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Fast move on student loan sale possible

The BIS website has published a letter from Martin Donnelly to Anthony Odgers dated 25 March 2015.

In it Donnelly, the senior civil servant in BIS, empowers Odgers to deliver the student loan sale once a government decision has been made.

Odgers thereby becomes the Senior Responsible Owner and would presumably appear before the Public Accounts Committee instead of Donnelly were that committee to look into the value for money of a sale.

Odgers objective is to deliver a first sale within nine months of ‘Ministerial decision’. In order to get sale proceeds into the 2015/16 financial year – as per the official projections – Odgers would need to be given the go-ahead in June.

Things could move very quickly after the general election. A different Secretary of State for Business may make a different decision to Vince Cable, who vetoed a loan sale last summer.

A sale though still remains ‘broader government policy’.

For more detail on attempts to sell student loans, see my recent essay for the London Review of Books.

Undergraduate numbers & postgraduate loans

Although the Budget has announced a new consultation of postgraduate funding, perhaps more significant is the large downwards revision to future undergraduate numbers contained in the Office for Budgetary Responsibility’s Economic & Fiscal Outlook.

Student numbers in England were expected to rise this year following the removal of the higher education numbers cap, but have done so by considerably less than expected. The latest data on student numbers and applications indicate a more gradual rise than in the original estimate of the cost of this policy change. We originally assumed that student numbers would rise relatively quickly as excess demand was catered for, but there have only been around 10,000 new entrants this year and applications for next year suggest a similar rise in 2015-16. We therefore assume that student numbers will rise by a further 10,000 in 2016-17, to 375,000, but remain broadly stable thereafter. This would still represent a steadily rising proportion of 18-19 year olds. (The ONS population projections that underpin our forecasts show around a 10 per cent decline in the number of 18 year olds in the population between 2015 and 2020.) The forecast also takes account of new postgraduate loans, the introduction of which was announced in Autumn Statement 2014. (paragraph 4.158)

The 2013 Autumn Statement thought that removing student numbers controls this coming September would reach unmet demand of 60 000 places. The OBR has revised down the projections for new student loan outlay to £16.5bn in 2019/20. In December it thought that £18bn would be going out the door each year, indicating that it thinks there will be  100 -150 000 fewer undergraduate students to fund each year. (New Postgraduate loan uptake is included in that £16.5bn).

Sale of Student loans – ‘progress continues’ (Budget 2015)

The 2015 Budget indicates that ‘progress continues’ on attempts to sell the student loans that were issued to those starting before 2012 (‘pre-2012 loans’). Despite Vince Cable vetoing a sale last summer, it remains government policy. How we interpret ‘government’ – Treasury or Tory – there might be clearer after the Lib Dems get to set out their alternative budget tomorrow.

In the meantime here’s a relevant paragraph from the Office for Budgetary Responsibility’s new Economic & Fiscal Outlook.

 At Autumn Statement 2013, the Government announced the intention to sell part of the student loan book, which it expected would raise around £12 billion over five years from 2015-16. This intention was reiterated in Autumn Statement 2014 and has been again in this Budget. The Government has informed us that the sale in 2015-16 remains its firm intention, but that there have been changes in the form of the expected sale relative to that which underpinned our previous forecast assumptions. While the preparations for the sale are still at an early stage and significant uncertainties remain, one implication is that it is likely that a larger quantity of loans would need to be sold to meet the Government’s £12billion central estimate for the proceeds from the sale. The Government has confirmed to us that it intends to proceed on that basis. We have therefore kept the £12 billion over five years in our latest forecast, but have revised up the extent to which future repayments and interest paid to the Exchequer will be reduced. Other things equal, these changes reduce repayments by around £¼ billion on top of the almost £1¼ billion by 2019-20 that had already been factored into our forecast. (paragraph 4.162)

The £2.3bn cash estimated to be raised in 2015/16 would help Osborne’s claim that public debt would be falling as a share of GDP by 2015/16.

There is no indication as yet as to what the new form  of sale might be. For my take on efforts so far, see ‘Cash Today’ in the London Review of Books.

 

Education Question Time – 11 March, Cambridge

Originally posted on Critical Education:

I AM UNABLE TO PARTICIPATE THIS EVENING OWING TO FAMILY BEREAVEMENT

Anglia Ruskin University is hosting an Education Question Time at its Cambridge campus on Wednesday 11 March.

I will be in one of the hot seats along with Wendy Scott, Julia Flutter, Philipa Harvey & Tony Booth.

