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  • What’s in House Republicans’ Risk-Sharing Plan?

    What’s in House Republicans’ Risk-Sharing Plan?

    Under a new accountability measure recently proposed as part of a larger House budget bill, colleges would have to pay millions of dollars each year to reimburse the government for their students’ unpaid loans.

    The plan builds on an idea—known as risk-sharing—that lawmakers and policy analysts have been toying with since at least 2015. As the federal student loan portfolio grew, the goal was to require colleges to have some skin in the game and incentivize them to improve student outcomes.

    And while the concept has gained some bipartisan support in theory, higher education institutions have repeatedly argued that it is difficult to create a fair accountability system when many of the variables involved are out of an institution’s control and depend on the decisions of individual students and borrowers.

    So far, the higher ed lobby has successfully defeated proposed risk-sharing plans such as the one included in a Republican bill from the last Congress, known as the College Cost Reduction Act. But now, an almost identical proposal is back and at the heart of House Republicans’ plan to cut at least $330 billion from higher education programs over the next 10 years. The overall legislation, which aims to cut $1.5 trillion from the budget, could receive a vote on the House floor this week, though some lawmakers have threatened to block the measure amid concerns that it doesn’t include deeper cuts. Even if the bill fails, it serves as a marker of what House Republicans hope to accomplish moving forward.

    Many higher education policy experts warn that practically speaking, the latest risk-sharing plan relies on a complicated formula that’s essentially a black box. Released in late April, the proposal has not been tested enough to know its ramifications, they say, and the limited data available is inconclusive. Some analyses released by conservative groups say the program will be a financial boost for efficient public institutions and penalize bloated private ones. But one study conducted by a lobbying group suggests that public regional and minority-serving institutions that serve high populations of low-income students will get hit the hardest.

    “Fundamentally it’s an astonishing level of federal overreach to essentially lump in all institutions of higher education together—public, private, for-profit—and run a convoluted formula to determine winners and losers at the federal level and then redistribute funding,” said Craig Lindwarm, senior vice president of government affairs for the Association of Public and Land-grant Universities.

    Democratic politicians also argue that the purpose of the legislation is not truly to hold colleges accountable for student outcomes like graduation rates and income levels, but to crack down on what the government considers overly liberal institutions and fund President Donald Trump’s priorities.

    Even some conservative supporters acknowledge that it’s difficult to know the full scope of the bill’s potential impact this early. But they say risk-sharing is a necessary tool to penalize colleges that provide a poor return on investment and ensure the production of a well-prepared, financially stable workforce. They also suggest that the incentives such as additional grant funding to institutions that keep costs low and graduation rates high will offset the penalty for most public institutions.

    “With any policy change, we’re not going to be able to predict in advance 100 percent of how this is going to affect everyone, everywhere, all the time. But I don’t think that should be an excuse to not make policy changes,” said Preston Cooper, a senior fellow at the conservative think tank the American Enterprise Institute. “I still think the data we have gives us a general idea of which sorts of institutions would be affected and the magnitudes of the penalties involved.”

    So How Does It Work?

    The proposed risk-sharing plan would kick in for new loans starting in July 2027, said an aide for Republicans on the House Education and the Workforce Committee. That means colleges wouldn’t be penalized for disruptions to the student loan system that occurred during the pandemic or efforts during the Biden and Trump administrations to overhaul repayment.

    If we don’t even understand how this works, why the heck are we passing it? I mean, it’s a concept, but I don’t think it’s the concept that people think it is.”

    Jason Delisle, nonresident senior fellow at the Urban Institute

    And because borrowers don’t have to start paying back their loans until six months after they graduate or stop out, institutions likely won’t have to pay a penalty until 2029 or 2030 at the earliest, the aide added.

    But from then on, institutional payments would be calculated annually—major by major—for each new cohort of borrowers and would continue until they’ve paid off their loans. The amount per cohort could change from year to year, depending on factors such as borrower behavior, postgraduation earnings and college costs. But it’s expected to grow as more and more cohorts are added to the lump sum.

    Under the bill, the amount per cohort would be calculated using a three-part formula, which is largely unchanged from what Republicans proposed last Congress in the CCRA.

    The first step is to determine a college’s risk-sharing liability, which is how much each institution owes the government. To do that, the formula looks at the difference between how much students were supposed to repay during a given year and how much they actually did. The calculation takes into account the value of any missed or partial payments as well as any interest that the government waived or principal contributions it matched, the committee aide said. It does not, however, include debt waived through programs like Public Service Loan Forgiveness, which was a concern for institutions.

    This is the part of the formula that raises the most questions for institutions, as the mechanics of exactly how the risk-sharing liability is calculated are not clearly outlined in the legislation or in a CCRA database published by the education committee Republicans in 2024. And even if it were, much of the data needed to run the formula is not publicly accessible.

    “How the formula works is the million-dollar question, and something that we’ve been trying to work on for a year and a half,” one policy expert said. “It’s very complicated and relies on metrics that aren’t publicly available.”

    House committee aides counter that colleges have access to student borrower data via the National Student Loan Data System, which can be used to predict future risk-sharing payments. They also point to a recent Dear Colleague letter reminding colleges of their responsibility to monitor borrower payments.

    But even then, higher ed lobbyists say, it’s not clear who will be responsible for calculating the liability. If any part of that responsibility falls to campus financial aid administrators, higher ed groups say the plan will increase the administrative burden on colleges.

    “If I were a lobbyist, I would just say to all of my members, go to your congressman and say, ‘We don’t know what this does,’” said Jason Delisle, a policy analyst who has worked at think tanks across the political spectrum but is now based at Urban Institute where he’s a nonresident senior fellow. “If we don’t even understand how this works, why the heck are we passing it? I mean, it’s a concept, but I don’t think it’s the concept that people think it is.”

    Incentives to Lower Costs

    Once that risk-sharing liability is known, the next step in the formula is to figure out how much of that liability fee a college will have to pay. That’s done using what the legislation calls an earning-price ratio, which compares students’ earnings to the federal poverty line and college cost. A higher EPR means a lower final payment. For example, if an institution’s EPR is 0.3, or 30 percent, then it has to pay 70 percent of the original liability.

