GSM exit ‘shows need for insurance plan’ for stranded students

Students who suffer financial loss from institutional failures should be compensated by sector scheme, says English ombudsman

November 19, 2020
Source: istock

The collapse of England’s biggest for-profit college underlines the need for an insurance system to help students affected by any future closures, the sector’s ombudsman has recommended.

In a report into the closure of GSM London in September 2019, which led to the transfer of 2,600 students to different providers to continue their studies, the Office of the Independent Adjudicator (OIA) said the winding-up of the business-focused college highlighted “gaps in provision” for students who had been “badly affected and for whom there are no suitable alternative arrangements that don’t involve additional costs”.

“We continue to believe that there is a need for some kind of insurance scheme that could protect students, give them more confidence in the system and pay out in the worst-case scenario,” says the report, published on 19 November.

“We would like to see more discussion and policy thought about who should provide this vital safety net and how it should be paid for,” it adds.

The OIA, which was part of a task force convened in summer 2019 when GSM entered administration, outlines in its report how it had recommended compensation for a handful of GSM’s 3,500 students who complained to the ombudsman.

Given the “clear financial loss” suffered by these students as a result of the closure, it recommended that one complainant receive £6,500 and another £4,582, with others receiving smaller sums.

However, the ombudsman acknowledged that these students were unlikely to receive the compensation recommended because they are unsecured creditors of GSM, which was in administration when it made its recommendations.

“The reality is the actual amount which students will receive is likely to be considerably less than the sum we consider is reasonable,” it says.

While the report says the Office for Students’ proposed student protection directions – which would allow the regulator to direct providers deemed at risk of closing – might help to mitigate the potential impact of future closures, it adds “it is important that meaningful [financial] remedies are available for students” who are unable to transfer to other courses.

In the case of GSM, formerly known as the Greenwich School of Management, which had almost 6,000 students at its peak, most of its students were successfully transferred to other institutions, but there “may be some who did not return to higher education at all and so may never achieve their intended level of qualification”.

Felicity Mitchell, the independent adjudicator, said the coronavirus crisis, which had placed pressure on many higher education providers, meant that it was “timely to share our learning from what we have seen, and hope that it will be helpful to providers, student representative bodies and others who support students in these circumstances”.

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