Student loan firm bursary could cost sector £3m

The hidden cost of the Government's top-up fee reforms came to light this week as it emerged that universities may have to pay administration costs of £15 for every bursary they award - which could leave access universities with annual bills of five figures.

Plans by the Student Loans Company show how it could run bursary schemes, charging institutions £10 to £15 per eligible student. The total cost to the sector could be up to £3 million a year, but new universities fear that the cost will fall disproportionately on them because they have more students who qualify for bursaries.

The SLC said that it could cost the sector "three to four times as much" if universities opted for in-house systems of assessing students' eligibility and allocating bursary funds.

Expectations are growing that most universities will compete for students by offering perks and a range of financial aid packages when variable tuition fees are introduced in two years, rather than by varying course prices.

Ralph Seymour-Jackson, SLC chief executive, said the company could operate the mandatory £300 bursaries for poor students and any optional schemes, such as the £4,000 bursaries promised by some Russell Group universities.

But Michael Driscoll, chairman of Campaigning Modern Universities, said one of the "iniquitous features" of the reforms was that institutions with the highest numbers of poor students faced the highest costs.

CMU figures show that Wolverhampton University, for example, takes more than 4,000 students who will be eligible for the minimum £300 bursary. The SLC scheme would cost Wolverhampton £1.3 million in lost fee income and £64,000 in administration costs. Luton projects 1,591 bursary students, costing £477,000 in lost fee income and almost £24,000 in administration.

Professor Driscoll said the Government had "remained pretty silent" about the likely administrative costs during the debates on tuition fees and bursaries.

"Our argument remains as it always has: there should be a central mandatory bursary system paid for by top-slicing the funding of the whole sector and distributing centrally," he said. "We think that we are being disadvantaged by the mandatory bursary system - as we have larger numbers of eligible students - and if we are going to be charged per student for the administration cost, it rubs salt into the wound."

Cambridge University told The Times Higher that it planned to run its own bursary scheme. The university said it had distributed bursaries totalling £1.5 million in 2002-03 and was keen to maintain the link between benefactors who had established schemes and their beneficiaries.

Michael Sterling, vice-chancellor of Birmingham University and chairman of the Russell Group, said the £300 mandatory bursary, paid centrally, was a good idea if it was cost effective.

He added: "In terms of institutions' own bursaries, it would depend on their structure and how difficult it would be for the SLC to administer."

But he said the decision would also be based on cost.

paul.hill@thes.co.uk