    To further offset the risk-sharing penalty, colleges can also qualify for a new pot of funding proposed in the bill called the PROMISE Grant, which is the third step of the formula. How much a college would get in PROMISE funding depends on the total value of Pell Grants received and the graduation rate of Pell-eligible students. This grant is funded by other colleges’ risk-sharing payments.

    Rep. Tim Walberg, a Michigan Republican and chair of the House Education and Workforce Committee, is leading the effort to cut billions from higher education programs.

    Bill Clark/CQ-Roll Call Inc. via Getty Images

    So, according to data from the House committee, the State Technical College of Missouri should get $3,230,130.50 in PROMISE grants. But the community college would have to pay $9,688, bringing its net gain down to $3,220,442.50. Washington University in St. Louis, however, would receive no PROMISE Grant funding and lose about $3.5 million. (The House Committee data only lists the final risk-sharing payment—not original liability values or EPRs.)

    In theory, this data demonstrates how the EPR and the PROMISE Grant are supposed to support colleges that serve low-income students, but many higher ed lobbyists are worried the program will actually do the opposite. That’s largely because colleges can only receive a PROMISE Grant if they agree to lock in tuition rates for each new freshman class. If they can keep tuition costs low, then their EPR scores will only be strong. Some lobbyists say that neither is a feasible option for public colleges and minority-serving institutions, which rely heavily on funding from the state.

    “It’s not a coincidence that some of our schools that would get hit the hardest are in states that invest very little in public higher education. Some of our schools in Pennsylvania and Arizona, for example, would fare extremely poorly, and it’s by and large because tuition levels are such a determinative component as it relates to the penalty assessment,” said MacGregor Obergfell, director of governmental affairs at APLU. “To think of what traditional conservative orthodoxy is, it seems pretty unusual that a conservative position is using the federal government to punish state institutions for decisions made by their states.”

    Reward or Penalty?

    Some higher ed groups also noted that much of the formula either depends on or fails to acknowledge factors outside of a college’s control. Much of this has to do with unpredictable borrower behavior, but there are other factors at play, too; for example, when calculating discounts with the EPR, the formula doesn’t account for differences in the cost of living from college to college.

    “Institutions in higher-cost areas are at more of a disadvantage than other institutions,” said Karen McCarthy, vice president of public policy and federal relations for the National Association of Student Financial Aid Administrators. “They have to charge higher prices to reflect higher costs of labor, maintaining facilities and all those types of things.”

    The burden of risk-sharing payments may be so high that colleges elect to opt out of the federal student loans program entirely, she added: “Ultimately it would have an impact on lower-income students who have a need both for a Pell Grant and a direct loan to help them meet their cost of attendance.”

    Of colleges that enrolled 70 percent or more low-income, Pell-eligible students, 96 percent would have to pay a risk-sharing penalty and 91 percent would lose money over all when PROMISE Grant is factored in, according to the American Council on Education’s analysis of the House data.

    The committee countered that finding with its own analysis of the data, sent to Inside Higher Ed, showing how colleges that enroll the highest share of low-income students should see about $99 more per student, while those that enroll the lowest share would lose about $66 per student.

    The ACE analysis as well as the committee’s data are among the few studies that show the estimated impact of the previously proposed risk-sharing plan. None have been updated yet to reflect the latest iteration.

    Another analysis from Cooper, the AEI fellow, estimated that public institutions as a whole should get more money under the plan, but private nonprofits are expected to face a substantial penalty.

    Although critics point to how the plan would affect individual institutions, particularly small, underresourced schools, proponents argue that the focus should be on the impact to higher education over all, and that colleges can lower their costs to see a payoff.

    “Because the net gains are significantly larger, the sector as a whole sees a net gain even though more institutions have net losses,” Cooper said. “So, the upside for institutions here is that there are significant rewards available to those which can improve their outcomes.”

    At the end of the day, it’s all about how you choose to look at the data.

    “I would just like to see [the formula of risk-sharing] play out for a couple of hypothetical colleges based on data that has some bearing on reality,” said Delisle from Urban Institute. “And that’s a hard thing to come by right now.”

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  • Chat Bot Passes College Engineering Class With Minimal Effort

    Chat Bot Passes College Engineering Class With Minimal Effort

    Since the release of ChatGPT in 2022, instructors have worried about how students might circumvent learning by utilizing the chat bot to complete homework and other assignments. Over the years, the large language model has enabled AI to expand its database and its ability to answer more complex questions, but can it replace a student’s efforts entirely?

    Graduate students at the University of Illinois at Urbana-Champaign’s college of engineering integrated a large language model into an undergraduate aerospace engineering course to evaluate its performance compared to the average student’s work.

    The researchers, Gokul Puthumanaillam and Melkior Ornik, found that ChatGPT earned a passing grade in the course without much prompt engineering, but the chat bot didn’t demonstrate understanding or comprehension of high-level concepts. Their work illustrating its capabilities and limitations was published on the open-access platform arXiv, operated by Cornell Tech.

    The background: LLMs can tackle a variety of tasks, including creative writing and technical analysis, prompting concerns over students’ academic integrity in higher education.

    A significant number of students admit to using generative artificial intelligence to complete their course assignments (and professors admit to using generative AI to give feedback, create course materials and grade academic work). According to a 2024 survey from Wiley, most students say it’s become easier to cheat, thanks to AI.

    Researchers sought to understand how a student investing minimal effort would perform in a course by offloading work to ChatGPT.

    The evaluated class, Aerospace Control Systems, which was offered in fall 2024, is a required junior-level course for aerospace engineering students. During the term, students submit approximately 115 deliverables, including homework problems, two midterm exams and three programming projects.

    “The course structure emphasizes progressive complexity in both theoretical understanding and practical application,” the research authors wrote in their paper.

    They copied and pasted questions or uploaded screenshots of questions into a free version of the chat bot without additional guidance, mimicking a student who is investing minimal time in their coursework.

    The results: At the end of the term, ChatGPT achieved a B grade (82.2 percent), slightly below the class average of 85 percent. But it didn’t excel at all assignment types.

    On practice problems, the LLM earned a 90.4 percent average (compared to the class average of 91.4 percent), performing the best on multiple-choice questions. ChatGPT received a higher exam average (89.7 percent) compared to the class (84.8 percent), but it faltered much more on the written sections than on the autograded components.

