When students get their student maintenance loans, they get the first instalment a lot earlier than their university gets the corresponding tuition fee payment.
That might help explain the curious case of disparities between pulldown – but there’s a sound theory to it. Students without savings could face a cashflow issue if it was any other way.
It’s becoming a problem for universities too. The Office for Students’ (OfS) financial sustainability update report highlights low liquidity levels in the sector – especially during certain points in the annual cycle.
That matters because universities have to meet minimum liquidity requirements in the registration conditions in England. A failure to maintain those levels can also impact “going concern” status and breach some lending covenants.
In the past, cash flow imbalances tended to be offset by other income sources, borrowing, or cross-subsidies, such as from international student fees.
But given how universities operate and the demands on cash before those SLC payments come in, there is in some providers a disproportionate reliance on arrears payments from SLC-funded students compared to other funding sources.
For non-SLC funded students, universities typically charge fees upfront (or at least in front-loaded advance instalments) or get payments for stuff like government-funded apprenticeships monthly. Research funding streams also match payments to incurred costs.
But the SLC’s payment profile for undergrads is 25:25:50 – so universities face significant upfront costs in the first two terms and then wait longer than standard 30-day payment terms to receive funds, forcing them to bridge the gap using other resources.
So the University Alliance has a proposal – switch those payments to 40:40:20 to improve the sector’s funding position:
Even if the move was phased first to 33:33:33 and then to 40:40:20 it would have an immediate impact on the current situation which has been adversely impacted by the previous administration’s approach to international student recruitment through restrictive visa policies.
The current system is going to have to undergo change anyway, given the potential implications of the LLE. I note in passing that one of the most common student leader manifesto goals this year is better, less front-loaded instalments – surely the principle (and the issue in terms of cashflow) cuts both ways.
But UA’s proposal might not land in quite the way intended – partly because the Student Loans Company is under pressure to increase yield.
Leakage
DfE’s “Tailored Review” of the Student Loans Company back in July 2019 talked of the rapidly increasing size of the student loan book, and the increasing importance and value of having a robust, well-resourced and effective repayment strategy which actively seeks to maximise yield.
That said that the SLC is hamstrung by IT systems which do not “adequately facilitate the use of smart diagnostics for effective modelling, proactive use of data analytics and more precise customer segmentation” to minimise repayment leakage:
Indeed, unverified customers account for c. £7bn of uncollected repayments (although many of these would not be in a position to repay)
September’s SLC board minutes noted that its CEO had been along to DfE’s Audit and Risk Committee, where the department led an item on the student finance loan book, with an emphasis on its “scale and yield potential”.
And its newly published Business Plan for 2024-25 says it will work with partners in DfE to progress proposals to “improve repayment customer verification rates”, “improve data quality to increase verification and yield” and look at options to apply stronger sanctions to customers not adhering to the terms and conditions of their student finance repayments.
Some of that is about the SLC’s systems – but one of the problems noted in the National Audit Office’s report into franchising is that there is often “insufficient evidence” that students are attending and engaging with their courses:
In determining a student’s eligibility for loan payments, and before making payments, SLC uses lead providers’ data to confirm students’ attendance. Lead providers self-assure their own data… there is no effective standard against which to measure student engagement, which attendance helps demonstrate, and there is no legal or generally accepted definition of attendance. Providers themselves determine whether students are meaningfully engaged with their course.
So in a set of circumstances where the NAO and the Public Accounts Committee (PAC) are already worried about attendance and engagement, and providers are worried about their own cashflow, it seems unlikely that DfE is going to be receptive of a proposal to give providers more of the money early – especially if, in the case of franchised provision, it can’t just claw it back from the lead provider if there’s a problem like the Applied Business Academy.
As we noted back in October, the government’s response to the NAO and the PAC was that it published guidance on attendance management in May, against which providers can be held to account “in relation to the release of SLC tuition fee payments”.
That said that there is an “understanding and acceptance” across the sector that providers should have in place published attendance and engagement policies, so that students understand the commitment expected of them and the respective process a provider follows if attendance expectations are not met.
It also said that in any circumstance where a provider does not have a published policy, the department “expects” that one will exist from the 2024-25 academic year – but it’s pretty clear talking to people around the country that that goal hasn’t been meaningfully met in large parts of the sector, at least in terms of a policy that both covers home students and is “auditable”.
And part of the difficulty there is what is or isn’t meant by “attendance”.
Attending isn’t always in person
The Attendance Management guidance says:
Attendance means participation in a course by a student, including, but not limited to, teaching face-to-face or blended study, in line with a provider’s published attendance policy. A provider should communicate its policy to a student and have an auditable process in place to support the action it may take when a student does not meet attendance expectations.
It goes on to say that providers have flexibility to ensure every student engages with a course, and that the student and/or the course may require greater or less attendance than another due to circumstances or content.
SLC told me that there is no difference between “attendance” and “engagement” – the definition of “attendance” for student finance purposes is active and ongoing engagement. Crucially, it said that “attendance” doesn’t have to mean “in person”, or “studying on campus”.
But the conflation of “attendance” and “engagement” doesn’t seem to apply when a course is designed and designated. Noting that “blended learning” combines traditional classroom teaching with online learning and independent study, it says that there has been some confusion as to whether these courses should be coded as distance learning courses:
Courses of any teaching method are distance learning if the students only attend occasionally, for example once a term. If students attend regularly, for example once a week, and follow a structured timetable, the course is not distance learning and you should not add it to CMS as such.
