Dickinson recently noted on this site. According to the Sutton Trust, only one in twenty will now repay their debt in full by the age of 40, compared to almost 50% under the previous system. An average teacher will still owe £25,000 by their early 50s. The freezing of the repayment threshold will make an undergraduate degree more costly still and, last year, we saw maintenance grants turned into loans and student nurses stripped of their bursaries.

It’s naïve to believe that such wholesale reconfiguration of the way in which our sector is funded won’t disrupt the nature of undergraduates’ engagement with their university or change academics’ working conditions. That’s exactly why our students were placed at the heart of the system – so they’d behave like consumers and enact the marketisation agenda.

Teaching-Excellence-Framework2However, in many respects, they’ve refused to play ball. Take the proposal to link success in the Teaching Excellence Framework to higher fees. The National Union of Students objected immediately, taking a position of principled disengagement long before the rest of the sector began to follow suit. Yes, there are some individual undergrads who’ll seize their rights as newly-empowered service users to make unreasonable demands on staff as they seek to maximise their return-on-investment. But there are millions of others who don’t measure their experience in solely utilitarian terms and want their time at university to be inspiring, cordial and enlightening.

The nameless author of the piece fantasises about replying with: “Hey student – all I’m asking for is a little respect, seeing as how much you pay makes no difference to my wages, yet the level of support I am forced to offer you takes up 80% of my time despite the fact that teaching still only equates to 33% of my workload.”

Is support for students really something that academics are “forced” to offer? And if we must gripe about our salaries, might it be judicious to acknowledge the inter-generational unfairness that the current funding model precipitates?

arguing.pngBut the bigger question here is who gains from such grumbles. A frostier relationship between students and academics doesn’t benefit those who yearn for campuses of old. Rather, it benefits those who seek to marketise and instrumentalise the sector further. Undergraduates can be framed as dissatisfied customers, then as budding agents of change, while academics can be positioned as ivory-towered and over-protected. Many of the 4,000+ comments beneath the original piece offer precisely this reading.

But the student-academic relationship at English universities is surely stronger than such simplistic polarisations allow. Is a little respect really too much to ask for?

Why research and teaching need to be reintegrated as well as rebalanced

Note: this piece was originally published on the All-Party Parliamentary University Group website. Further details of the presentation I gave to the Group are here.

Among the stronger arguments made in the government’s Green Paper is that a ‘rebalancing’ of research and teaching in Higher Education is needed. As a sector, we’ve become accustomed to close scrutiny of our research while our teaching has largely remained unaudited, sometimes reliant on the dedication of personally committed academics. But there’s an equally strong case to be made for 4research and teaching to be reintegrated. What makes students’ learning at university different from earlier, more instrumental educational experiences is the opportunity to be immersed in a culture of scholarly enquiry and research advancement, to learn first-hand from those leading their field, and to conspire in the creation of new knowledge. In measuring teaching, we must take care not to set it further adrift from research.

For any teaching audit to benefit the sector, buy-in from both students and academics is vital. Attempts to frame the Teaching Excellence Framework (TEF) as siding with long-suffering undergraduates are undermined by ‘principled disengagement’ from the National Union of Students. The link with fees makes the TEF the hardest of sells to the ‘consumer’ it supposedly empowers, especially now maintenance grants have become loans and repayment thresholds are frozen.

For academics, the risk is that separate audits for research and teaching put the sector in a state of perpetual preparation and further fuel the kind of game-playing ‘industries’ that the Green Paper rightly chides. A better integrated, lighter-touch framework might allow more time for universities to do what matters, instead of just reporting it in the most favourable terms possible.

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The questions a TEF might most usefully ask of the Higher Education sector are those that encourage us to make better use of our data, communicate more clearly with applicants, and draw on our own research to ensure that every student receives the teaching and support that’s best suited to their needs. For example, we know all about key outcome differentials, such as the relative under-attainment of Black and Minority Ethnic students compared to White students. But how do we address them? Part of the answer surely involves research. We need to understand better how cohort and staff diversity, curriculum design and campus culture affect performance.

201CKm_cEcUAAEB3arIndeed, one problem with relying on metrics is that some are such distant relations of teaching quality that they’d barely recognise one another. Graduates salaries, for example, are predicted much more by subject choice, university prestige and social capital than by how effective your lecturers were. Similarly, high satisfaction scores can be achieved by pleasing students rather than challenging them. In so diverse a sector, metrics can never tell the whole story.

Would-be students will benefit far more if universities – and then disciplines – created their own narratives. Many young people find their school-to-university transition difficult to negotiate and would benefit from clear, evidence-based guidance about the pedagogical approach and distinctiveness of individual courses.

2imagesThe Impact and Environment Statements used in the Research Excellence Framework (REF) offer useful potential templates. Teaching impact could be evidenced by localised measurements of learning gain; teaching environment by learning culture and staffing strategy, as well as by facilities and extra-curricular learning opportunities. Emerging narratives would be accompanied by relevant supporting evidence, such as student attendance at research seminars, the ratio of contact hours spent with senior academics relative to teaching assistants, the retention and performance of WP students relative to non-WP students, etc.