    ChatGPT demonstrated its worst performance in programming projects. While it had sound mathematical reasoning to theoretical questions, the model’s explanation was rigid and template-like, not adapting to the specific nuances of the problem, researchers wrote. It also created inefficient or overly complex solutions to programming, lacking “the optimization and robustness of considerations that characterize high-quality student submissions,” according to the article.

    The findings demonstrate that AI is capable of passing a rigorous undergraduate course, but that LLM systems can only accomplish pattern recognition rather than deep understanding. The results also indicated to researchers that well-designed coursework can evaluate students’ capabilities in engineering.

    So what? Based on their findings, researchers recommend faculty members integrate project work and open-ended design challenges to evaluate students’ understanding and technical capabilities, particularly in synthesizing information and making practical judgements.

    In the same vein, they suggested that faculty should design questions that evaluate human expertise by requiring students to explain their rationale or justify their response, rather than just arrive at the correct answer.

    ChatGPT was also unable to grasp system integration, robustness and optimization over basic implementation, so focusing on these requirements would provide better evaluation metrics.

    Researchers also noted that because ChatGPT is capable of answering practice problems, instruction should focus less on routine technical work and more on higher-level engineering concepts and problem-solving skills. “The challenge ahead lies not in preventing AI use, but in developing educational approaches that leverage these tools while continuing to cultivate genuine engineering expertise,” researchers wrote.

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  • A Primer on Commercialization Postdocs (opinion)

    A Primer on Commercialization Postdocs (opinion)

    When you finish a Ph.D., it often feels like you’re standing at a professional fork in the road: stay in academia or go into industry. But what if the real opportunity lies not on either of those well-worn paths, but at their intersection?

    That’s where commercialization postdoctoral programs come in—an option many early-career researchers don’t know exists but for which you may be ideally suited.

    These programs provide the tools to turn your research into real-world impact. They explore how discoveries made in the lab can become products, services or systems that solve real problems. And they teach you how to think like an entrepreneur, even if you don’t plan to start your own company, which many postdocs find helps them become more competitive for faculty and industry roles.

    If you’re curious about how your work could make a broader impact or simply what technology transfer, commercialization or innovation looks like from inside the university, this is your invitation to learn more.

    What Are Commercialization Postdocs?

    At a basic level, commercialization postdoc programs support Ph.D.s learning how to move research from discovery to application. These programs fall into two general categories:

    1. Technology transfer fellowships train you to manage intellectual property (IP), evaluate market potential and support licensing processes.
    2. Entrepreneurial and IP commercialization fellowships let you work hands-on with university-owned (or your own) innovations to develop them for real-world use.

    Both paths expand your skill set well beyond most traditional academic training and do so in a way that positions you to lead innovation in any field or sector.

    Why This Training Matters

    Here’s a truth we don’t talk about enough—Ph.D.s are already practicing innovation.

    You’re trained to identify gaps, solve problems and produce new knowledge. Commercialization programs help you understand how to apply those same skills in ways that create value beyond the lab or scholarly community.

    Even if you don’t see yourself launching a start-up, learning to assess market needs, build relationships across disciplines and effectively communicate your research vision and unique value proposition can open doors to new kinds of funding, partnerships and diverse career prospects.

    From Mindset to Practice: A Case Study in Entrepreneurial Thinking

    In spring 2024, Virginia Tech worked with Archer Career to develop a program focused on helping postdocs adopt an entrepreneurial mindset. Through online modules and a full-day, in-person workshop, 19 postdocs from across multiple disciplines engaged in activities including:

    • Crafting elevator pitches
    • Identifying the innovative aspects of their research
    • Mapping and mobilizing their personal and professional networks

    Those that attended the program said they felt it filled a gap in their knowledge and appreciated hearing from current Ph.D. entrepreneurs and connecting with peers. They also realized they weren’t alone in their questions about research commercialization and start-up company creation, and that there was space for conversations about innovation that didn’t require giving up their scholarly identities. This event also demonstrated the need for more discussions about the value of an entrepreneurial mindset among academics.

    Where Commercialization Postdoc Programs Live

    While commercialization postdoc programs are still emerging, there’s a growing list of opportunities across the U.S. that support Ph.D.s building critical technology transfer and entrepreneurial skills.

    Technology Transfer-Focused Programs

    Entrepreneurial and Start-up–Oriented Programs

    • Innovation Commercialization Fellows Program—Carnegie Mellon University: Current graduate and Ph.D. students, postdocs and research assistants at Carnegie Mellon apply to work on a start-up based on university research with a faculty member.
    • ASPIRE to Innovate Postdoctoral Fellowship Program—Vanderbilt University: Current Ph.D. students studying biomedical sciences and postdocs affiliated with Vanderbilt School of Medicine apply to receive mentorship, training and networking opportunities to learn how to launch a company and to commercialize technologies discovered at Vanderbilt.
    • Postdoctoral Entrepreneurship Program—University of Washington: This program gives strong preference to UW postdoctoral researchers or graduating Ph.D. students. It funds “commercially focused individuals” to work in UW labs on translational experiments to identify and obtain funding and to develop a business model.
    • Presidential Postdoctoral Innovation Fellowship Program—Virginia Tech: This fellowship provides up to two years of support for Ph.D.s working to commercialize Virginia Tech intellectual property alongside a faculty mentor at the university.
    • Ignite Fellow for New Ventures Program—Cornell University: The program aims to build new businesses, “grow entrepreneur scientists and engineers,” and “enrich Cornell’s venture ecosystem.” The program is open to graduating Ph.D.s or master’s students working with a faculty inventor to commercialize technology developed on a Cornell campus.
    • Activate Fellowship: This program provides two years of support, including “funding, technical resources, and unparalleled support from a network of scientists, engineers, investors, commercial partners, and fellow entrepreneurs.” The program accepts applications in the fall of each year, with the fellowship beginning in early summer the following year. Prospective fellows can apply to work in their local ecosystem or in hubs located across the U.S.:
    • Runway Startup Postdoc Program—Cornell Tech: “Part business school, part research institution, and part startup incubator,” Runway is focused on digital technologies, and Startup Postdocs are provided with training, mentorship and other resources to support their growth as entrepreneurs. Startup Postdocs arrive with ideas that require time and specialized guidance to develop. The program accepts candidates from anywhere around the world.