That paragraph draws a clear distinction between attendance and engagement. Its two scenarios also appear to draw a distinction between (physical) attendance and “engagement”:
- Scenario 1: Thomas is studying a BA Hons in sports coaching. His course hours are 30 weeks online study including lectures and tutorials, 2 days per week physical attendance at sports academy, 6 days per year attendance at university. As Thomas needs to attend the sports academy regularly rather than occasionally, this is an in-attendance course.
- Scenario 2: Kate is studying an HND in Musical Theatre. Her course hours are 30 weeks online study including lectures and tutorials, 3 days per year (1 day per term) attendance at college. As Kate only needs to attend college occasionally rather than regularly, this is a distance learning course.
The difference between Scenario 2 and the patterns of attendance being seen by many providers around the country this term is that in that scenario, the course is designed not to include regular physical attendance.
A two-stage process
SLC told me that whether it’s distance or in-person, engagement on a course is required and confirmation of that engagement is therefore required for SLC to make a fee loan payment on the student’s behalf.
Ongoing engagement is not part of the definition of in-person or distance learning. That distinction relates to the attributes of the course that is supplied by the provider, as to whether the course has elements of in-person learning or if the student is not required to be in-person.
But the obvious question is as follows. Notwithstanding codified exemptions for disabled students, if a course is designed as blended, would an acceptable “attendance management” policy for a course of that sort allow a student to engage all term, but only occasionally physically attend?
If yes, and Kate’s HND wasn’t designed as blended, and her mate Kathy was on a course that was designed as blended, that would seem to mean that they could both have exactly the same attendance and engagement pattern, but Kathy would get a maintenance loan while Kate wouldn’t.
If, on the other hand, a course was designed as blended and requiring regular in-person attendance, and SLC would expect an attendance/engagement policy to enforce that regular in-person attendance, there’s plenty of providers right now falling foul of those expectations.
So you end up with three categories:
- Providers who’ve never really had a proper policy on any of this for home students – let alone enforce one – beyond noticing if a student doesn’t submit what can often be end-of-year summative assessment.
- Providers who designed a course as blended where students are in reality engaging in a “distance learning” kind of way – which, while confirming engagement in accordance with the rules, seems hugely unjust to tens of thousands of OU students if nothing else.
- Providers who are heavily auditing and requiring physical attendance – partly to achieve parity with international students – at just the point that students are struggling to attend in-person given wider demands on their time.
It may well be the case that SLC is stuck with the definitions it has – which in part date back to the Teaching and Higher Education Act 1998.
But if it’s the case that it’s OK for an attendance policy to not actually require regular in-person attendance, it’s hard to believe that whatever size and shaped-problem that DfE and the SLC have with student loan fraud is going to get anything other than worse.
And in the end, this all comes back to an old problem – not knowing what’s going on underneath headline non-continuation.
How far in?
Remember those risks that OfS identified in its insight brief on subcontracting:
- Data of extremely poor quality has been submitted in relation to students at some subcontractual partnerships, leading to payments being made to, and on behalf of, students who are not genuinely entitled to them.
- Delivery partners have lacked clear attendance policies, making it almost impossible for lead providers to submit accurate data to the OfS and the SLC in relation to these students.
- Students have been encouraged to register for courses that they do not genuinely intend to study, to access public funding through maintenance loans. In some cases, students have withdrawn from courses shortly after receiving these funds; in others there are grounds to doubt that they are continuing to study, despite their termly attendance being confirmed.
Whether we’re looking at a select group of partnerships as OfS published data on last week or directly taught provision, while we know what percentage of UG students don’t make it to the second year, we don’t know what proportion:
- Got instalment 1 of the maintenance loan but didn’t get as far as “engaging” enough for the provider to claim instalment 1 of the tuition fee loan (they don’t show up at all in non-continuation)
- Engaged enough to enable the provider to claim instalment 1 but not enough to enable the provider to claim instalment 2 (and what proportion of them claimed maintenance instalment 2)
- Engaged enough to enable the provider to claim instalment 2 but not enough to enable the provider to claim instalment 3 (and what proportion of them claimed maintenance instalment 3)
- Engaged enough to enable the provider to claim instalment 3 but then failed and was withdrawn
- Engaged enough to enable the provider to claim instalment 3 and was eligible to progress but then self-withdrew
- And we don’t know any of the above for subsequent years of study.
In many ways, what we have here is (yet) another iteration of the stretch involved in a single level playing field. There have been endless tales down the years of Russell Group alumni not really “engaging” at all for entire years, and in some cases entire degree courses – only to pull it out of the bag at the end. It’s an adult environment, after all.
On the other hand, with another part of the sector now under close scrutiny over ghost students of differing definitions – just as the FE sector saw scandals over in the 90s – it doesn’t feel like that kind of legend is to be allowed.
In terms of the cashflow thing, if DfE and the SLC are going to push more of the money upfront, they’re surely going to want to know the percentages and numbers in each of the above categories.
And the accuracy of those percentages and numbers involves providers being sure about “enough” engagement – in an auditable way across the diversity of programmes and reasonable adjustments – to tick the box in the data return to SLC three times a year.
It does feel like there’s some distance to go on all of that as it stands.
