English vice-chancellors are lobbying for a change in how the government releases student loan payments, with the current back-loaded system said to be adding to cash flow worries.
A quarter of the money – the single biggest source of income for many institutions – is paid when student intakes settle in October, with another quarter following in February. The remaining half is not released until May.
A “case for change” document that has been sent to officials at the Department for Education says the current payment schedule is not in sync with university operations – institutions face their highest outlays in the first two “teaching heavy and cost-intensive” terms of a typical three-term cycle. Universities’ adoption of more flexible study options and multiple student intakes increase the need to review the system, adds the document, seen by Times Higher Education.
Universities have historically dealt with the imbalance by cross-subsidising from other income sources, particularly international student revenue, which tends to be paid in full upfront, or borrowing – but both have become harder to come by.
ADVERTISEMENT
Many institutions face their lowest levels of liquidity – a key marker used by the Office for Students and lenders to assess financial health – in the run-up to student loan payment dates, and “smoothing out” the system is seen as one way of easing some of the issues.
The document calls for payments to initially be split into thirds before moving to a front-loaded 40-40-20 model. Another option understood to be under consideration would involve smaller payments, each representing an eighth of the total, spread out across the year.
ADVERTISEMENT
John Latham, the vice-chancellor of Coventry University, has been spearheading the push for change, supported by 25 other university leaders.
Vanessa Wilson, chief executive of the University Alliance, the representative group that authored the policy paper, said that while a change would not make a massive difference to the sector’s overall finances, it could help some providers, particularly smaller, more specialist institutions, get through potentially difficult periods.
“It is in the gift of government to make things that little bit easier for any provider – and it could be offered on an optional basis – so why not do it?” she said.
Rachel Hewitt, chief executive of MillionPlus – another of the groups supporting the proposed change – said it would go “some way to ease university cash flow management and has the benefit to the government of being cash-neutral”.
ADVERTISEMENT
But, Ms Hewitt cautioned, “while this change would offer some short-term relief to institutions, it is not a silver bullet and could not in isolation undo the systemic problems that exist in the current funding system that remains in need of urgent reform”.
Ms Wilson said it seemed “counter-intuitive” that some universities were having to borrow as a stopgap to meet immediate outgoings while waiting for a payment, meaning money intended for students’ learning was swallowed up by interest payments.
Ministers, however, may be wary of a move that could eliminate some of the incentives for universities to ensure that students continue with their studies. Shifting a substantial amount of money into a different financial year would also have immediate accounting implications for institutions and the government.
Although the move might cause some initial disruption, Ms Wilson said, the government was going to have to switch to a “more agile and responsive system” in the coming years anyway, with the introduction of the Lifelong Learning Entitlement (LLE), focused on modular study.
ADVERTISEMENT
