Fees and Loans in the FE and Skills Sector

Fees & Loans in the FE and Skills Sector

Unionlearn Policy Briefing

September 2011

Introduction

Last month the government published a consultation document, New Challenges, New Chances: next steps in implementing the further education reform programme (www.bis.gov.uk/newchallenges). The government is consulting on a number of the policy measures set out in the government's skills strategy that was published last year. In brief, the full consultation covers measures designed to:

• Provide greater freedoms and flexibilities and further reduce the burden of bureaucracy on further education and skills providers;
• Improve the quality of teaching and learning for adults;
• Strengthen further education and skills providers' capacity to offer training at higher education level;
• Review and improve basic literacy and numeracy provision for adults;
• Refocus Government support for informal adult and community learning; and
• Introduce loans from the 2013/14 academic year providing access to advanced and higher level courses.

This policy briefing largely focuses on one aspect of the consultation, namely the measure to end government subsidy and to introduce HE-style income-contingent loans for all courses at Level 3 and above for individuals aged 24 and over.

Skills Strategy - measures on fees and loans

The skills strategy - Skills for Sustainable Growth - published last year set out major changes to fee entitlements in the FE and skills sector, including radically reducing the entitlements of those aged 24 and over. At the same time the skills strategy committed the government to safeguarding FE/skills entitlements for young people aged under 24 (though there have been associated budget cuts, such as the changes to the Education Maintenance Allowance). As a result young people retain an entitlement to full funding for a first Level 2 or Level 3 qualification and foundation learning (Entry and Level 1). Those aged under 24 are also benefitting from the continued expansion of apprenticeships.

In the case of adults aged 24 and over there have been major changes. The Education Bill currently progressing through Parliament is abolishing the adult Level 2 entitlement and this means that from 2012/13 people aged over 24 will no longer be entitled to full funding for their first Level 2 qualification (though in practice most adult employees have already lost the opportunity to access this entitlement as a result of the ending of the Train to Gain programme).

The Education Bill also abolishes the previous Level 3 entitlement which granted full funding for 19-25 year-olds doing their first full Level 3 qualification (as opposed to the new Level 3 entitlement which is restricted to those aged under 24). Originally the plans were that this change to the Level 3 entitlement should come into effect in 2012/13 alongside the ending of the adult Level 2 entitlement. However, various stakeholders lobbied the government arguing that it made much more sense to delay this change until the new loans system was introduced in 2013/14 and the government has now agreed to this.

The Government made a commitment in the skills strategy that literacy and numeracy learning up to Level 2 would continue to be fully funded and free to adult learners. However, the funding of literacy and numeracy has been reduced, as from September, with the removal of the previous funding uplift for all provision (with the exception of Entry Level numeracy which has been given a higher priority). As a result of these changes one challenge for unions is that it may prove more difficult to source flexible provision with regard to literacy and the higher levels of numeracy learning. BIS have also set up a high level Project Board to review and reform literacy and numeracy provision and unionlearn is represented on this Board (the review will report later this autumn).

Major restrictions to English for Speakers of Other Languages (ESOL) courses are also currently coming into effect and there is now no longer any public funding to support ESOL training for migrant workers. The government had also planned, as from September, to restrict free training (including ESOL courses) to citizens claiming 'active' benefits (e.g. JSA) with those claiming other benefits (e.g. Income Support) forced to pay fees for the first time. However, due to lobbying by a range of stakeholders, the government has given some concessions and agreed that colleges will now have 'some local discretion to provide fully subsidised courses for people on a wider range of benefits - provided the training is to help them enter employment' (BIS Press Release, 9/8/11).

The new FE/skills loan system

As well as covering the proposed new FE/skills loan system in its main consultation paper, BIS has published a separate consultation paper on this particular policy development. It is proposed that from 2013/14 income-contingent loans will be introduced and will apply to all provision at Level 3 and 4 for those aged 24 and over. In effect this means that 24- and 25- year-olds currently entitled to free provision for their first Level 3 qualification will have to pay full fees and all other adults currently paying discounted fees will in future have to pay the full cost of their courses. The government is introducing a HE-style income contingent loan system to enable adults to pay for these 100% tuition fees without them having to make any upfront payments. According to the consultation document the new rules will also cover 'Access to HE courses as well as Advanced and Higher Level Apprenticeships.'

