As official notes go this one appears pretty anodyne:
“This department has been reviewing our modelling of the RAB charge on student loans. We currently estimate the RAB charge on student loans to be around 45%, which reflects our current estimate of the costs to government of the higher education subsidy to students.”
What it means is that for each £1 issued as a loan on average the government only expects to receive back 55p in net present value terms – the relevant cashflows last for 30 years after repayments first fall due. The RAB charge is the impairment set into accounts and budgets in the year the loans are issued so that the estimated longrun loss of 45p is covered now.
It’s easy to get caught up in the long-time frames and the big numbers about who will owe what in 2045 and beyond. The more immediate issue is that these estimates affect departmental budgets and accounts today.
In the 2010 Comprehensive Spending Review, BIS was allocated resource of £2.9billion to create the Resource Accounting & Budgeting charge for 2014/15. With over £10billion of loans to be issued (here the financial year does not tally with the academic year), an estimated loss of 45% would require over £4.5billion for RAB. For 2015/16, the Spending Round last summer allocated £4billion to RAB but loans issued will be around £12billion, thus requiring more than £5bn for the RAB impairment.
This puts immediate pressure on the budget. The department for Business, Innovation & Skills will have to renegotiate its resource. In the last three financial years, they have received ‘reserve claims’ totalling £7billion to deal with similar issues.
What’s different this time is that the upwards revision has been more dramatic. In the Autumn, it was newsworthy when we had an official admission that the RAB was ‘between 35% and 40%’; the Autumn Statement in December continued to use the 35% figure to calculate the additional subsidy required to fund an expansion of undergraduate places. In January, we heard 40% but also that a fundamental revisions to the models was underway. The OBR figures for estimated repayments released on Wednesday were the first fruits of that change.
With each percentage point being an additional £100m in loss, this is a big change in three months. We do now need a frank and open explanation of what is going on. Is this more significant than simply proper allowance for the effects of a prolonged recession? These estimates already include the assumption that we return to macroeconomic ‘trend’ by 2020. And what about current HE and FE budgets? The recent cuts to institutional teaching grants may only be the first signs of broader retrenchment.
That is not where questions end. Changes to assumptions about graduate earnings and repayments also affect the already existing loans sitting on the government’s books. They may have to be written down by several billion. Moreover, we don’t yet have the specifics as to what that new RAB figure names: there are students on the former funding regime receiving loans this year (third years and above) who may be bringing down the RAB to that average of 45%.
Spokesman Books have reissued Warwick University Ltd edited by EP Thompson and originally published in 1970.
In February 1970, students occupying the Registry at Warwick University uncovered evidence of secret political surveillance of staff and students. There followed not only fierce debates within the university on issues of governance and democracy, but also a legal battle as the administration tried to stop the press from publishing the documentary evidence, and wider public debate on the purpose and values of university education. Warwick University Ltd will be of great interest to today’s activists, because the conflict at Warwick clearly prefigures current struggles over the subordination of higher education to commercial goals, as well as political surveillance, policing, the use of legal injunctions, press freedom and business corruption. This edition includes a new introduction prepared by some of the original contributors, highlighting the links between then and now
The London launch
Date: Monday 31 March
Time: 6p.m.
Venue: London School of Economics, Room OLD3. 21
Speakers include: David Davis MP; Hugo Radice (editor of new edition); Heather Brooke (journalist and former Warwick student)
Special Offer – £6 per copy!!
Spokesman Press can provide pre-publication copies of the new edition of Warwick University Ltd. at a reduced price of £6 per copy. Please add £1 for UK postage, £5 for Europe and £7 for the rest of the world. Orders with mailing address to Tony Simpson at:
enclosing card details (number, expiry, name, security code).
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There was nothing in the Budget about the sale of student loans. But the Office for Budget Responsibility has quietly let slip a big revision to student loan repayments to 2018/19 inclusive.
§4.162 Our forecast for new student loan outlays is little changed from December. The forecast for the repayment of English loans now makes greater use of Student Loans Company data, in addition to survey data, and also makes greater use of historic earnings data to project forward individuals’ future earnings paths. These changes have widened the projected earnings distribution over time, which, since payments are only due over a particular threshold, has reduced our forecast for aggregate repayments. As a consequence, we now expect greater write-offs beyond our medium-term forecast horizon, and will update the longer-term projections in our next FSR, to be published in July.
What this means is that low earning graduates are estimated to be earning less than previously thought.
While we await the longer range numbers, here’s what’s in the footnotes to Table 4.35
| 2013-14 | 2014-15 | 2015-16 | 2016-17 | 2017-18 | 2018-19 | |
| Cash spending on new loans (£billion) | 10.3 | 12.7 | 14.4 | 15.6 | 16.7 | 17.4 |
| Cash repayments (£billion) | 1.8 | 2.1 | 2.3 | 2.5 | 2.5 | 2.6 |
In December, the estimated annual graduate loan repayments received in 2018-19 were £3.2billion. Nearly 20% of repayments have been written down. The total payments received over that six-year forecast period being £2.5billion lower than was thought three months ago.
