Universities face post-marketisation reckoning as student debt soars

05 February 2019 Consultancy.uk

Having enjoyed a boom in funding thanks to the marketisation of higher education, universities across England and Wales now find themselves in a precarious position. Having eroded the traditional relationships of collaborative spaces in favour of a consumer-provider contract, they are expected to provide more services as value for money, while demand looks set to plateau thanks to huge student debt and socio-political frictions.

Tuition fees were first introduced in the UK in 1998 by what was then a new Labour Government. The belief was that for Tony Blair’s somewhat arbitrary target of eventually seeing 50% of the population go to university would need a significantly higher level of funding to be sunk into the higher education system. The Government found such an increase more palatable if it were contributed to by students themselves, with the first tuition fees standing at £1,000 per year.

Just over a decade later, that figure would be controversially upped to a £9,000 figure. The Conservative-Liberal Democrat coalition which oversaw that change provoked public ire with its decision, with mass demonstrations of students bringing the policy under constant public scrutiny. In the end, however, the decision stood, and universities have moved toward a much more marketised system, to chase lucrative £9,000 fees from prospective students in ever greater numbers – especially after the 2015 lifting of student number controls.

A new survey of 160 vice-chancellors in applicable universities by PA Consulting has uncovered the pros and cons of this changed system, as well as what challenges it will face in the future. The study mostly relates to the English university sector, while universities in Scotland, Wales and Northern Ireland are still mainly grant-funded with caps on domestic recruitment. On the downside, all the vice-chancellors interviewed expressed regret at the erosion of relationships across the system brought on by marketisation.

Perceived impacts of key policy and funding developments (% of respondents)

Most notably for universities, this saw respondents express regret at the treatment of students as fee-paying consumers, turning co-creative learning partnerships into “transactional entitlements, encouraged by consumerist narratives from ministers and regulators.” Current criticisms over universities’ value for money continue due to this, with the students who are expected to pay more, and the public purse which has taken on large amounts of student debt in the short-term, expecting institutions to provide services including high quality teaching, more contact time, and improved post-graduate employment prospects. At the same time, vice chancellor pay has become a bone of contention, with universities being pilloried for cutting courses or services on the one hand, while their leaders command six-figure salaries on the other.

Disconnect

Despite noting the disappointing development of transforming education into a consumption-based relationship, most vice chancellors do not seem to register that tuition fees played a role in this. Only 4% of respondents said they were highly damaging as a key policy development. At the same time, a huge 82% believed they had been beneficial to varying degrees. On the other end of the spectrum, vice chancellors were concerned with the effective end of capital grants, exposing something of a disconnect between university leadership and their students. 30% of respondents said that the ending of most contributions by government to cover at least part of the costs in universities’ facilities had been highly damaging, while 67% suggested it had been damaging to an extent.

According to the research gathered by PA, then, universities are happy to accept loans which significantly encumber students with debt in years to come. Student loan debt in the UK now stands at more than £100 billion, and with the government capable of changing the conditions on these loans at any point, making their repayment more likely than many have anticipated, while privatising the student loan book, the matter weighs heavy on the minds of many students. This is something which particularly deters poor and working class students from accessing higher education, narrowing the opportunity for social mobility and reinforcing the social hierarchies in the UK. At the same time as supporting a policy for declining government support of students which has led to this, however, vice chancellors believe their institutions should receive greater levels of governmental support.

Progress towards university strategic goals (% of respondents)

With the funding structure of universities now dependent on attracting new ‘customers’ at an ever higher rate, meanwhile, even the marketised model of higher education now finds itself in an extremely precarious position. With the flow of new students from overseas potentially being stymied by new visas and other immigration controls, especially with Brexit likely to drastically reduce the number of EU students arriving to study in the UK, a portion of the student body which universities would be able to charge higher fees than domestic students could be depleted.

This has been exemplified by the blunt comments of Iselin Nybø, Norway’s Minister for Higher Education, who has urged students to avoid British universities. Nybø told state broadcaster NRK, "There’s so much uncertainty because of Brexit. If you’re a student and plan to travel out of Norway to study this autumn, I recommend you look at other countries than Great Britain."

This last point is also where British universities seem to have made the least progress, in terms of their long-term strategic goals. The majority say they have either fully achieved or made strides toward strengthening their financial position and resilience, but in contrast, growing their international standing and presence lags behind, despite its financial implications. A huge 62% of vice chancellors still classify this as a work in progress, and relating to this, 50% of vice chancellors are still unable to say their institution has satisfactorily reduced its dependence on sources of direct public funding.

Demand

Universities have seen a range of experiences when it comes to the broader impact of the shift toward marketisation in terms of demand. What some institutions have benefited from in terms of market trends, others have found them somewhat or highly damaging.

Strategic impacts of market trends and developments (% of respondents)

For example, roughly a third of UK vice chancellors believe that domestic and EU undergraduate demand for full-time studies have been slightly damaged, while the same number believe it has either been slightly improved, or drastically improved. While broadly, this would suggest that marketising the sector has helped drive demand for undergraduate studies in a full-time capacity, however, 30% of vice chancellors have seen a negative impact on demand for more costly post-graduate studies – an area not previously covered by government loans – and a major decrease in demand among part-time students.

Despite this, 2010 to 2018 is seen as a good period for universities in terms of funding, with many benefitting significantly from the windfall effect of £9,000 fees, while student recruitment held up across the board and grew substantially for some. Looking forward, a number of entities are now considering how best to prepare for the post-boom period which is looking set to follow this. With demand seemingly on the edge of a plateau in a number of key areas, PA’s report states that the new mantra for vice chancellors is ‘getting back to the basics’, re-evaluating imperatives for sustainability.

Speaking to Times Higher Education, Paul Woodgates, Higher Education lead at PA and co-author of the report, said “there was scepticism among vice-chancellors at the likelihood of outright institutional failures, if that meant locking the gates and sending the students elsewhere – a prospect so unattractive to all concerned that ways will be found to avoid that”. At the same time, however, “that is not the same as saying things will carry on as they are” and sector leaders believe that “there will be significant rationalisation…where a university gets into trouble.” He added these will be addressed “by the government or perhaps… by the sector itself.”

Related: UK education consulting spend rises 196% in 14 years.

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