    Each of these programs offers something slightly different, but they share a common goal—to empower researchers to think beyond the bench and take an active role in translating ideas into action. The Activate Fellows and Runway program at Cornell Tech are especially unique, as they allow a Ph.D. to bring their own ideas with them. The Runway program, which to date has trained 55 postdocs, has also been featured in The Journal of Technology Transfer.

    One advantage of participating in a commercialization-focused postdoc program is the access to resources that support your growth. Many programs are embedded in innovation ecosystems, such as tech transfer offices, legal support, start-up incubators and translational research centers. Some even offer seed funding or business mentorship to help you move a technology forward.

    What’s Next? A Call to Action

    If you’re a postdoc or advising one, you don’t need to have a ready-to-pitch product to benefit from this kind of training. You just need to be curious.

    Ask yourself:

    • What problems does my research help solve?
    • Who beyond my field might care about this work?
    • What skills could help me turn this into something people can use?
    • What resources are available to me to learn more about commercializing research and entrepreneurship?

    Whether you want to start a company, work at the intersection of science and policy, or simply make your research more impactful, commercialization training can help you get there.

    We also need to do more, collectively, to bring visibility to commercialization programs available to Ph.D.s. This includes:

    Most importantly, we need to keep reminding ourselves and our colleagues that commercialization and entrepreneurship isn’t a detour: It’s a destination that many Ph.D.s are uniquely equipped to reach.

    Final Thoughts

    You don’t need to have a CEO title in your sights to benefit from entrepreneurial thinking. At its core, commercialization is about connecting your work to the world, and that’s something every researcher and scholar should know how to do. Whether through a fellowship, a campus workshop or self-guided exploration, now is a great time to start learning how your research can make a difference in the world.

    And who knows? You might just discover that innovation is your next career frontier.

    Chris Smith is Virginia Tech’s postdoctoral affairs program administrator. He serves on the National Postdoctoral Association’s Board of Directors and is a member of the Graduate Career Consortium—an organization providing a national voice for graduate-level career and professional development leaders.

    Tomer Joshua serves as associate director of the Runway Startup and Spinouts programs at Cornell Tech and the Jacobs Technion–Cornell Institute, where he supports deep tech and digital start-ups.

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  • How I Lost Faith in My University’s Mission (opinion)

    How I Lost Faith in My University’s Mission (opinion)

    I am currently chair of the philosophy department at the University of Utah. I have taught at “the U” for 32 years. We are a flagship but not an elite university; we admit 89 percent of applicants. Our students range from quite unprepared to extremely capable. For the most part, I have loved my job and have put my heart and soul into it. I have always been proud to be on this faculty helping students at all levels of academic readiness acquire skills in reading, writing, speaking and reasoning that enhance their lives and prepare them for virtually any job. But recently, my pride has evaporated and been replaced with feelings of grief and shame.

    This year—my first as chair—has seen profound upheaval. In January 2024, shortly before my term began, the State Legislature passed an anti-DEI bill, prohibiting, among other things, offices and programs related to diversity, equity or inclusion. Administrators were required to purge these three words from university websites and other documents, such as RPT—retention, promotion and tenure review—guidelines, and the university administration interpreted the law as requiring that the Women’s Resource Center, the Black Cultural Center and the LGBT Resource Center be shuttered.

    The state has also imposed a “bathroom bill” requiring trans university students to use locker rooms aligning with their sex assigned at birth, has banned Pride flags in public spaces (and in faculty offices if they can be seen through a window), and now requires faculty to post their syllabi in a publicly searchable database. It also prohibits university presidents from taking a stand on any issue that does not bear upon the “mission, role or pedagogical objectives” of the institution. And finally, as the coup de grâce for academic freedom and faculty expertise, it has funded and established the Center for Civic Excellence at Utah State University, mandating that all students take general education courses on the topics of Western civilization and the rise of Christianity. The law establishing the center identifies it as a pilot program to be rolled out to other Utah universities in the future.

    Then there is the state of Utah’s version of the national campaign against alleged “waste, fraud and abuse.” Recently passed laws dictate the process by which all post-tenure reviews of faculty must be conducted, curtail shared governance and cut state funds to all Utah public institutions by 10 percent ($60.5 million). Universities can have the funds “reallocated” if they use them for high-demand, high-wage majors. As a result, we lost our History and Philosophy of Science major, which drew some of our best students, many of them double majoring in STEM subjects and working toward careers in medicine and public health. To be clear, eliminating this major will reduce opportunities for students while producing no savings whatsoever; offering it requires no additional staff, advisers or courses beyond what is already in place for our philosophy major. These funding cuts also mean that tenure-line faculty in my department will receive a zero percent raise this year.

    In addition to the state’s actions, the upper administration—in seeming alignment with Facebook’s motto of “move fast and break things”—has instituted so many changes in such a short time it is hard to keep track. It abruptly revamped the advising system, brought four colleges under the umbrella of a Colleges and Schools of Liberal Arts and Sciences in a “shared services” arrangement, and keeps rolling out new “student success initiatives.” Whether these changes are wise or not, the pace at which they were made imposed a crushing amount of (mostly stultifying) work on deans and department chairs. Aside from refereeing a few manuscripts for journals, I have not read a piece of philosophy since I became chair, much less written one. In the midst of this, the dean of my college, a strong supporter of philosophy, resigned in the middle of the fall semester and was replaced by someone from outside our college, essentially putting us in receivership.

    While all this is happening, my youngest child, who is queer, is deciding where to attend college. He applied to the University of Utah, where he was admitted to the Honors College and received a scholarship. But how can I send him here? I fear for his safety no matter where he lives in our current hate-filled political climate, but still I hesitate to subject him to the environment on my own campus. I will likely incur a hefty bill, then, so he can attend a university out of state.

    I had more or less come to terms with this constraint, and was also managing to persevere in my job, when something happened that finally took the wind out of my sails: The president of the university announced, to the surprise of faculty, that returned missionaries from the Church of Jesus Christ of Latter-day Saints will be eligible to receive up to 12 college credits for their service to the church.

    I am galled by what all this says about who matters at my university. While students like my child can’t even have a designated room on campus to hang out in with like-minded others—and while the main symbol reminding us of the existence and dignity of students like him is banned from public spaces—returned LDS missionaries, who have an entire institute across from campus dedicated to their spiritual support, can get a full semester of credit, at a greatly reduced cost, essentially for going door to door trying to persuade people to join their church. This set of priorities is so wrong-headed that it verges, for me, on surreal. And yet the administration sees no irony or hypocrisy in naming its Office of Student Experience “U Belong.”

