Debt rise blamed on red tape

October 27, 2000

Universities determined to widen access are losing out when it comes to collecting tuition fees.

At least one new university has outstanding bad debts of more than £700,000 - 2 per cent of its income - for which poor administration of fee payments is partly to blame.

Ministers are reviewing the situation after complaints from university finance directors, who have reported problems identifying and collecting unpaid tuition fees.

Deborah Findlay, finance director at South Bank University, who has been researching the effects of the introduction of tuition fees, said:

"Universities with middle-class students do not have any problems. Their students turn up on the first day of term with a cheque from their parents."

But universities with a large number of non-traditional students, who are more likely to be exempt or partially exempt from tuition fees and who must be carefully means-tested, are facing a bureaucratic headache. The debts are creating planning crises, with universities unaware how much they are owed.

Some institutions are left seriously short-changed, say finance directors.

They point to a "fundamental flaw" in the system, which leaves universities financially liable, indefinitely, for mistakes made by local education authorities and the Student Loans Company.

LEAs means test students to establish whether they are exempt from paying tuition fees or if they are entitled to pay a reduced fee. In cases where students are exempt, or partially exempt, the state meets the bill and pays the institution via the SLC.

Ms Findlay said the LEAs often get assessments wrong, allowing the SLC to withhold or to claw back money from the university for an indefinite period.

"There is a much higher incidence of reassessment than anyone expected," said Ms Findlay. "Debts settled by the SLC can be suddenly repealed if a reassessment establishes that the student should have paid more. But students might have graduated by the time reassessment shows they should have paid.

"Universities are separate legal entities and I don't think this point has ever been properly appreciated. The lack of any time limits for the reassessment of students - leaving us to be penalised for others' mistakes - is a big issue," she added.

Bad debts at Middlesex University rose from £245,000 in 1998 to £716,000 in 1999. The university said the figure, which included all unpaid fees, including overseas and postgraduate students, had grown partly because of a change in auditing arrangements. But there were also increasing problems in collecting debt.

Graham Lane, head of education at the Local Government Association, said: "Fees are either met by the student or the exchequer, so universities will get their money."

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