Willetts wants banks to fill postgrad funding gap

But NUS says commercial loans are not the answer to ‘crisis’

July 18, 2013

Source: Rex Features

Funding kick-starter: Willetts wants to know why banks are withdrawing

Universities and science minister David Willetts has said that he wants to “kick some more life” into professional and career development loans as a source of finance for postgraduates.

At a round-table event aimed at addressing access to UK postgraduate funding, Mr Willetts questioned why banks were withdrawing from the area given that the government was providing an estimated £15 million a year in support.

“Much to my frustration, professional and career development loans, which are supposed to be the instrument that tackles this problem…are not growing and in some years have shrunk,” he said.

The minister read out a “list of shame” of schemes that had closed, including provision by NatWest, Lloyds TSB and HSBC, and said he planned to meet with the banks to find out why.

But Rachel Wenstone, vice-president for higher education at the National Union of Students, told the event, organised by the thinktank Demos, that commercial loans were not the answer to the problem.

The credit rating needed and the level of risk students had to be willing to take on meant that such loans were a solution only for middle-class postgraduates, she said.

“It’s not where the problem really lies, which is in those from disadvantaged backgrounds,” she added.

Rachel Wenstone, of the National Union of Students

Act now to head off crisis

Delegates at the event, held in London on 11 July, met with the aim of addressing an issue rapidly rising up the policy agenda, which Ms Wenstone said should be tackled “before we hit a crisis”.

Earlier this month, the government announced plans to improve access to postgraduate education - which Mr Willetts said was becoming “the new social mobility frontier” - including a £25 million fund to be distributed by the Higher Education Funding Council for England.

Heather Fry, director of education, participation and students at Hefce, told the event that the relatively short deadline for institutions to bid for the funding was so that schemes could start in 2014-15.

The proposals (which besides student support could relate to broader issues, such as how the structure of postgraduate education relates to demand) would help the government to understand how a further £50 million redirected from the National Scholarship Programme could be best spent in 2015-16, she said.

Ms Fry added that it was important not to rush into schemes that would disrupt a system that, despite difficulties in accessing funding, was “pretty successful”.

Ms Wenstone put forward the NUS’ own proposals, which include a cost- neutral government-backed loan scheme first developed by economist Tim Leunig while at the thinktank CentreForum.

However, Mr Willetts listed a number of “genuine issues” with the plan, including the fact that the Student Loans Company lacked the capability to run an additional scheme. He added that the coalition could not assume that the resource accounting and budgeting charge - the proportion of loans it would have to write off - would be low.

He also found fault with a proposal for universities to raise funding for student loans through bond issues, advocated at the event by Jon Wakeford, director of strategy and communications at university estates firm University Partnerships Programme.


Bond villain? V-c warns of credit crunch over funding plan

A plan that groups of universities could issue bonds to raise funding for postgraduate student loans was criticised at a round table in London last week.

Developed by Jon Wakeford, director of strategy and communications at university estates company University Partnerships Programme, the scheme would make use of universities’ stable risk profiles to source money from financial markets at low rates, which they could offer to postgraduates using their own lending criteria.

At the event, organised by the thinktank Demos on 11 July, Mr Wakeford said he estimated that universities would be able to provide funding at roughly half the cost of existing career development loans.

But Dame Glynis Breakwell, vice-chancellor of the University of Bath, said that taking out certificates of debt, which guarantee repayment plus interest at a later date, could be a step too far for universities.

Institutions were already using their status as a “jolly good bet” to borrow capital for investment and to reassure the pension regulator that they have the means to meet the requirements of the University Superannuation Scheme, she said.

“What I see as a vice-chancellor is a series of things being stacked, one on top of another, which assumes that we are a good credit bet … and what Jon wants me to do is add another one on top of that. And I’m getting twitchy,” she said.

David Willetts, the universities and science minister, also suggested that the scheme might fall foul of rules that say that individual borrowers must be assessed for risk.

“It is surprisingly hard to design a scheme that is neither full-blown conventional public spending nor a commercial scheme subject to financial services regulation,” the minister added.

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Reader's comments (1)

59% of postgraduates are over the age of 25 when they begin their postgraduate studies and many study part-time so significant numbers of potential PG students may currently not have the same undergraduate debts as more recent students. It is at least worth Ministers exploring if the Professional Career loan option can be improved. The reality is that there is unlikely to be only one answer to supporting the PG students of the present and future.


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