    Soon I will be hosting a retirement party for a wonderful colleague who joined the faculty one year before I did. In another era, I would have been sad to see him go but glad to be continuing in what I regard as my vocation. Now I feel nothing but envy. It is time for me, too, to retire, but, alas, that is not an option, because I have four years of out-of-state tuition to pay.

    Cynthia Stark is a professor and chair of the philosophy department at the University of Utah.

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  • University Finance and Managing the Margins of Error

    University Finance and Managing the Margins of Error

    • By Huw Morris, Honorary Professor of Tertiary Education at the Institute of Education, UCL’s Faculty of Education and Society, and Richard Watermeyer, Professor of Education at the School of Education, University of Bristol.
    • Over the weekend, HEPI blogged on the possible consequences for universities and students of a new UK / EU agreement – see here.

    The financial challenges currently facing UK universities, as revealed by last week’s report from the Office for Students, have focused attention among university leaders, government policy makers and media commentators, as well as higher education staff and students, on four things:

    What has received less attention are variations between universities in the number of students recruited in general and international students in particular, as influenced by perceptions of institutional quality, and the wider incomes and costs of this provision. It is these things which impact on institutional margins, their surpluses and losses, and determine their longer-term financial sustainability. Most importantly, there are very big differences between universities when assessed by these measures. With a HM Treasury Spending Review and a Department for Education Higher Education White Paper expected imminently, it is these wider institutional economics and financial management issues which are the focus of this article.

    Higher Education Statistics (HESA) data reveals a very mixed pattern of financial activity and performance among the 302 higher education institutions that filed accounts for 2022/23, the last year for which full records are available. Income from all sources, including tuition fees, research funds, government grants, endowments and other miscellaneous sources for these organisations, has ranged from £84,000 at the Caspian School of Academics to £2.5 billion at the University of Cambridge. Despite such wide variance, 88 institutions are responsible for over 80% of the income; within this group, the 24 members of the UK’s Russell Group of research-intensive universities account for the lion’s share (47.3% despite attracting only 25.8% of total student numbers). This mismatch between volume and income is explained by the financial margins of course provision.

    The costs universities incur are similar. Salaries for academic, professional services and support staff vary, but national pay bargaining and pension arrangements mean that the differences are not great. Meanwhile, the costs of campus buildings per square metre and the unit costs of equipment are similar. So, while there are significant differences in the number of staff, size of university estate and scale of expenditure on equipment, most institutional leaders are alert to the key metrics that help to marshal these aggregate costs. The big difference in costs is in supporting research activity, with the Transparent Approach to Costing (TRAC) data revealing £4.6 billion a year of unfunded activity. This is a measure of the research activity undertaken by university academic staff, which is not supported by research funds and appears to be undertaken within hours nominally allocated to other things, such as teaching and administration. It is this and related figures that the Minister of State for Skills is referring to when she challenges universities to be more transparent with the information they provide on their use of public money.

    At a UK level, information on this activity is not hard to find. Table C.1.2. of the OECD’s Education at a Glance reveals that the UK has a higher level of expenditure on research and development per HE student than the US, despite very much lower levels of Gross Domestic Product per capita. The proportion of unfunded research activity varies considerably between institutions and is lowest among Russell Group universities and highest among institutions that are seeking to increase activity from a lower base.

    What is understood by most university leaders, but less commonly by policymakers and the media, is the vital role of operating margins in determining whether a university is financially sustainable. The role of margins is best illustrated by comparing two fictional universities.

    University A is a large research-led institution that offers a wide range of courses to home and overseas students. In 2021/22, in keeping with the average Russell Group university, one third of its students were recruited from overseas and its position in the Chinese Academic World Ranking of Universities (AWRU) – and to a lesser extent the QS and THE World rankings – enabled the university to charge fees of £80,000 for its MBA programme, £60,000 per year for its Medicine degree to overseas students, and £20,000 per year for its doctoral programme. These high fees and the large volume of students applying for a limited number of places generated sufficient margins (gross surplus) to subsidise the costs of the less remunerative courses for home students in subject disciplines such as English Literature where the full-time undergraduate degree fee is £9,535 per year. This was important because the cost of these courses with the higher charging courses for international students was typically twice the £9,535 per full-time student income earned from UK students, not least because of the costs of the providing time and resources for staff research in these disciplines where there was no grant income to support this activity. These funds also provided the financial resources to underpin some of the research work of academic staff and their professional services colleagues.

    The picture is less rosy at University B, a large former polytechnic, with a much lower ranking in international league tables and which is consequently less competitive in attracting Chinese international students. Instead, University B is dependent on recruiting first-generation international students; students typically from less wealthy families, unable to afford the premium fees charged at University A. At University B, the fee for an MBA is £20,000, although this is often discounted and then diluted by recruitment agency fees. The high sticker price and subsequent use of discounting is used because the advertised fee is a marker of quality and the discount fee is used to draw the student in by adjusting the amount to what they can afford and flattering them into believing the university wants them for their talents. University B does not have a Medical school and so a comparator fee is not available, but the fee for an international student on a science and technology degree is £18,000. When diluted by agents’ fees and discounted prices, this fee may drop below the costs of provision. Finally, the PhD course fees of £5,000 per year only cover half the running costs in order to attract students who will help to boost external assessments of the research undertaken by this university.

    Figure 1. Course prices and costs compared

    The net effect of the combination of different course prices and costs at University A and University B is that the former is making significant gross surpluses and the latter is making significant gross losses. It is important to note that this pattern of surpluses and losses is also evident in the financial performance of other university services, including, for instance, franchise courses in the UK and overseas, student accommodation, conference facilities, catering and other services. This is because the prices charged by institutions with less auspicious reputations and league table positions are lower than those of their competitors, but the costs are similar.

    There are also issues associated with capital requirements (the need for funding to pay for the renewal and replacement of buildings and other assets) and risk exposure (the extent to which future activity is certain and predictable). The number of young British people wanting to study at UK universities has historically been predictable, and while there has been competition between universities, this competition has rarely led to institutional failure. Institutions may have got smaller, closed courses, and on occasion merged, but they have not been forced into insolvency. Such relative assurance may wane in future as risks rise and the need to renew and replace buildings and other capital assets grows.

