Support for Part Time Undergraduate Students Summary 1. This paper provides a summary of options for the reform of support available to Welsh-domiciled part-time undergraduate students in higher education. The paper asks Cabinet to agree to one of two options for a revised system to be implemented from 2012/13. 2. In addition, Cabinet are asked to note the financial implications for each of these options, and consider how the Welsh Government deals with a significant shortfall in non cash that is needed to fund the provision of student loans. The Issues 3. In my statement to the Assembly on 30 November 2010, I announced changes to the full-time higher education funding and student support system from 2012/13. In addition, I included a commitment that part-time Welsh-domiciled students will be able to access a tuition fee loan depending on the level of intensity of their course. This reflected the proposals in England to make available fee loans to part-time undergraduate students who studied at 25-75% intensity, but also allowed time for robust policy analysis, detailed financial modelling and proper engagement with stakeholders. 4. To help identify and test workable policy solutions, officials have been working with key stakeholders (including Higher Education Funding Council for Wales, Higher Education Wales, the Open University Wales, part-time OU students and the NUS) to assess potential options going forward. 5. Following these discussions, I have identified two options for consideration, these are: option 1 - replicate the Welsh full-time system of tuition fee support for 2012/13; option 2 - replicate the English part-time model; for each option the maximum tuition fee would be restricted (pro-rata) to either 9,000 or 7,000. In reality this would mean a tuition fee of 4,500 or 3,500 for a part time course of 50% intensity. 6. Both of these options are broadly affordable within current budgets, although there are significant issues with regard to the availability of non-cash provision. Funding models to meet the cost of each option are set out in the Financial Requirements and Governance Implications of this paper. Current system of support 7. Currently part-time first-degree students are eligible for means-tested tuition fee and course grants. In addition, there are a number of targeted awards that are 1
available, including Childcare Grant, Adults Dependent Grants and Parents Learning Allowance. 8. The HEFCW teaching funding includes a per capita element which comprises a payment of 50 for each enrolled student. This funding applies equally to full-time and part-time students and, since part-time students spread their studies over a greater number of years than full-time students on equivalent programmes of study, the funding methodology favours institutions with a higher proportion of part-time students. Student Support Package 9. The following table illustrates the support that the Welsh Government currently offers to part-time students (2011-2012). Table a Name of Grant Scheme Statutory Power(s) Target Group Eligibility Criteria Amounts - thresholds & taper Course Grant Course grant can help with the cost of books, travel and other expenses. The Assembly Learning Grants and Loans (Higher Education) (Wales) Regulations 2009. Students who are ordinarily resident in Wales and are taking a part-time higher-education course, anywhere in the UK. Designated course must: Last at least one year; lead to a higher qualification; and not take more than twice the full-time equivalent. Full grant of 1,125 where income is under 26,095. Partial Grant where income is 26,096 to 28,179. Students starting on a part-time Initial Teacher Training (ITT) course in 2010/11. 50 payable @ 28,180 No Grant payable where income is 28,181 or above. Fee Grant Covers the cost of the fees charged by the students university or college. The Assembly Learning Grants and Loans (Higher Education) (Wales) Regulations 2009. Students who are ordinarily resident in Wales and are taking a part-time higher-education course, anywhere in the UK. Designated course must: Last at least one year; lead to a higher qualification; and not take more than twice the full-time equivalent. Students starting on a part-time Initial Teacher Training (ITT) course in 2010/11. 3 rates based on intensity of study or fee charged = 50-59% FTE - 670 60-74% FTE - 800 75% plus FTE - 1,000 Full Grant payable where income is 16,685 or below. Partial Grant payable where income is 16,866 to 25,435. No Grant payable where income is 25,436 or above. 2