The loans will be repaid on an income-contingent basis in line with how HE loans operate (i.e. repayments will only begin once someone is earning above £21,000 and 'at a set proportion above that threshold regardless of the level of loan they have taken out'). As with HE loans, any outstanding debt will be written off after 30 years (see appendix for a table from the consultation document comparing the FE and HE loan conditions). The FE loans system will be aligned with the HE loans system to facilitate progression and the consultation document states that 'access to HE support will not be affected by previous access to FE loans.' However, the government says that it is 'aware of the need to consider the position of those who progress from loan-funded FE into HE and will commission research to understand how the attitudes of these learners will be affected by the introduction of loans.'

The maximum loan will be £4,000 but will be determined by the fully funded rate for the course in question (individuals will not be able to apply above this rate as there is no facility to take out any element of a loan for maintenance purposes). The minimum loan is yet to be decided but is expected to be in the region of £200-£500. Learners will be able to pay the costs of the course upfront if they so wish or to make a contribution to the costs upfront in order to take out a lower loan. There is also an expectation that in some cases individuals will be able to get their employers to make a contribution and use the loan system to pay their individual contribution. Loans will be available on the same basis for full- or part-time courses but spread over the number of months the training takes place. Also, learners who have used a loan to fund a Level 3 course will be able to take out a further loan to undertake a Level 4 course.

In the case of apprenticeships the consultation document states that 'there will continue to be an assumed 50% (of the fully funded rate) contribution from the employer' and this 'could be made either in cash or in-kind'. This is one of the most contentious aspects of the new loans system and the consultation document highlights this when it states that: 'This will be the first time that learners aged 24 or above may be expected to contribute toward the costs of their Apprenticeship, alongside the contribution from their employer' [our emphasis]. The consultation says that this is in line with the principles set out in the skills strategy, i.e. 'those who benefit most should make a greater contribution to the cost of training, as both employers and individuals benefit from undertaking an Apprenticeship'. However, the consultation document acknowledges that 'there is limited evidence related to the willingness of employers and Apprentices to share the costs of their training [and] currently Apprenticeships are free to Apprentices (and will remain so for those under 24).'

The model for the loans system will be finalised in December informed by responses to the consultation. Following this the Skills Funding Agency and Student Loans Company will confirm exactly how the loans system will operate from 2013/14 onwards (learners will submit the first loan applications from March 2013 onwards).

Potential impact on adult learners?

While it is difficult to gauge the potential impact on adult learners of the planned changes to fees and the introduction of a loan system in the FE/skills sector, some significant concerns are already being voiced by a range of stakeholders, including the following:

• Asking apprentices for the first time to pay towards what, in effect, is job-related training is causing a great deal of concern, with some arguing that there is a strong possibility that apprenticeships amongst this age group will go into decline due to the reluctance and/or inability of individuals to take out a loan to fund this form of work-based learning
• Adults using the FE system to facilitate their progression to a university education will be faced with the prospect of taking out very large loans as they will have now have to fund both their 'access studies' and their subsequent degree studies
• Employer support for Level 3 and 4 courses for adult employees could be adversely affected once public subsidy for this completely dries up from 2013/14
• Forcing adults to pay for 100% of course fees is likely to have a detrimental impact on the capacity of people to take the initiative to re-skill for new jobs

The low-paid and most disadvantaged are most likely to reject the idea of taking out a loan and this could exacerbate the training divide that currently blights the UK labour market.

Conclusion

The TUC will be submitting a response to the New Challenges, New Chances consultation and a call has gone out in TUC Mail asking affiliated unions to submit contributions to feed into the TUC response (contributions to be emailed to Richard Blakeley, rblakeley@tuc.org.uk, by 19 September).

Appendix

Comparison of FE and HE loan conditions

*this interest rate will also apply during the period of the course while the learner is in training

(Table reproduced from: New Challenges, New Chances: next steps in implementing the further education reform programme. Further Education Loans. Available at: www.bis.gov.uk/newchallenges)