Eventually, any ‘excellence’ framework will get gamed. What’s arguably more important is the direction in which it nudges the sector and the behaviours it implicitly encourages. As universities grow more confident in their own research into Higher Education and articulate richer pedagogical narratives, the TEF’s role may develop into one of overseeing panel assessment rather than imposing metrics of its own. A low-maintenance REF and low-maintenance TEF could evolve and coalesce according to consistent underlying methodological principles, and in ways that allow research and teaching to complement, not compete with, one another.

Student Loans for Sale: killing confidence in the system?

A couple of weeks ago, The Guardian leaked a confidential, Whitehall-commissioned report, written by Rothschild investment bank and piss-takingly dubbed ‘Project Hero’.

‘Project Hero’ proposed redrawing the terms of student loans taken out over the past 15 years to make them more expensive for borrowers and therefore more attractive to potential purchasers.

Danny Alexander (Chief Secretary to the Treasury) later confirmed that the student loan book will indeed be privatised to raise £10bn, but offered no further details about the ‘sweeteners’ involved.

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Among the first to respond was Martin Lewis, head of the Independent Student Finance Taskforce. Lewis has succeeded in explaining higher fees to the younger generation better than any politician or university, so it’s interesting that he went off-message and took a strong stand against the suggested fire-sale, tweeting:

“To hike past students loan interest [would] betray every democratic principle and kill confidence in loan system.”

Lewis’s point is a very good one. It’s an act of faith for anybody to attend university in the higher fees era. Trust in the loan system is vital. Any suspicion that graduates will be fleeced by the state is likely to have serious consequences, especially for the most debt-sensitive of young people.

Writing in The New Statesman, Alex Hern has been excellent at explaining the economic ramification of the sell-off, first describing the idea as “terrible financial management” and then noting that:

“Our government is twisting itself in contortions, discussing student loan debt as though it’s a pile of newspapers sat at the back of the treasury, which they mustn’t be “compulsive hoarders” of, in order to sell at a discount an asset which is significantly more valuable in public hands than private. It’s politically driven economic illiteracy.”

Finally, Tim Whitmarsh, a Professor of Ancient Literatures at Oxford University, makes important points about social justice:

“The situation is deeply troubling. Higher education is the primary driver of social mobility in the UK. Huge fees are already a deterrent to many, but at least when they came in we were promised a benevolent, progressive loans structure. The involvement of the private sector in student financing can only damage that. Private companies want profits, and profits have to come from somewhere.”

Professor Whitmarsh has set up an online petition against loans privatisation, which already has over one thousand signatures. It can be found here.

All three of the arguments above are very persuasive. Nothing will undo Lewis’s work in promoting the new system faster than potential university students losing confidence in those from whom they must borrow. Hern is also right to point out the mindless economic short-termism of the proposal. And Whitmarsh’s concerns about interfering with the ‘safety net’ of a relatively progressive clawback mechanism are entirely justified if participation rates, particularly among those from less well off backgrounds, aren’t to be damaged.

As Martin McQuillan says, this is a “trainwreck” of an idea.

For an overview of the counter-arguments to this position, see Andrew McGettigan’s patient summary of a sell-off’s ‘quick wins’. However, note that McGettigan’s conclusion – that selling the loan book “without consent or consultation and without a parliamentary vote” is not on – is entirely consistent with the views expressed above.

The terms of students’ participation ‘bet’ must always be honoured. If you back a winner at 3-1, you don’t expect the bookie to ‘retroactively’ cut your odds to 5-2.

You can’t change the price of a degree once the student has graduated.

Can interest charges double the cost of HE participation?

Those Student Finance Calculator thingies are damn addictive. Hours can fly by when you’re sliding the little pointers up and down, watching how total repayment sums (and periods) change depending on variables like inflation, salary growth and average earnings.

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They’re a great idea, but I do wonder how successfully young people manage to negotiate them. Can applicants really predict how RPI will change over the next three decades? How do they estimate their average annual pay rises? All I had to worry about at that age were beer prices in the Students’ Union.

The calculator’s default setting help, of course. Currently, they put average inflation at 3%, salary growth at RPA +2%, and average UK earnings growth at RPI +1%.  Based on those assumptions, a student’s maximum total repayment in today’s money is £90,400 for a 3-year degree (costing £50k, including living costs) and £124,290 for a 4-year degree (costing £66.7k). That’s assuming you’re paying maximum tuition fees and receiving the maximum maintenance loan, with London weighting.

Pay Day Lender extortion? No, far from it. But still huge sums for many students. Interest charges can’t quite double the cost of participation, but they can increase a graduate’s lifetime repayments by over 80%.

What the calculator also shows is that total repayments go up and up with your expected starting salary. Until, that is, they start going down and down. That’s the regressive nature of the system that I’ve mentioned before; it’s also discussed here by Ron Johnston.

Take Ruth, a stay-at-home student who begins a 3-year course at an £8k-a-year university in September 2013. She qualifies for no grants or bursaries, and takes out no maintenance loans. With a starting salary of £16.5k, Ruth’s lifetime repayments will be a mere £30, just one pound per year.

