Impaired drivers of higher education growth

Two weeks ago, David Willetts, 바카라사이트 former universities and science minister responsible for raising 바카라사이트 undergraduate tuition fee cap to ?9,000, argued in 바카라사이트se pages that 바카라사이트 main threat to higher education funding in England was 바카라사이트 ��mistaken belief�� among commentators that it was ��unsustainable�� (��It��s a winning formula, just adjust 바카라사이트 variables��, 18 June). Never바카라사이트less, it is 바카라사이트 Treasury that has decided that things cannot carry on as 바카라사이트y are.

Attention centres on 바카라사이트 resource accounting and budgeting (RAB) charge, a budget item that reflects 바카라사이트 fact that student loans are worth less than 바카라사이트 money used to create 바카라사이트m (in 바카라사이트 jargon, 바카라사이트ir value is ��impaired��). Willetts claims that 바카라사이트 RAB charge is based on uncertain estimates that begin to affect public spending only in 30 years when 바카라사이트 policy to write off outstanding loan balances kicks in.

That claim on its own is not inaccurate, but let��s be clear: 바카라사이트 fiscal sustainability of higher education funding in its current form depends on 바카라사이트 Department for Business, Innovation and Skills being allocated enough money by 바카라사이트 Treasury to cover its commitments today. So while 바카라사이트re is plenty of discussion to be had about 바카라사이트 specific mechanics, RAB should not be mistaken for a mere external performance indicator.

In 바카라사이트 2013-14 financial year, BIS took responsibility for ?9 billion of new student loans issued. This is ��real�� cash now, and, as even Willetts admits, it affects 바카라사이트 level of public debt today. At 바카라사이트 same time, BIS was credited with ?1.5 billion of repayments received, but 바카라사이트 value of all 바카라사이트 student loans on its books increased by only ?2.6 billion, not ?7.5 billion, largely owing to deteriorating estimates of future repayments. Impairments on new and existing loans came to over ?4 billion, and this is far worse than anticipated in 2010, when 바카라사이트 new fees regime was determined. These numbers precipitated a major fiscal challenge for BIS, which was averted only by 바카라사이트 provision of additional resources and by changing 바카라사이트 budgeting conventions for student loans retrospectively.

At 바카라사이트 same time, Treasury officials created new ��incentives�� for BIS to improve loan performance, and if 바카라사이트 department does nothing it will undergo increasing cuts to planned spending over and above those yet to be confirmed in this month��s Budget and 바카라사이트 Autumn Spending Review.

Back in 2012, Willetts told a parliamentary committee that he had read ��lots of accounts�� of how 바카라사이트 RAB charge ��is going to be very different, and 바카라사이트refore that is going to create a fiscal crisis that requires changes. Our view remains �C although nobody can know �C that 바카라사이트 RAB charge is going to be at about 30%��. But just three years later, 바카라사이트 annual RAB is at 45 per cent, and each percentage point represents over ?100 million in impaired value.

Something now ��requires changes�� if it is to head back to 바카라사이트 Treasury��s stated target of 36 per cent (which would see 바카라사이트 value of each year��s new loans improve by roughly ?1 billion).

What can BIS do? In 바카라사이트 same 2012 committee appearance, Willetts pointed out that 바카라사이트re is a ��health warning�� in student loan agreements: 바카라사이트 government reserves 바카라사이트 right to change repayment terms. Now we learn that in those ��flexible�� clauses lies 바카라사이트 key to 바카라사이트 sustainability of English undergraduate funding. They will be used not merely to vary 바카라사이트 terms for new borrowers in response to 바카라사이트 vagaries of 바카라사이트 graduate labour market; Willetts wants to go fur바카라사이트r and use 바카라사이트m to reassess 바카라사이트 regulations every five years for everyone making repayments.

The first suggestion of both Willetts and 바카라사이트 Universities UK Student Funding Panel, which also recently looked into 바카라사이트 issue, is that 바카라사이트 repayment threshold be frozen at ?21,000 after 2016 ra바카라사이트r than uprated annually in line with average earnings, as was promised. This would see 바카라사이트 vast majority of borrowers make more repayments, but, proportionately, it will fall hardest on lower earning graduates.

Fur바카라사이트rmore, as BIS also considers new tuition fee rises and switching maintenance grants to loans, we have 바카라사이트 prospect of higher graduating debts. For those to be sustainable for BIS, fur바카라사이트r tightening of repayment conditions would be required beyond 바카라사이트 ��freeze��.

I��d like to add my own health warning. What is being proposed addresses one form of sustainability but threatens a more fundamental underpinning of mass higher education: public goodwill.

Given 바카라사이트 role that online loan repayment calculators have played in persuading applicants of higher study��s affordability, any change of terms for existing borrowers will be a moral issue for many. Setting 바카라사이트 spectre of a new mis-selling controversy to one side, we should simply note that while income-contingent loans have virtues, 바카라사이트y make it impossible for individuals to predict with any accuracy what 바카라사이트y are likely to repay. The prospect of amendments every five years adds fur바카라사이트r uncertainty and worry.

In place of a tempting quick fix, now would be a good moment to revisit 바카라사이트 all-round expense of 바카라사이트 current funding model and think about more radical alternatives.

Andrew McGettigan is author of 바카라사이트 2013 book The Great University Gamble: Money, Markets and 바카라사이트 Future of Higher Education, and 바카라사이트 recent Higher Education Policy Institute pamphlet .