This may present difficulties for BIS’s budgets in the near term and certainly poses acute questions for any attempt to sell loans issued to those starting undergraduate study before 2012. Can loans be priced fairly in any robust manner when we are seeing such fluctuations? Won’t potential buyers want protection against risks?
The OBR’s figures for December already incorporated the reduction in repayments due to sales of loans to third parties (who receive the payments instead of government).
Update
This blog was corrected to show that estimated repayments from 2013/14 to 2018/19 are now £2.5bn lower than was estimated in December. The original £1.8bn figure used in the post reflected the downwards revisions in December’s estimates that largely reflected the impact of the planned sale on repayments coming to government. Thanks to John Morgan for alerting me to the original slip.
I will be ‘in conversation’ with Andrew Ross on Friday 28 March at MayDay Rooms in Fleet Street. We will be discussing his new book, Creditocracy.
Time: 7pm
We’ll both also be appearing on the bill for Life Before Debt the following day.
I’m getting flashbacks to the Summer of 2011. Once again, well-connected figures are garnering publicity for a start-up education initiative. Today, we have excited write-ups in the Guardian and on the LRB blog about a ‘free university’. Back then, New College of the Humanities was undercooked and had to go public prematurely in order to raise additional, needed funding. At least, though, Grayling and Co had established a company.
“IF: this university is free” has not even managed to get that together – it has neither associated nor incorporated. That it’s asking the public first for £10 000 is a bit rich.
They are using Kickstarter – a website intended for start-up ventures. On their own website, IF claims to be a ‘social enterprise’ – a non-charitable form which commits to investing the ‘majority of profits’, but not all, to advance social missions. In contrast, charities cannot make profits and must reinvest all surpluses. In addition, charities must subordinate all activities to public benefit objects and specify trustees.
In many ways, New College of the Humanities could claim to be a social enterprise as the high fees charged to some students are used to subsidise the fees of others – indeed some students are on full studentships. NCH also has a charitable arm to provide additional student support.
When assessing a social enterprise – and whether to donate to one – you need to see the formal articles of association or incorporation to see what the mission is, who is involved, and how profits will move round and out of the company. You cannot yet do any of this assessment with IF.
To further confuse things I received the following tweet early this morning
Hi @amcgettigan @lrb IF is in the process of applying for charitable status. Happy to provide company details when available.
— IF (@thisuniisfree) March 18, 2014
IF can’t both be a charity and a social enterprise unless it creates a group structure with more than one legal entity. I’d want to know to which one I was making my donation.
Judging by its publicity materials, there are further problems with IF as a pedagogical initiative.
Focusing on the ‘free’ cost of its proposed courses, it’s blind to its paternalistic offer. In many ways, it is simply the complement to New College of the Humanities: the cheap and cheerful, liberal arts alternative for the deserving poor, ‘young people priced out of today’s higher education market’.
In its publicity, IF repeats the worst forms of mooc boosterism in claiming to be a genuine alternative to higher education. In truth, it looks closer to de Botton’s middlebrow School of Life without the price tags. At least NCH students are studying for a degree.
These may be teething troubles that IF sorts out, but their sample course (piggybacking on Yale’s Listening to Music course) doesn’t help. If that’s the current understanding of what a Humanities degree should offer, then let people do Law. University is not about becoming the middle classes of yesteryear. And that leads to my final points.
What is interesting about ‘free universities’ is not that they do not charge. It’s that they are democratic and participatory, often member organisations experimenting with radical alternative forms. IF’s emphasis on the absence of a price focuses on ‘the free beer, rather than freedom’ to quote Joss Winn, who helps to run the Social Science Centre, a co-operative. IF’s declared dependency on moocs and TED talks only underscores the conservative nature of the endeavour.
And where will that £10 000 go? You can’t tell from the pitch and may not see any accounts for a while.
Update
We are currently taking legal advice on whether to form as a CIC [Community Interest Company] or a CIO [Charitable Incorporated Organisation]. Our status is that we are two individuals using Kickstarter to fundraise for a specific project, the summer school described in our pitch.
A talk on student loans and their proposed sale.
Venue: Royal National Hospital for Rheumatic Diseases, Bath
Time: 6-8pm
Date: Monday 24 March
No booking required. Free Admission. All Welcome.
Situating current art schools within the context of an historical legacy of self-organised, experimental and alternative education models, this symposium aims to interrogate the content of art and design education.
Date: Saturday 29 March
Time: 10am-6pm
Venue: ICA, London
Speakers: Lucy Rose Bayley, Prof. Jon Bird, Prof. Sonia Boyce, Maurice Carlin, Kelly Chorpening, Dr. Elena Crippa, Emma Cocker, David Cross, Ian Dawson, Emily Druiff, Anna Harding, Anna Hart, Dr. Nicholas Houghton, Timothy Ivison, Maria Lisogorskaya, Dr. Loraine Leeson, Andrew McGettigan, Louisa Minkin, Prof. Nicholas Mirzoeff, Prof. Lucy Renton, Dr. Hilary Robinson, Harriet Warden, Martin Westwood, Laura White and Prof. Neal White.