10. It is estimated that the total cost of part time student support to the Welsh Government in the financial year 2011-2012 will be: -Tuition fee grants - 2.4m; -Course grants - 4.7m. 11. Tuition fees for part-time courses are currently unregulated in England and Wales. This means that institutions may charge such fees as they consider appropriate. Option 1a - replicate the Welsh full-time system for tuition fees, maximum tuition fee of 9,000 (pro-rata) 12. HE Institutions in Wales will be allowed to charge a maximum tuition fee in Wales in line with pro-rata limits for full-time equivalents (25% - 75% of full-time fee depending on amount of study that is the maximum fee on a course carrying 50% intensity would be 4,500). The provision of part-time courses would be regulated and institutions would have to include the provision of part time courses in their fee plan to HEFCW if fees are charged above the basic amount on a prorata basis. 13. Student Support - all Welsh-domiciled students would be entitled to a nonmeans-tested loan and or grant to meet the up-front cost of their tuition fees. In line with the full-time package, a loan would be available to cover a proportion of the fee and a grant from the Welsh Government would be available to cover the remaining amount. If we assume a full-time fee of 9,000, the package of support would be as follows: Tuition fee - 4,500 (assuming 50% intensity) Tuition fee loan - 1,732.50 Tuition fee grant - 2,767.50 There would be limited means-tested targeted support (see table a) available to students in line with current arrangements. Alternatively we could decide to withdraw maintenance support (in line with English proposals) and utilise the budgets to reduce the top slice to HEFCW budgets. Option 1b - replicate the Welsh full-time system for tuition fees, maximum tuition fee of 7,000 (pro-rata) 14. HE Institutions in Wales will be allowed to charge a maximum (pro rata) tuition fee in Wales of 7,000 with limits for full-time equivalents (25% - 75% of full-time fee depending on amount of study that is the maximum fee on a course carrying 50% intensity would be 3,500). The provision of part-time courses would be regulated and institutions would have to include the provision of part time courses in their fee plan to HEFCW if fees are charged above the basic amount on a prorata basis. 15. Student Support - all Welsh-domiciled students would be entitled to a nonmeans-tested loan and or grant to meet the up-front cost of their tuition fees. In line with the full-time package, a loan would be available to cover a proportion of the fee and a grant from the Welsh Government would be available to cover the remaining amount. The package of support would be as follows: 3
Tuition fee - 3,500 (assuming 50% intensity) Tuition fee loan - 1,732.50 Tuition fee grant - 1,767.50 There would be limited means-tested targeted support (see table a) available to students in line with current arrangements. Alternatively we could decide to withdraw maintenance support (in line with English proposals) and utilise the budgets to reduce the top slice to HEFCW budgets. 16. In line with the controls in place for full-time higher education, legislation would be needed to control part-time student numbers. 17. Repayment of student loans the terms and conditions for the repayment of student loans would be the same for full and part-time students, they are: Risks interest accrues at RPI +3% during study; statutory repayment date will be the April after three years of study (e.g. 1 st SRDD will be April 2015) unless part time course last less; repayment threshold will 21,000 and repayment rate will be 9% ; interest rate will then accrue on sliding scale depending on income form RPI for 21,000 and less to RPI +3% for 41,000 and above; and loan balance written off after 30 years. 18. There are a number of risks that need to be considered when evaluating options 1a and 1b: it is possible that the provision of a grant could increase student numbers applying to enter part-time rather than full-time education; it is possible that we would see an increase in the number of EU students applying to study in Wales; deliverability it is possible that HEFCW and SLC would be unable to deliver a revised system by 2012-2013. Early indications suggest that implementation is possible; however, there is a significant risk in implementing major system and regulatory changes over a short timescale which will require careful management and control; there is likely to be a reduction (or change in behaviour) in employers contributions for employees undertaking part-time study; the legislative timetable to introduce changes is tight; future costs are extremely difficult to model due to a lack of robust data on part-time students and on the possible impact of these changes on the behaviour of students and institutions. Option 2a - Replicate the English part-time model maximum tuition fee of 9,000 (pro-rata) 19. Institutions in Wales would be allowed to charge a maximum tuition fee in Wales in line with pro-rata limits for full-time equivalents (25% - 75% of full-time fee 4