This shows the system is working – Ruth is a low earner so her degree costs are being heavily subsidised.

As Ruth’s hypothetical starting salary goes up, so too do her lifetime repayments. As you’d expect.

That is, until we set Ruth’s starting salary around £36k, at which point total repayments peak, and then begin to fall.

If Ruth is lucky enough to have a starting salary of £50k, she’ll pay three grand less in interest charges. If she starts on £60k, she’ll avoid paying a further £1.3k.

This is where ‘it’s a tax, not a debt’ line of argument begins to collapse. What kind of tax hits middle earners harder than higher earners? And don’t forget that the very wealthy have the option to repay the debt immediately upon graduation, thereby avoiding interest entirely.

Time taken to repay at today's prices

Of course, to call it a ‘debt’ is also misleading. Debt collectors aren’t known for being generous towards those on low incomes, nor do they tend to ‘forgive’ after 30 years. In fact, any starting salary under £25.5k will mean that Ruth’s total lifetime repayments are actually lower than the loans she took out. And any starting salary under £21.5k means that she’ll get her degree for under ‘half price’.

According to some reports, the concessions to low-earners make the student loan repayment structure hugely expensive. For Nicholas Barr, professor of public economics at the London School of Economics, the solution is a “no-brainer“: drop the repayment threshold from £21k to £18k so that low-earners pay back more of their loan (“the purpose of student loans isn’t to help the poor,” Professor Barr says, “there are much better ways of doing that”).

But why not first remove the concessions for very high earning graduates?

The fairness case certainly seems much stronger. After all, you can (just about) understand why the City hotshot may feel the price of her degree shouldn’t be higher than the middle-earning schoolteacher’s. It’s essentially the same product. But is there really an argument that the price of her degree should be lower?

The Regressive Nature of UK Student Loans

Earlier this year, the LSE blogged a guest post by Ron Johnston, a geographer at Bristol University. Johnston, along with his colleague Tony Hoare, is the author of an important 2010 paper which found that “students with high A-level scores are more likely to get first-class degrees, but students from state schools with such high scores are more likely to achieve the highest degree grade than are students with similar scores who attended independent schools“.

Here, Johnston is talking about the new student loan structure, and his post is framed in terms of falling recruitment to postgraduate courses. Will Hutton had previously written about student fees leaving graduates too skint to consider a taught masters, and Johnston notes the picture is actually much grimmer than Hutton painted.

While I fully agree that the new undergraduate fee structure could hurt postgraduate recruitment further (at least on those courses leading to public sector professions), I was more intrigued by the figures put forward by Johnston about the regressive nature of the fee repayment system.

Naturally, I knew that the more a graduate earned, the quicker s/he would pay off the debt and the less interest s/he would therefore be charged. I was also aware of the coalition horse-trading that foreshadowed the decision to allow wealthier graduates to repay all of their  fees immediately after graduation. But what I hadn’t fully understood was just how much difference the power of compound interest made to total repayment. On this issue, the numbers really are quite staggering. Just look at the how a graduate’s starting salary affects their total repayment (figures based on fees-only borrowers of £27,000):

If your starting salary is £25k, total repayments are £57,526.

If your starting salary is £30k, total repayments are £50,943.

If your starting salary is £40k, total repayments are £44,354.

All projections about future graduate repayments are, of course, subject to assumptions about inflation and annual pay rises. However, according to Johnston, “the conclusion is clear: the less well-paid you are when you enter the labour market, the more your degree costs, both relatively and absolutely.”

Incidentally, for students who take out a full maintenance loan (£7,675 per year) on top of the £27,000 fee loan, it’s a similar story. If your starting salary is £30k, your total repayments are £135,914. But if your starting salary is £40k, total repayments are only £104,105.

It should be noted that the regressive nature of these repayment totals are partly the result of assumed starting salaries being relatively generous. For ‘fees + maintenance’ borrowers on lower starting salaries, the debt-wipe concession kicks in after 30 years.

It is this concession, of course, that allows the BIS website to brag that “under our new more progressive repayment system, around a quarter of graduates, those with the lowest lifetime earnings, will pay less [than under the previous system]”. The 2010 Institute of Fiscal Studies report, Higher Education Reforms: Progressive but Complicated with an Unwelcome Incentive, makes similar claims, and Vince Cable even argues that the new system is a “progressive graduate tax in all but name.”

But how progressive is a repayment system that squeezes much more from middle-earning graduates than it does from high-earning graduates? Martin Lewis’s Independent Student Funding Taskforce  reckons that fee levels are “irrelevant to most people – they’ll just keep paying the same proportion each month and if they don’t earn enough, they won’t come close to paying back what was borrowed (never mind the interest).” But once real graduates find themselves repaying different levels of debt over different lengths of time, I wonder whether they’ll be quite so blasé?

Johnston’s excellent blog (and startling graph, reproduced above) warns that unprecedented levels of debt will put further study beyond the means of most graduates. However, once the unfairness within the repayment structure begins to bite, it may not only be aspiring postgrads who feel aggrieved.

Thousands of graduates may wonder why their bill is so much greater than fatter-salaried friends who took the same degree at the same time.