    We might, for instance, reasonably anticipate increased risk associated with international student recruitment where geopolitical and concomitant financial volatility impact the inward migration of students into UK universities. While we have already witnessed the inhibitory effects of visa rule changes, we can reasonably expect exchange rate fluctuations and changes to the proclivity of overseas governments to fund students studying in the UK to further increase these risks. In the medium term, a requirement to maintain a high ranking in international university league tables, as corresponding justification for high fee charges, compels sizable financial investment in buildings, equipment, and staff to maintain the research performance.

    Assessment of university performance in the AWRU, QS and THE World University rankings is dependent on research performance measured by citations and, in the case of the QS and THE specifically, the reputation of the institution in the eyes of senior leaders in other universities and the opinions of employers. These ratings are influenced by past rankings and impressions of campus quality. In the long term, maintaining these league table positions is likely to become more demanding for three reasons.

    • First, the drive by governments in many other countries to create their own ‘world-class’ universities leads to an increase in the costs of competing and a consequent decline in margins.
    • Second, the growing prominence of philanthropy and alumni giving looks set to make up an increasing proportion of the funding of highly ranked institutions, though this is less of a feature in UK higher education. In the USA, for example, higher education endowment is around $800 billion and is growing by 150% per year. Endowments now account for 50% of the income of Harvard University and a very sizeable proportion of the income of other Ivy League and American research-led institutions. Of course, whether this remains the case in the face of challenges from President Trump’s new administration remains to be seen.
    • Finally, in the longer term (10 to 30 years), it seems reasonable to predict that developing countries in the Global South will develop their own higher education provision, and the number of young people travelling overseas to study will reduce, as is being encouraged by the China-Africa 100 University plan and similar initiatives.  

    The lessons of this analysis for institutional leaders and their governing bodies and councils are that they should broaden their focus to consider the operating margins on all their activities, (that is, teaching, research, accommodation, conferences, room and equipment hire) as well as the investment requirements to maintain this performance in the medium to long term. Without engaging in these types of analysis, the risks of cashflow problems will grow and the longer-term sustainability of these institutions will be jeopardised.

    The lesson for governments is that they should look at the real costs of different courses and focus the funding that is made available through student loans and grants on those activities which will provide the greatest sustainable private and public benefit in the long run. This means aligning the funding with future needs, as defined by assessments in the NHS Workforce plan and the analyses by Skills England, Local Skills Improvement Plans and the UK shortage occupation list and, where this is not the case, subject areas where it seems probable that the student loans will be repaid. If institutions wish to fund programmes that fall outside these lists, then they can subsidise these courses with surpluses made from other activities. The issues outlined above also mean that the pressures facing institutions are different, and it is probably beyond the capability of the Department for Education and the Office for Students to oversee the transitions that will be needed in many of the 452 higher education institutions in the UK. To handle these changes will require additional leadership, management and governance resource and ideally greater local and regional stewardship for most institutions.

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  • Steps Toward Creating a More Accessible and Inclusive College Classroom – Faculty Focus

    Steps Toward Creating a More Accessible and Inclusive College Classroom – Faculty Focus

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  • La Trobe is following in Arizona State uni’s footsteps – Episode 168 – Campus Review

    La Trobe is following in Arizona State uni’s footsteps – Episode 168 – Campus Review

    Chief information officer of Arizona State University Lev Gonick outlines the part technology has played in the 20-year of transformation of his university.

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  • International education in Australia needs an urgent rethink – Campus Review

    International education in Australia needs an urgent rethink – Campus Review

    The federal government’s recent decision to again raise the international student visa application fee to $2,000 has reignited concerns about the country’s approach to international education.

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  • University of Tasmania continues cuts to Arts, Humanities – Campus Review

    University of Tasmania continues cuts to Arts, Humanities – Campus Review

    The University of Tasmania (UTAS) is set to cut 13 full-time staff as it proposes a massive shake-up of its humanities, social sciences, creative arts, and media schools amid declining student enrolments.

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  • It’s the Home Office that’s misselling UK higher education

    It’s the Home Office that’s misselling UK higher education

    On 23 May 2023, then home secretary Suella Braverman announced a package of measures to damp down the higher education sector’s contribution to net migration. The removal of the right for taught postgraduates to bring dependants dominated the headlines, and has loomed large over arguments about international recruitment ever since.

    One of the other changes that attracted less publicity – indeed, it was welcomed by the sector – was the elimination of international students’ ability to switch out of the student route onto a work visa before their studies have been completed (with the exception of PhD students, who would still be allowed to after 24 months, in recognition of the fact they may be employed by their university).

    This new policy was brought into effect by a statement of changes to the immigration rules on 17 July 2023. As set out by paragraphs 6.5 and 6.6 of the explanatory memorandum, the ban on “switching” came into effect at 3pm that same day, counter to usual practice of leaving at least 21 days before immigration rule changes apply. “The Government considers this departure from that convention to be necessary and proportionate,” it is noted, in order to “reduce the possibility of a large number of applications for […] switching being made in the 21 days usually available between Immigration Rules changes being laid and coming into force.”

    A petition opposing the change was launched, eventually gaining 15,579 signatures:

    We want Government to postpone the rule implemented on 17 July 2023 which prevents existing students from moving to a Skilled Worker without completing studies. We believe this rule should only be implemented on new students starting in January 2024.

    We believe this change is unfair and unjustified as when students came the rules allowed them to switch onto the Skilled Worker visa route without completing studies and existing students should not be prevented from switching in this way. The rule should be implemented to new students starting from January 2024.

    There should be no retrospective effect on law, it should be implemented on new students coming from January 2024 onwards.

    The Home Office was unmoved, saying in its response that “the student visa is for study” and that “we needed to crack down on broader abuse of the system and prevent people using the Student route as a backdoor to looking for work.”

    On the charge that this was a “retrospective” application of the law, the response said:

    When someone is switching immigration routes, the rules that apply are those in place at the time they switch, not the rules in place when they first entered the UK under a different route entirely.

    One student affected by the change was Ashraful Islam, from Bangladesh, who had come to the UK on a student visa in January 2023. On 20 July of that year – three days after the statement of changes – he applied to switch to a five-year skilled worker visa, with a plan to work in the care sector. He had a certificate of sponsorship from an employer dated 16 June.

