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.

A response to the House of Commons Education Committee report on Multi-Academy Trusts

The number of schools joining multi-academy trusts has grown over the last five years, and it is expected that this growth will continue. The House of Commons Education Committee has, as a result, looked into the performance and role of these trusts. This blog, which I co-authored with Steven J Courtney, Ruth McGinity, Robert Hindle, Stephen M Rayner and Belinda Hughes focuses on four key aspects of the Committee’s report and argues that broader questions about the government’s policy remain untouched. It was originally published on the LSE’s Politics and Policy blog.

The House of Commons Education Committee published its report on multi-academy trusts (MATs) on 28th February. At a time when the health of school budgets is increasingly jeopardised, the report is a timely reminder that the role of the select-committee system is to hold government to account. The report consequently critiques some aspects of the development and administration of multi-academy trusts, whilst largely accepting the overarching policy strategy.

Academisation since 2010 has increased rapidly, leading to new types and configurations of academy. A MAT is the most common way of uniting diverse academies into one legal entity, governed by a single board of trustees. Government policy on MATs reflects an expectation that maintained schools should become academies and that these should join or form a MAT. What is in doubt, and is addressed by this report, is how this policy aim is being operationalised.

In this response to the report, we focus on four key areas: the report’s attitude towards local authorities; how it addresses MATs’ financial sustainability; its distinctive treatment of leadership; and the report’s use of language.

The role of local authorities

One of the most striking features of the report is the marked change in the way in which local authorities are described and positioned. After many years as a target of what Stephen Ball called ‘discourses of derision’, local authorities are now seen as the potential saviours of an incoherent programme of MATification.

Allowing local authorities to set up their own MATs, which has been impossible until now, might entice hitherto reluctant school governors and leaders, particularly in primary schools, to join a MAT, because they would expect to retain valued relationships and support structures. We support the report’s conclusion that the fundamental problem remains, however. A triangle of power-bases – Ofsted, Regional School Commissioners and local authorities – has been established, without clarity about the place of each within what the present Secretary of State calls ‘the schools ecosystem’.

Financial sustainability

The report gives a warm reception to the idea of a ‘growth check’ on MATs and we await the metrics on which such checks will be made. This acknowledges that larger MATs increasingly become monopoly providers, both regionally and nationally. Previous thinking might have suggested that larger-scale organisations benefit from cost-saving economies of scale­ – important in a tight financial climate – and an Austrian economics view of the power of innovation driven by greater funds. The need for ‘growth checks’ suggests a consideration of the drawbacks of monopoly positions.

Are some MAT leads driven by power rather than quality? In The New Industrial State (1967), JK Galbraith introduced the notion of a small number of larger corporations dominating markets, a ‘technostructure’ of self-interested managers, a system by which ‘predator’ firms govern and which serves to maintain their own power through expansion. The performance of many academy chains to date suggests that the scale of a MAT has at best an inconsistent impact on outcomes. Furthermore, the report’s warning that neither the Department for Education nor the Education Funding Agency may cope with future MAT growth should ring alarm bells.

Leadership

‘Strong leadership’ is the fifth of the six characteristics identified by the Committee as key to MAT success. It is not called leadership, however, but ‘a shared vision’, supporting findings that the former is increasingly reducible to the latter. ‘Leaders’ in this report mean MAT CEOs and the overarching Board of Trustees, which includes sponsor representation.

In fact, there are many more references here to ‘sponsor’ than ‘leader’. This has the effect of diffusing the act of leadership, of partly removing its exercise from a single, perhaps heroic figure in the New Labour mould. If trusts may ‘do leadership’, two questions immediately follow. First, which activities apparently constituting leadership are possible or impossible? Second, how is accountability for the impact of such activities understood and experienced?

Language

Finally, it is worth noting the subtle shifts in language that pervade the report. As well as the now-familiar market-based metaphors (“sponsored” school, “brokered” deals, etc.), we also find new imagery. For example, some MAT-less schools are framed as “untouchables”, presumably because they are deemed financially unviable rather than because they belong to a caste system that regards them as impure. The term seems to follow similar rhetoric used by Warwick Mansell and others when characterising such schools as “orphans”. This image may capture a sense of rejection, but the danger is that in framing schools as in need of benevolent parenting we disguise the truth – that they’ve been forsaken not by misfortune but by an ideology.

In conclusion, this report ostensibly leaves untouched the broader questions concerning the appropriateness of the overarching MAT policy: who the winners and losers are from their very existence, for example, and what this means for public education. However, the extent and radical nature (for these times) of some of its proposals amount to a damning indictment of the direction of travel. For instance, it is highly unorthodox to call for the sort of role for local authorities that it has; to call into question MATs’ financial sustainability and to downplay (relatively) individual leadership. In that spirit, it is seeking to obtain maximum value, effectiveness, and usefulness from a policy constructed as unopposable.