depending on amount of study-that is the maximum fee on a course carrying 50% intensity would be 4,500). The provision of part-time courses would be regulated and institutions would have to include the provision of part-time courses in their fee plans to HEFCW, if fees are charged above the basic amount on a pro-rata basis. 20. Student Support - all Welsh-domiciled students (and EU students in Wales) studying at eligible intensities would be entitled to a non means-tested loan to meet the up-front cost of their tuition fees. If we assume a full-time fee of 9,000, the package of support would be as follows: Tuition fee - 4,500 (assuming 50% intensity) Tuition fee loan - 4,500 As in England, there would be no means-tested maintenance support available to students under this model. Option 2b - Replicate the English part-time model maximum tuition fee of 7,000 (pro-rata) 21. HE Institutions in Wales will be allowed to charge a maximum (pro rata) tuition fee in Wales of 7,000 with limits for full-time equivalents (25% - 75% of full-time fee depending on amount of study that is the maximum fee on a course carrying 50% intensity would be 3,500). The provision of part-time courses would be regulated and institutions would have to include the provision of part-time courses in their fee plans to HEFCW, if fees are charged above the basic amount on a prorata basis. 22. Student Support - all Welsh-domiciled students (and EU students in Wales) studying at eligible intensities would be entitled to a non means-tested loan to meet the up-front cost of their tuition fees. The package of support would be as follows: Tuition fee - 3,500 (assuming 50% intensity) Tuition fee loan - 3,500 As in England, there would be no means-tested maintenance support available to students under this model. 23. In line with the controls in place in full-time higher education legislation would be needed to control student numbers in part-time provision. 24. Repayment of student loans the terms and conditions for the repayment of student loans would be the same for full and part-time students. They are: interest accrues at RPI +3% during study; statutory repayment date will be the April after three years of study (e.g. 1 st SRDD will be April 2015) unless part-time course lasts less than 3 years; repayment threshold will 21,000 and repayment rate will be 9%; interest rate will then accrue on sliding scale depending on income form RPI for 21,000 and less to RPI +3% for 41,000 and above; loan balance written off after 30 years. 5
Risks 25. There are also a number of risks that need to be considered when evaluating options 2a and 2b: the part-time system would not be equitable to full-time package of support; in some cases a part-time course would be more expensive (when comparing WG support) than a full-time course; part-time students would face much higher levels of debt; there is likely to be a reduction in employers contributions for employees undertaking part-time study; the legislative timetable to introduce changes is tight; future costs are extremely difficult to model due to a lack of robust data on part time students and on the possible impact of these changes on the behaviour of students and institutions. Finance Requirements and Governance Implications 26. The section provides a detailed financial analysis for each of the options under consideration. The provision of student support for part-time students in Wales should be seen in the following context: the Welsh Government is likely to be able to access tuition fee loans (funded by AME) if we follow the policy changes in England and offer loans to part-time students (this includes partial loans). However, this funding is ring fenced and should we decide not to follow England, we may not be able to access this funding thereafter; The modelling outlines a conservative estimate from a financial perspective; with the exception of non-cash (see options in paragraphs 24 26), the proposals are affordable within current DfES resources if we agree to the following: utilise unallocated budgets in the DfES MEG (see paragraph 23 for further details); reallocate existing resources (see paragraph 23 for further details); agree that any shortfall be met from within the existing HEFCW budget for part-time provision (the existing allocation that supports part-time provision in Wales); Students will qualify for a grant when they apply for a tuition fee loan from Student Finance Wales. 6