    His application was rejected by the Home Office – and he applied for a judicial review. This was refused in both January and April 2024, so he went to the Court of Appeal. The case was rejected for a final time in April of this year.

    His case rested on a line in the new rules which said:

    An application which does not meet all the validity requirements for a Skilled Worker may be rejected as invalid and not considered.

    The argument was that the presence of may within the rules (“may be rejected”) left discretion to the Secretary of State to make a decision. He also pointed out that his certificate of sponsorship had been issued before the rule change, the rapid implementation of the new rule departed from convention, the application was made very shortly after the change came into force, he had not been aware of the change’s effect, and that he met all other criteria. Given these facts, were the Home Office empowered to exercise discretion there were a variety of reasons why it should choose to do so.

    The judges agreed that this was not a correct interpretation of what the word may was doing in this context – rather, the “natural and ordinary meaning” was that the Home Office is entitled to reject a non-compliant application “without any consideration whatever of the underlying merits of the application.”

    The court did however rule that the Home Office was not able to claim its legal costs from the appellant, as it had failed to submit an argument to the court until 17 March, two weeks before the hearing, despite permission to appeal having been granted in July 2024.

    Nobody cares

    The final tossing out of Ashraful Islam’s persistent attempts to get redress through the courts is probably the last glimmer of attention to a piece of immigration policy that nobody really cared about.

    You would get long odds on switching from student to work visas ever being allowed again in any future migration rules. In the run-up, Universities UK International spoke for most of the higher education sector when it said:

    We would welcome the proposals to end switching from student and work visas where students have not completed their course. This would close an unhelpful loophole and ensure that international students that choose the UK finish their programmes before they are able to move into full-time employment.

    Universities’ work was greatly complicated by international students who had seemingly applied solely in order to get to the UK and then immediately look for employment. There are a whole host of incentives to seek to prevent this from happening, from tuition fees being paid in instalments to UKVI compliance metrics penalising institutions with lower completion rates. And it somehow goes further than this, striking at a sense of what university study is for.

    It’s hardly good for students either, who are paying enormous amounts of upfront tuition fees, visa charges, and in many cases commission to recruitment agents, relative to the worth of the education they receive during a shortened time as a student in the UK.

    But you couldn’t quite imagine a world in which home students were legally prevented from dropping out of university and going into employment (though admittedly a regulatory focus on continuation along with a completely inflexible student finance system put plenty of pressure in the system to prevent this from happening). The government’s whole framing of international students in recent years has become dominated by a tension over whether or not they are supposed to be finding employment. Like this, not like that. And equally in the higher education sector, the change in tenor around an institution’s relationship with its international students that the reintroduction of post-study work permissions engendered has still not really played out in full.

    The corresponding rise in importance of international recruitment agents and sub-agents is a big part of this. The Financial Times’ splash last weekend on how students are being “lured” to the UK was a welcome bit of attention to the issue. One student had been told that they would be eligible for indefinite leave to remain after five years on the student and graduate route – neither qualifies. Another felt she had been misled over the availability and remuneration of part-time work. We’ve covered stories of much worse practice on Wonkhe in the past.

    Recruitment agents (and a wider ecosystem of peers, advisors and influencers) are undoubtedly encouraging and facilitating young people in other countries who would like to work in the UK to find ways to take advantage of student visas. One commentator is quoted over on University World News this week in pretty stark terms:

    One agent once told me that the student visa route, despite upfront tuition payments, was ‘cheaper and less risky than paying a people smuggler’.

    The Home Office’s approach to policymaking has become a whack-a-mole for these instances of unintended consequences – with the result that the majority who would actually like a fulfilling university experience followed by a successful professional life, whether in the UK or elsewhere, are constantly having their experiences made more tawdry and more unfair. And this is to say nothing of the fact that constantly changing how the visa system works creates a perfect state of flux, confusion and misinformation for unscrupulous actors to take advantage of.

    If it was just about switching, that would be one thing. But the changes to the post-study work landscape have proliferated in the last three years – and despite what the government may protest, it is one retrospective change after another if you are an international student.

    Now wait for last year

    From 6 February 2024 the Immigration Health Surcharge (IHS) main rate rose from £624 to £1,035 a year, a 66 per cent increase. This had at least been announced in July 2023 – with the rationale of funding an NHS pay rise – along with an increase to visa fees. The cost of a graduate visa, for example, rose by 15 per cent to £822.

    In neither case did we see quite the level of haste from the Home Office that had been the case with banning switching. But there is still a clear “retrospective” element to it, given that many students moving onto post-study work would have already signed up for their student visa before the changes had been made – in some cases, long before. It doesn’t really make any odds whether those on student visas are given a handful of hours, or 21 days, or several months – they are a captive audience.

    The increase in visa fees and health surcharge also applied to the skilled worker route (with the exception of certain healthcare occupations for the IHS) – again, those moving from study or graduate visas into work visas were charged far in excess of what they could have expected would be the case. For those with dependants, yet more. The IHS is an annual charge, but all years are payable in advance.

    If we consider an international student’s time at university and subsequent entry into the labour market as one “product”, then this would be a clear example of drip-pricing – showing the purchaser an initial price and then including additional, unavoidable charges later in the purchase process. Elsewhere on Wonkhe, Jim has written regularly about how universities themselves are required to avoid this in their marketing and contractual arrangements with students, especially under more stringent CMA guidance which is in effect as of this year.

    The counter-argument would then be that study and work are two separate things – going back to the Home Office response to the switching petition, it’s a “different route entirely” – as well as the fact that the government is not selling a product, it’s operating the country’s border system. But as the international education strategy and many other policy papers spell out, post-study work arrangements are designed to attract students to study in the UK, despite all the subsequent handwringing. They are part of the package. The Home Office might be safe from judicial review here, but that doesn’t mean it’s right.

    The changes last year went far beyond price-gouging. From April the baseline minimum salary for skilled worker visas was increased from £26,200 to £38,700, and the minimum salary specific to particular jobs (the “going rate”) was also substantially increased. Student and graduate visa holders benefit from a discount rate here, but this was still a massive inflation-busting restriction on the jobs that students would be able to get sponsorship for. For many, this was a large part of the reason to come to the UK to study – to progress from university into a career, in the same way that it is for domestic students. For plenty, this was essentially the only reason they had chosen the UK higher education system over international rivals – let’s be honest.