Time: 6.45-8pm

Venue: LAB002, Anglia Ruskin University, CB1 1PT

Reserve Your Place here

View original

Tuition Fees & Student Loans – talk in Coventry, Thursday 12 March POSTPONED

andrewmcgettigan:

POSTPONED OWING TO FAMILY BEREAVEMENT

Originally posted on Critical Education:

THIS EVENT IS POSTPONED OWING TO FAMILY BEREAVEMENT

I will be talking at an open meeting in Coventry on Thursday 12 March.

The topic will be tuition fees and student loans.

Venue: Coventry University

Room 338, George Eliot Building (GE 338)

Time: 12 noon

The meeting is organised jointly by the local UCU and NUS branches.

View original

Education Question Time – 11 March, Cambridge

I AM UNABLE TO PARTICIPATE THIS EVENING OWING TO FAMILY BEREAVEMENT

Anglia Ruskin University is hosting an Education Question Time at its Cambridge campus on Wednesday 11 March.

I will be in one of the hot seats along with Wendy Scott, Julia Flutter, Philipa Harvey & Tony Booth.

Time: 6.45-8pm

Venue: LAB002, Anglia Ruskin University, CB1 1PT

Reserve Your Place here

Some further consideration of Labour’s tuition fee announcement

Campaign for the Public University has provided five reasons to give two cheers to Labour’s tuition fee pledge.

I am not a cheery soul but I’ll offer three further plus points for fee reductions.They involve taking a wider view of Higher Education policy than the commentators who are narrowly thinking about eighteen year-olds commencing three years of full-time study and their likely repayments. I would add that in itself HE policy cannot address the inequalities in income distribution that animate mainstream media kibitzers, who would normally complain about the 61% marginal take from graduate salaries over £41 865 (40% income tax, 12% NI, 9% student loan repayment).

I’ll also add a pet gripe – Labour’s statements have tended to use nominal figures. When you are talking about stocks and flows three decades from now, it helps if the numbers are presented in today’s terms rather than those of e.g. 2045. Though I guess the higher figures are thought to help the case against £9000 fees. When you do the rebasing on, say nominal write-offs, you’ll see that the departmental accruals accounting already has suitable amounts factored in for losses. It should also be pointed out that what is written off in nominal terms from loan accounts is not the same as the ‘write-off subsidy’ which scores in the national accounting at that point.

 

1 Reducing graduating debt is good for all students.

Student loan agreements contain the following clause:

 “You must agree to repay your loan in line with the regulations that apply at the time the repayments are due and as they are amended. The regulations may be replaced by later regulations.”

That is, terms and conditions on loan repayment are not fixed when loans are taken out. The government has administrative power to alter the repayment threshold, the repayment rate, interest rates and the point at which outstanding balances are written off.

Ministers previously waved away this ‘form of words’ as something inherited from Labour. But former BIS civil servant, Matthew Hilton, expresses a refrain now frequently heard: you can change the terms of repayment for existing borrowers to manage the sustainability of loans using statutory instruments (ie almost no parliamentary oversight).

‘For example, as a matter of fact, the government could reduce the RAB charge to whatever it wanted at a stroke, and within the existing overall policy framework, just by adopting a different approach to the financial management of the student loan book. If interest rates, repayment levels etc. were able to flex in line with the macro-economic context, the RAB issue would go away.’

This is sometimes also referred to as ‘tweaking’ the loan scheme. The most likely candidate for change is the repayment threshold. It is supposed to go up in line with earnings from 2017 onwards, but the relevant regulations have not yet been made. That indexing was a last minute concession to Lib Dem MPs to get them to vote with the government in favour of £9000 tuition fees back in 2010.

The less debt you start with, the less exposed you are to future governments worsening your repayment conditions.

It’s not just that the Conservatives have refused to rule out fees, they have refused to rule out freezing the repayment threshold. Actually, you might want to press Labour on that too!

 

2 A reduction in fees may make part-time study and retraining more feasible for many.

Numbers of part-time students and mature students have drop precipitously over the last few years. A reduction in fees to £6000 for full-time students may make part-time fees more reasonable. Not everyone considering HE has access to loans – for example, those who already hold a first degree or have spent time studying with the benefit of loans and grants.

Labour have promised further announcements on ‘earn while you learn’ degrees and accelerated programmes.

 

3 Restoring direct funding to HEI’s impedes privatisation

The Conservative party had a clear agenda before the 2010 election: to create as far as possible a level playing field for private HE provision by removing direct grants to universities and making HEI’s overwhelmingly reliant on fees for undergraduate provision. Overnight in 2012 tuition fees at private providers became competitive with those at HEIs and private students were also given access to loans up to £6000 per year for tuition fees.

This policy has led to the rapid expansion of places at private providers. The quality of that expansion is mixed to say the least.

Restoring some block grants for all subjects at established HEI’s undoes the key measure underpinning a troubled policy.

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