Current expenditure on Part-time support Table 1 2012-2013 2013-2014 2014-2015 2015-2016 Status Quo HEFCW Recurrent Funding 43,366,851 43,366,851 43,366,851 43,366,851 OU funding 7,967,897 7,967,897 7,967,897 7,967,897 Widening access and strengthening part time provision 6,192,000 6,192,000 6,192,000 6,192,000 Total allocated by HEFCW 57,526,748 57,526,748 57,526,748 57,526,748 Tuition fee Grants 3,100,000 3,400,000 3,700,000 3,800,000 Course grants 4,700,000 4,700,000 4,700,000 4,700,000 Total allocated by WAG 7,800,000 8,100,000 8,400,000 8,500,000 Total Part time allocation 65,326,748 65,626,748 65,926,748 66,026,748 Option 1a and 1b replica of full-time system of support maximum tuition fee of 9,000 or 7,000 (pro-rata) 27. These options would be funded in the following ways through AME provided by HM Treasury (for students accessing loans); the use of money previously identified as residual Assembly Learning Grant the use of the budget currently allocated for tuition fee grants; the balance of the costs (and any shortfall) would be met by top slicing HEFCW recurrent grant; options for non-cash provision are provided at paragraphs 33. 28. The overall costs of implementing this system during the current term of the Welsh Government (from 2012-2013 until 2016-2017) is provided in table 2 (for option 1a) and table 3 (for option 1b) below: 7
Table 2 -maximum tuition fee of 9,000 (pro-rata) 2012-2013 2013-2014 2014-2015 2015-2016 Option 1 - Tuition fee support provided in loans and grants - replica of tuition fee system adapted for full time Tution fees (assuming 100% take up) loans 6,700,000 16,700,000 21,200,000 23,500,000 grants 10,700,000 26,700,000 33,800,000 37,500,000 Government subsidy (non cash) 3,800,000 9,700,000 12,400,000 13,800,000 Maintenance support 4,700,000 4,700,000 4,700,000 4,700,000 Total cost 25,900,000 57,800,000 72,100,000 79,500,000 Funded By Loans AME provision 6,700,000 16,700,000 21,200,000 23,500,000 Near Cash Current Maintenance support budget 4,700,000 4,700,000 4,700,000 4,700,000 Residual additional ALG 4,200,000 9,900,000 14,900,000 17,500,000 Tuition fee grant budget 3,100,000 3,400,000 3,700,000 3,800,000 Reduction in HEFCW recurrent funding 3,400,000 13,400,000 15,200,000 16,200,000 non cash either additional non cash allocation 3,800,000 9,700,000 12,400,000 13,800,000 or further reduction in HEFCW allocation Remaining HEFCW allocation for funding continuing part time students implementing ministerial priorities Total (including recurrent grant, OU Funding and Widening Access Premium) 54,126,748 44,126,748 42,326,748 41,326,748 or if additional non cash provision is not available 50,326,748 34,426,748 29,926,748 27,526,748 8
Table 3 - maximum tuition fee of 7,000 (pro-rata) 2012-2013 2013-2014 2014-2015 2015-2016 Option 1 - Tuition fee support provided in loans and grants - replica of tuition fee system adapted for full time Tution fees (assuming 100% take up) loans 6,700,000 16,700,000 21,200,000 23,500,000 grants 6,800,000 17,100,000 21,600,000 23,900,000 Government subsidy (non cash) 4,300,000 10,900,000 13,800,000 15,300,000 Maintenance support 4,700,000 4,700,000 4,700,000 4,700,000 Total cost 22,500,000 49,400,000 61,300,000 67,400,000 Funded By Loans AME provision 6,700,000 16,700,000 21,200,000 23,500,000 Near Cash Current Maintenance support budget 4,700,000 4,700,000 4,700,000 4,700,000 Residual additional ALG 4,200,000 9,900,000 14,900,000 17,500,000 Tuition fee grant budget 3,100,000 3,400,000 3,700,000 3,800,000 Reduction in HEFCW recurrent funding - 3,800,000 3,000,000 2,600,000 non cash either additional non cash allocation 4,300,000 10,900,000 13,800,000 15,300,000 or further reduction in HEFCW allocation Remaining HEFCW allocation for funding continuing part time students implementing ministerial priorities Total (including recurrent grant, OU Funding and Widening Access Premium) 57,526,748 53,726,748 54,526,748 54,926,748 or if additional non cash provision is not available 53,226,748 42,826,748 40,726,748 39,626,748 9
