Banks could offer student finance option, v-c suggests

Rama Thirunamachandran moots idea of a loan system ‘underpinned by the private sector’

February 20, 2014

A consortium of retail banks could offer undergraduate loans to cover tuition and maintenance costs under a new system of student finance, according to a vice-chancellor floating the controversial idea.

Rama Thirunamachandran, vice-chancellor of Canterbury Christ Church University and former director of research, innovation and skills at the Higher Education Funding Council for England, said that the current model for student finance is unsustainable in the long term if the sector is to expand.

He is thought to be the first head of a UK university to publicly moot the idea of using the banking system, rather than government-funded loans, to provide access to student finance.

“There probably needs to be a substantial rethink about how higher education is funded in the UK,” said Professor Thirunamachandran, who speculated about whether there are “options to consider” in moving to a loan system that is “underpinned by the private sector”.

He added that policymakers needed to look again at how best to share the costs of higher study between individuals and taxpayers.

In December, the government said that the cost of lifting the cap on student numbers would be met by selling the pre-2012 book of income-contingent loans.

Recent estimates from the Department for Business, Innovation and Skills suggest that 40 per cent of the outlay on post-2012 loans will never be repaid, and critics believe that the actual amount is likely to be higher. Professor Thirunamachandran said: “The numbers don’t add up.”

In 2012, Sir Eric Thomas, vice-chancellor of the University of Bristol, came under scrutiny after leaked documents revealed that he had in the previous year sent details of a private finance scheme to the universities and science minister. In an email to David Willetts in 2011, Sir Eric outlined a system in which uncapped tuition fees are paid by private investors in return for a proportion of a graduate’s salary.

Last year, Sir Christopher Snowden, president of Universities UK, told Times Higher Education that it was not “inconceivable” that the government would approach banks about ways to provide funding.

Describing his idea, Professor Thirunamachandran said that banks offering student loans would be subject to “significant regulation” and that interest rate charges would have clear caps. Any schemes would also need to be agreed and underwritten by the government, he said.

He added that a student who turned to the private sector to borrow would have to be able to do so in a “semi-regulated environment”.

“Is that more transparent and sustainable than the current model, where you have got student loan books being sold off?” he asked.

There are private loan systems in the US and in South Korea, where higher education participation rates are much higher than the UK’s, Professor Thirunamachandran said.

He said that he was “pretty certain” that any new model would require contributions from students and taxpayers. But he suggested that the government’s contribution to higher education could be viewed in a “different way”.

“One of the things I would argue that the public purse should buy [is] access to university for those who are from disadvantaged communities,” Professor Thirunamachandran said.

He added that whatever funding system is developed in the future, no able and qualified student should be prevented from entering higher education by a lack of finance.

“That is where designing any funding model is actually quite challenging,” he said.

holly.else@tsleducation.com

Times Higher Education free 30-day trial

You've reached your article limit

Register to continue

Registration is free and only takes a moment. Once registered you can read a total of 3 articles each month, plus:

  • Sign up for the editor's highlights
  • Receive World University Rankings news first
  • Get job alerts, shortlist jobs and save job searches
  • Participate in reader discussions and post comments
Register

Reader's comments (3)

How is it that Scotland ,Germany and Switzerland for example manage to public sector finance higher education?
Parents could as well. . The fee is cheaper than Manchester Grammar School (a day school) and parents pay the maintenance costs, uniforms and extras there.
@Alan Gowers. Taking the case of Scotland, the more the Scots howl "independence" the more they are given money by England to keep them quiet ( if they vote NO in their referendum, England will pamper them with yet more money) and the Barnett pot of money sent to them is topped up! Also, they hit English students for £9000 to study in Scottish universities, thereby keeping many departments and courses open in these universities. They go and get more overseas students too. Add all the above, their funding for free university education is assured. The irony is , most of these Scottish and overseas students leave Scotland once they complete their courses and move to England. What does Scotland achieve by their free university education as a result , one might ask? As for Germany, if we work as efficiently and as productively as Germans, we could afford free university education. If we cut drastically our bloated overseas aid to countries, then we could do as Germans do.

Have your say

Log in or register to post comments

Most Commented

Lady Margaret Hall, Oxford will host a homeopathy conference next month

Charity says Lady Margaret Hall, Oxford is ‘naive’ to hire out its premises for event

Laurel and Hardy sawing a plank of wood

Working with other academics can be tricky so follow some key rules, say Kevin O'Gorman and Robert MacIntosh

Woman pulling blind down over an eye
Liz Morrish reflects on why she chose to tackle the failings of the neoliberal academy from the outside
White cliffs of Dover

From Australia to Singapore, David Matthews and John Elmes weigh the pros and cons of likely destinations

Michael Parkin illustration (9 March 2017)

Cramming study into the shortest possible time will impoverish the student experience and drive an even greater wedge between research-enabled permanent staff and the growing underclass of flexible teaching staff, says Tom Cutterham