    Again, for international students already at university in the UK, and a large swathe of graduate visa holders, the changes were implemented far too quickly for there to be any possibility of them getting onto skilled work routes before the cut-off (let’s remember, “switching” is banned, and morally suspect). James Cleverly’s statement to Parliament in December was clear this was not retrospectively unfair on those already here:

    Those already in the Skilled work route, and applications made before the rules change, will not be subject to the new £38,700 salary threshold when they change employment, extend, or settle.

    So that’s alright then. Unless you are a student, or a graduate route visa holder not yet in a position to find permanent long-term employment.

    The raised salary threshold was well in excess of the average salary for typical graduate roles in many parts of the UK. It’s unsurprising that both the Scottish and Welsh governments have been hammering the point that two years of graduate route (unsponsored) work is unlikely to allow young people to progress to a point in their careers where they are being paid enough to qualify for the skilled worker visa, given average wages in both nations. The same is true in many parts of England. If you wanted to design a policy to encourage graduates to head to London (and, longer-term, to start their educational journeys at random newly-opened branch campuses in the capital), it would probably look a lot like this.

    So now international students will be paying much more in immigration charges than they could have realistically expected upon coming to the UK to study. And the kinds of work available to them for longer-term settlement have completely changed, as has its geography. Could it get any worse?

    There’s no way this white paper’s CMA compliant

    The latest round of proposed changes to migration policy, as heralded in last Monday’s white paper, represent a new low in terms of changing the rules of the game while it’s already in motion.

    We don’t yet know when the reduction in length of the graduate route will come into effect (for UG and PGT) – next January feels most likely if you had to guess. The detail remains to be seen, but it feels wholly plausible that many students currently studying on courses which finish after this date will see themselves with a smaller post-study work entitlement than they expected when they signed up.

    But as much as this change and the prospect of a fee levy may have caught the sector’s attention – for their as-yet-unknown impact on recruitment and institutional finances – there are much more flagrant examples of rug-pulling in what the government’s proposing.

    Really it’s a cumulative effect. Labour’s overall plan to link up skills and migration is premised on a lot of additional charges and eligibility changes for work visas. For example, the Immigration Skills Charge which employers must pay when sponsoring a skilled worker visa is being hiked by 32 per cent to more than £1,300 a year (for medium and large employers). This (further) discourages companies from sponsoring anyone on the graduate route – ironically, students going directly to the skilled worker visa on completion of their course are exempt, further calling into question how the graduate route is being conceptualised.

    Visa thresholds for skilled work, already massively hiked in 2024, are likely to rise further in many professions that international graduates might have been planning to go into. The planned abolition of the immigration salary list, which provides salary discounts for certain occupations, will see to this – though we don’t know the detail yet. Many occupations will be removed from eligibility altogether. The Migration Advisory Committee has also just said that it would like to further review the “new entrant” discount rate for students (and presumably graduate visa holders):

    The impacts of arrangements for new entrants since the 2024 salary threshold increase are uncertain and would be worth reviewing in more detail.

    All these policy measures and the question marks hanging over them greatly complicate the ability of current students to plan where they are going – and represent a fundamental break with how the system was working when they signed up to study in the UK.

    Worst of all is the change to routes to citizenship and indefinite leave to remain – again, ill-defined and uncertain in its exact implementation for the moment. But the white paper promises that in the future it will take 10 years to qualify for settlement, rather than the current five. For one thing, indefinite leave to remain brings with it eligibility for home tuition fees – groups like Hong Kong Watch are already highlighting how this may mean young people on BN(O) visas needing to wait an extra five years to qualify. In England, at least – the Scottish government has already changed the rules to allow them to qualify after three years’ residency.

    And for all the young people from around the world who at some point in the last few years made the decision to plan for a long-term career in the UK? One graduate route visa holder greeted last Monday’s white paper announcements with the following post on social media:

    It’s official: UK graduate visas are a £3000 worth scam. To anyone who’s reading this and pondering about where to study out of the European countries: do not repeat my mistakes and waste your time, energy, and money on boosting the UK economy for nothing in return.

    £3000 is roughly the graduate visa fee plus two years of the immigration health surcharge. The particular policy change that had spurred the post was the change to long-term residency:

    I’m so mad at myself right now! I spent a huge amount of money and time on looking for a sponsored position in this country only to find out that I won’t be able to do it and that if I do land a sponsored role, it won’t mean my whole life isn’t in a precarious situation for 10 YEARS.

    They go onto say that they now regret having studied in the UK, and that they will now do their best to warn off other prospective students and graduates (as well as hoping to “magically land an incredibly high-paying job” in the window before further changes come into effect).

    And in the middle

    Plenty of international students will be confused right now – or furious. Most if not all international applicants will not be sure about exactly what they would be getting into if they came to the UK to study in the next year.

    Into the information void inevitably swoops networks of recruiters and advisors, many acting on slices of commission from higher education institutions, to over-promise and distort what post-study work in the UK is like – or at least to act as if they have the answers.

    Universities are stuck in the middle. Agents will still be keen to “lure” students to the UK, and in the worst parts of the industry this will continue to involve outright deception. And the government is once again making changes to post-study work that retrospectively affect students, in ways that would have affected their decision-making if they had known. There will be a generation of graduates going back to their home countries with cautionary tales of how international education is not how it was promised to them.

    This isn’t to say that the higher education sector is entirely divorced from both these acts of misselling. The behaviour of agents should be within the sector’s gift to improve, and some steps appear to be being taken, though without more transparency it’s hard to know to what extent it’s just talk. As for the Home Office, it would be nice if the impact of changes on current students would feature much more prominently in the sector’s lobbying efforts, as compared to hypothetical applicant numbers.

    But practically, the next few years look set to have continued moral challenges for universities around international students, not just financial ones. UKVI might be cracking the whip, but increased scrutiny of international students’ attendance and progress cannot be allowed to become an intrusive refrain echoing through their lives on campus. The graduate route has changed and could change further, and realistically will not be a route into permanent work in the UK for many – so universities need to think how their graduates can actually get something fulfilling out of it, and evaluate whether this is working.

    International students and applicants alike will need clear, honest advice about how the visa system works – from the university itself, rather than those with a financial stake in the ensuing decisions – as well as honesty when things are shit and honesty when what’s coming down the line is not clear.

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