I help to run a pub philosophy group called Big Ideas. We meet on the last Tuesday of each month to discuss a topic introduced by a guest expert.
Readers of this blog may be interested in March’s event:
Prof Alison Wolf (KCL) will revisit her book, Does Education Matter? Myths about Education and Economic Growth, and discuss tertiary education policy of the last 10 years.
Time: 8pm
Venue: Upstairs at The Wheatsheaf, Rathbone Place, London.
Way back when I started this blog, I had thought there would be discussion of more than university funding and finances.
I had just finished working for a London university, where for four years I had held a split academic-administrative post working solely with doctoral students. This may have been a role unique in English HE for all I know, since I was first academic reader of every PhD proposal submitted whatever the discipline. I conducted ‘triage’ and then worked on matching applications up with supervisory teams.
Since I also then worked with those admitted all the way through to submission, examination and what happens afterwards, I have a fair few opinions on doctorates. You can read some of my thoughts on why abandoning ‘practice-led’ research degrees might be a good idea here in an article for Afterall.
I am prompted to make some brief comments today after reading an article, ‘Fit to Supervise?’, in the latest issue of Times Higher Education. I won’t dwell on my concerns about the professionalism of the named authors in choosing to eschew anonymity. I will make a couple of points about what they appear to misunderstand about examination, since the same omissions have occurred in other articles run in the same magazine.
The power to award research degrees does not rest with the examiners. They are held by the university with which the candidate is registered.
Examiners are appointed by the institution responsible and asked to make a recommendation. The equivalent of an examination board – this may be a Research Degrees (sub)Committee – both approves the examiners and considers the recommendation.
With this to mind, and admittedly without knowing the specific circumstances, I find it hard to understand the following claim:
One of us has examined six doctoral theses in the past year and believes that not one of them was worthy of the degree. Yet he had the means at his disposal to fail only two of them. Administrative conventions and examination procedures, not to mention social pressures, simply did not allow the possibility of failure.
This really needs unpicking, as an external examiner, in theory exempt from internal institutional pressures, should really take the responsibility of making their concerns known to the exam board. Did, for example, another examiner disagree with that judgement? Did the chair of the viva moderate conflicting positions? Or did the exam board reject the case made for failing the candidate?
What’s the relevance of pressing this point? First, the division of responsibilities means that there is a structure through which to challenge inappropriate behaviour by examiners. I would recommend that one of your supervisory team attends the viva as an observer and a note-taker, allowing you to concentrate on answering the questions. (Actually, I’d make it compulsory).
Second, there are structures beyond the supervisory team which have overall responsibility for quality and progress of students from enrolment to submission through stages known under different names: ‘registration’, ‘transfer’, ‘upgrade’ and ‘confirmation’. The institution, not just the supervisory team, should be confident that a thesis submitted for examination is ready. Probably the biggest challenge for the management of research degrees is removing the uncertainty from this final stage.
However, if you are a doctoral student with concerns about your supervision, it is better to change in advance of examination. The formal transition from MPhil to PhD is often the best time to do this as at this stage you should have a clear plan to completion and accordingly know what support and expertise you need. Phillips & Pugh How to Get a Phd is generally excellent, but its chapter on ‘managing your supervisor’ is essential.
You are very unlikely to achieve redress for a poor examination outcome by complaining retrospectively about the supervision you received. And remember, the submitted thesis is only partial fulfilment of the requirements of a doctorate. The outcome rests on the viva, which will likely concentrate on framing decisions (what is in the thesis, what’s not in the thesis and why?) and discussion of your research’s more general relevance. That is, why is it a contribution to knowledge, not just scholarship (MPhil)?
In general, you should familiarise yourself with your institution’s regulations. Appeals about outcomes most often succeed owing to procedural irregularity, undeclared conflicts of interest, committee negligence or mitigating circumstances that could not have been declared in advance.
Jubilee Debt Campaign has organised a day event in March. It’s free, but you need to register.
Debt is at the centre of a broken economic system that is hurting ordinary people everywhere.
Speakers include:
- Rowan Williams, Former Archbishop of Canterbury
- Ann Pettifor, Director, PRIME and author of Just Money
- David Graeber, Author of Debt: The First 5,000 Years
- Costas Lapavitsas, Professor of Economics, SOAS
- Njoki Njehu, Daughters of Mumbi, Kenya and Africa Jubilee South
- Jihen Chandoul, Campaign to Audit Tunisia’s Debt
- Mohammed Mossallem, Drop Egypt’s Debt campaign
- Allyson Pollock, Professor of Public Health & author ofNHS Plc
- Andrew McGettigan, Critical Education blog and author of The Great University Gamble
- Andrew Ross, Strike Debt activist and author ofCreditocracy: The case for debt refusal
Date: Saturday 29 March 2014
Time: 10am-6.30pm
Venue: School of Oriental and African Studies
Thornhaugh Street, Russell Square, London WC1H 0XG
Critical Education 