The Role of Loans in Financing VET in England

1. The Role of Loans in Financing VET in England Mick Fletcher

2. Key questions • What can the experience of England tell us about the impact of loans for adult learning. • What is likely to happen to the nature and availability of loans in England in the light of the current crisis

3. Two main loan schemes • For full time undergraduate higher education loans are offered via the Student Loans Company (SLC) • For vocational education at a variety of levels Professional & Career Development Loans (PCDL) are arranged via the Young People’s Learning Agency (YPLA)

4. HE Loans • For full time undergraduates (ISCED 6) • Around 950,000 beneficiaries • At least 80% penetration rate • Around £5 billion cost to government

5. PCDL • For vocational education at a range of levels (ISCED 4 – 7) • Under 10,000 per year • Low penetration rate (but difficult to estimate) • Around £22 million cost to government

6. SLC Income Contingent Subsidised Interest rate Time limited An entitlement PCDL Mortgage style Commercial interest rate Unlimited Subject to credit rating Characteristics – individual perspective

7. SLC Public Debt Significant ‘deadweight’ Unpredictable cost A major expense PCDL Private Debt Some ‘deadweight’ Costs predictable Limited expense Characteristics – government perspective

8. SLC Browne Review HE Funding, fees and financial support Considerable public debate Yet to report PCDL Banks Review Fee collection Little public debate Reported but not yet agreed Policy Reviews

9. SLC Real rate of interest & repayment period ‘Graduate tax’ or differential repayment Extending ICLs to part time HE PCDL No change to characteristics No discussion of alternatives Massive expansion – 600,000 quoted. Policy debate

10. PCDL expansion • “Expansion of Professional and Career Development Loans offers an efficient and rapidly implementable means of increasing access to education, for many, many people. At the same time, it minimises the initial outlay for Government, minimises bureaucracy for colleges and training providers, and can be seen in the context of the new role for banks, perhaps paralleling measures to ensure banks support smaller businesses

11. SLC Reinforces pressure to reduce costs Modest extension of scope Unlikely to change essential characteristics PCDL Substantial pressure to substitute private for state funding Substantial increase in numbers but not target groups Is it realistic? Effect of recession

12. Conclusions • SLC loans show we can design a loan scheme that is attractive to students and generates a major increase in private funding • PCDLs show we can design a loan scheme that is cheap and safe for government and therefore sustainable • Can we design one that is both?