LASER Learning Awards Seminar Funding Changes and their implications for Sept 2013

1. LASER Learning Awards Seminar Funding Changes and their implications for Sept 2013 Joy Mercer, Director of Policy Association of Colleges 11 February 2013

2. What this presentation covers 16-18/19+ education funding trends 24 + Adult Learner loans Challenges

3. Where the education money is Schools 3-16 £46 billion Colleges 19+FE £1.8 billion University Teaching Grant £3.8 billion Sixth Form College £0.75 billion FE Colleges 16-18 £2.7 billion College Fees etc £0.8 billion £ School Sixth Forms £2.1 billion HE Fee Loans £3.6 billion FE Loans High cost pupils £0.6 billion College 16-18 Apps £0.3 billion 19+ Skills £1.2 billion College HE £0.5 billion 16-18Apprentices £0.5 billion

4. Post-16 education budgets HM Treasury controls mean annual dep’tl budgets. Higher education grant-loan transfer 16-18 education budget static/declining since 2010. Lack of clarity about future SFA funding partly protected in 2010 spending review. Significant risk post-2015. Source: BIS/DFE statements plus OBR projection on loans

5. 16-18 education budget DFE has ensured 5-16 Schools budget rises with inflation. Series of cuts made in 16-18 education in 2010 (EMAs, grants to Councils, Entitlement down to 30) 16-18 numbers down in 2011-12 and possibly in 2012-13 16-18 funding-£4,543 in 2012-13 Funding per secondary pupils aged 11 to 16 at £5,576 - a 22% premium. HE -£8,000 Is £3,900 enough for a core full-time programme? Note on 2012-13 allocations Yr 1 numbers drive Yr 2 budget 2012-13 allocations vs 2011-12 FE -3.2%, SFCs -2.2%, SSFs -2.6% Source: EFA funding team

6. What government wants from 16-18education? a drive to improve standards in both academic and vocational courses. The Ofsted Chief Inspector's latest Annual report declares that 35% of institutions need improvement. Alison Wolf's review of vocational education prescribed a series of reforms to improve quality. measures to ensure that every young person acquires a basic level of Maths and English by the age of 18 if they did not so by 16. ensuring more young people from poorer families enter selective institutions. reducing the number of young people becoming unemployed and increasing the number of apprentices.

7. 19+ FE/Skills funding SFA’s Spending Review cuts backloaded (until Loans start) + Two year’s of underperformance = A really tough allocation round in 2013-14 and no tolerance on 2012-13 New SFA formula creates new issues Adult Skills Budget (ASB) top-sliced to support Employer Ownership plus pressure to fund City Deals/Community Budgets Source: AoC analysis of allocations plus estimates

8. Managing 2013

9. 24+ Advanced Learner Loans A ground breaking reform Full-cost fees for 24+L3+ Student Loan Company pays the fees HMRC collects them A different student relationship

10. Loans in FE – why? Financial Cuts current expenditure because loans are capitalised Grant to SFA cut by £400 mil in 2014-15 BIS takes an impairment charge (estimated at 60%) Other reasons for FE Loans No upfront payment (except for 24+ apprentice loans) Possible to extend existing HE model 9% repayment over £21,000 income Interest rate varies with income tax band after 2016 . .

11. Loan implementation Timetable Plan to introduce FE Loans announced 2 years ago Students able to apply for loans in 49 days time (1st April) Student Loan Company starts paying loans in August 2013 Protecting the consumer It is likely that students will find it easy to get a loan, the bigger question will be whether they want one . .

12. 24+ Advanced Learner Loans Eligiblity Aged over 24, UK/EU resident, England-based study SFA-approved provider QCF Level 3+4, Access to HE, A-levels, Adv/Higher Apps Anyone allowed four loans (L3, L4, Cert, Dipl) Process Loans – min (£300) , max (SFA rate), apps (50%) Online application to SLC from April 2013 College confirms enrolment/attendance/course details Monthly payment, apportioned over course length Payments stop if student withdraws .

13. The HE vs FE loans system

14. The challenge for Colleges Loans in FE are massive challenge for Colleges Sums of money relatively small in 2013-14 Financially, the future for 19+ may be fees and loans Three big issues - planning & pricing - advising - processing

15. Planning & pricing Demand Little useful pricing data Low public awareness Many 24+students & apprentices pay nothing at moment Fall in mature and part-time HE students in 2012 Some positives – remove up-front fees, no “firstness” rules Opportunity to expand if you can find the students Relationship between demand and price

16. 24+ Adv Loans allocations Student numbers 324,000 over 24s on SFA L3,L4 of whom 41,000 pay no fees 91,000 apprentices SLC planning assumption 80,000 in 2013, 150,000 in 2014 Colleges & SFA funded providers 800 have relevant students 2013-14 FY £129 mil 2014-15 FY £398 mil 2013-14 AY equiv c£220 mil

17. The public 24+ L3+ market 250 Colleges, 30 Univs & HEIs, 500 training organisations Average loan allocation £275,000 in 2013-14 academic year £500,000 when 24+L3+ loans fully operational Average student numbers 100 Yr 1 students, 190 full year Fees averaging £2,500 to £3,000 for the full course

18. Maximum loan values? Version 2 of the SFA Loan rates matrix, June 2012

19. Pricing Pricing technicalities SLC links loan to an approved learning aim SFA confirm prices/issue LARA January 2013 SFA rate is a maximum not a price list Pricing and students Some students will be inquisitive about what fees buy Colleges have found fees a challenge in the 2000s Focus on maximising Fees * Group size * Retention

20. Processing Registration of the loan with Student Loan Company Expect Colleges to make a course offer Student applies (with Passport No, LARA, Dates, Loan £) College confirms enrolment after 2 weeks (provides ULN) Attendance and withdrawal Termly confirmation of attendance Changes of circumstances procedure Withdrawal triggers end of loan Compelling personal reasons procedure

21. Is it worth bothering? Cons “Students/Employers don’t want them so we’ll lose money” “It’s better not to offer loans than to mess up” “It’s always possible they’ll be canned in 2013 or 2015” Pros “Loans will help students change careers or make progress” “If demand drops elsewhere, there’s room to expand” “Many HE students in Colleges start on Level 3 courses” “Government may extend loans to more students in future”

22. Implications 16-18 Fewer qualifications per student Stepping stone qualifications towards GCSE maths and English Skills for employability General qualifications are getting harder-no modules, limited resits; end exam assessment Competition within the AO market for general qualifications

23. Implications for 19 plus Access to HE-reprieve from loans but have to progress to HE; possibly other ‘vulnerable’ groups funded through decline in HE enrolments Loans could be a commercial opportunity to develop programmes for career changers Marketing of loans and qualifications that can deliver quickly and cheaply On line learning and open source learning Development of higher apprenticeships and non prescribed HE-involvement of employers Initial Teacher training L3/4/5