What can defuse the student loan time bomb?

(Note: I published this piece first at The Conversation….)

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According to a new pamphlet issued by the Social Market Foundation, “the Tories’ student loan system that finances our universities, voted through by the Lib Dems, is a timebomb waiting to go off”.

The author Liam Byrne, Labour’s shadow minister for universities, science and skills, rues a “free-market experiment gone wild”, but offers few insights into Labour’s preferred alternative. There is no shortage of ideas out there for him to choose from.

The reason the system isn’t working is because, on current estimates, 45p for every £1 borrowed will never be paid back.

In a recent statement, the Russell Group dropped several hints about what Britain’s leading universities think should happen next in terms of student funding. Responding to a Business Innovation and Skills Select Committee report that also warned of an “increasingly fragile” system, the Russell Group pointed out that graduates currently pay back “only” 9% of their annual earnings above £21,000. This, they noted, was a “far” higher repayment threshold than under the previous system before the new fee regime was introduced in 2012.

The statement added that the government “can, of course, change these repayment conditions in order to increase the amount of money repaid, if they so choose.” With this line, the Russell Group acknowledged that the 2012 system requires change, but stopped short of calling directly for new thresholds for student loans to pay their loans back. The decision for that would remain the government’s, as would any subsequent blame.

Who benefits from a lower threshold?

Some, such as LSE’s Nicholas Barr, have explicitly advocated a lower opening repayment threshold. £21,000 is an arbitrary figure, for which no specific rationale was ever provided. If it were cut to, say, £15,000, a graduate earning £20,000 per year would still repay only £37.50 per month (compared to nothing now). A graduate on £25,000 would pay £75 (compared to £30 now).

However, such benign calculations do not address the broader question of whether lower-earning graduates should be hit harder than their higher-earning counterparts.

The graph below is a crude initial attempt to visualise how a reduced repayment threshold would affect graduates’ total lifetime repayments.

 

The blue blocks represent how much four types of earners would currently pay back, in today’s money, in return for borrowing £9,000 in fees, plus £5,500 maintenance per year, using the defaults currently set on a popular student finance calculator.

The red blocks represent approximate total repayments under a lower £15,0000 threshold for the same four groups of earners. The groups are those with starting salaries of £20,000, £30,000, £40,000 and £50,000 respectively.

As the graph shows, a reduced threshold would hit lower earning graduates harder than higher earning graduates (excluding those whose incomes never rise above £15,000 and who therefore receive full debt forgiveness). Higher earning graduates would be slightly better off.

Punishing middle earners

Note that in neither system do the very highest earning graduates repay most. As explained by the University of Bristol’s Ron Johnston, the 2012 system is regressive because high earning graduates complete their repayments earlier and thereby accrue less interest on their debt. Cutting the threshold at which repayments begin would both benefit and enlarge this group. They’d be the winners.

The losers would be graduates who aren’t high earners. As noted in the Sutton Trust’s report, Payback Time, under the 2012 system an “average teacher” will pay back around £42,000 of student debt, and still be making repayment in their early 50s. Under the system that was withdrawn in 2012, the same teacher would have paid around £25,000 and complete at the age of 40. The danger is that tinkering with repayment thresholds makes the current system even more punishing for such graduates.

On the surface, keeping a loan-based system has its advantages. The Russell Group is right to point out that UK universities punch well above their weight relative to the proportion of GDP that comes their way, and though the 2012 system failed as an austerity measure, it has safeguarded overall funding levels for most students.

What’s more, fears that the 2012 fees hike would deter young people from lower socioeconomic backgrounds from enrolling on full-time degree programmes appear not to have materialised. This summer’s figures have shown an 8% increase among the poorest groups (though the number of mature and part-time students has fallen alarmingly).

Give graduate tax a go

An alternative approach that receives less attention is that of a graduate tax. Understandably, some commentators have expressed concern that “hypothecated” taxes (ones earmarked for a specific purpose such as a graduate tax) might be diverted elsewhere by capricious future governments. But the principle that England’s highest earning graduates should contribute the most (or, at least, as much as their middle earning counterparts) is one that would surely enjoy popular support.

Liam Byrne is right. Today’s students are, as he says: “highly anxious about taking on an average of £44,000 worth of debt in an uncertain job market where nearly half of employed recent graduates are in non-graduate jobs.”

Of course, a graduate tax would make it trickier for universities to compete on price and therefore sits uneasily within fashionable, “student-as-consumer” thinking. But the alternative is that the cost of higher education, having already been transferred from taxpayer to graduate, could be further shifted from those who benefit most to those who benefit less.