Effect on DfES MEG 29. The overall budget for student finance and HEFCW (available to the HE sector) would increase if additional AME funding was made available from HM Treasury funds. There would be no effect on near-cash expenditure within the DfES MEG as any shortfall in funds would be met from within current HEFCW allocation. Option 2a and 2b provision of loans (only) for part-time tuition fees - replica of the English system of support 30. These options would be funded in the following ways: through AME provided by HM Treasury (for students accessing loans); additional non-cash provision (paragraphs 33) 31. The overall costs of implementing this system during the current term of the Welsh Government (from 2012-2013 until 2016-2017) is provided in table 4 (for option 2a) and table 5 (for option 2b) below: Table 4 maximum tuition fee of 9,000 (prorata) 2012-2013 2013-2014 2014-2015 2015-2016 option 2 - replica of the English part time model Tution fees (assuming 100% take up) loans 17,400,000 43,500,000 55,000,000 61,000,000 Government subsidy 11,300,000 28,300,000 35,800,000 39,600,000 Maintenance support - - - - Total cost 28,700,000 71,800,000 90,800,000 100,600,000 Funded By Loans AME provision 17,400,000 43,500,000 55,000,000 61,000,000 non cash either additional non cash allocation 11,300,000 28,300,000 35,800,000 39,600,000 or further reduction in HEFCW allocation Remaining HEFCW allocation for funding continuing part time students implementing ministerial priorities Total (including recurrent grant, OU Funding and Widening Access Premium) 57,526,748 57,526,748 57,526,748 57,526,748 or if additional non cash provision is not available 46,226,748 29,226,748 21,726,748 17,926,748 10
Table 5 maximum tuition fee of 7,000 (pro-rata) option 2 - replica of the English part time model 2012-2013 2013-2014 2014-2015 2015-2016 Tution fees (assuming 100% take up) loans 13,500,000 33,800,000 42,800,000 47,400,000 Government subsidy 8,800,000 22,000,000 27,800,000 30,800,000 Maintenance support - - - - Total cost 22,300,000 55,800,000 70,600,000 78,200,000 Funded By Loans AME provision 13,500,000 33,800,000 42,800,000 47,400,000 non cash either additional non cash allocation 8,800,000 22,000,000 27,800,000 30,800,000 or further reduction in HEFCW allocation Remaining HEFCW allocation for funding continuing part time students implementing ministerial priorities Total (including recurrent grant, OU Funding and Widening Access Premium) 57,526,748 57,526,748 57,526,748 57,526,748 or if additional non cash provision is not available 48,726,748 35,526,748 29,726,748 26,726,748 Effect on DfES MEG 32 The overall budget for student finance and HEFCW (available to the HE sector) would increase if additional AME funding was made available from HM Treasury funds. There would be no effect on near-cash expenditure within the DfES MEG as any shortfall in funds would be met from within current HEFCW allocation. Options for the provision of non cash 33. There are significant non-cash implications for both options. Early discussions with the Finance Directorate indicates that: the non-cash position of the Welsh Government remains as stated in the Final Budget published in February 2011, although further work is required across the Welsh Government to evaluate any potential pressures or opportunities and likely non cash position in 2011/12. These discussions will inform the future non-cash baseline position which will be taken forward as part of the next budgeting round (RAE 11); 11
the Final Budget shows that non-cash central reserves for 2012/13 and 2013/14 are very low and are not sufficient to cover these additional implications let alone manage any in-year potential pressures that may arise; and reallocation of non-cash can only be broached through the budget setting process. Even then, there can be no guarantee that an additional non-cash allocation can be made to DfES, and therefore DfES should bear the financial risk in proceeding. 34. As there are no issues of regularity or propriety nor is the matter before you novel or contentious in the sense of being likely to lead to legal challenge prior approval by the Corporate Governance Unit (CGU) is not required. 35. In accordance with FN1/07 & FN 01/09 this submission does not require prior CGU clearance, but has been copied to the CGU Mailbox for monitoring purposes. Strategic budgeting division are content with the contents of the submission and Cabinet paper clearance number SB4073. 36. This cabinet paper has been cleared by DCELLS Corporate Services Division. The clearance number is CSD: 040/11 Communications 37. There is significant media and public interest in the light of the UK Government s proposals for England and the very public campaign of opposition to higher tuition fees. If Cabinet agrees the recommendations in this paper, I intend to make a statement to the Assembly on 21 June. Thereafter, a programme of work will be put in place to implement the legislation required as soon as possible. We will need to consult on key elements of the legislation programme. HEFCW will also need to be consulted about the proposed changes to its remit. Changes to the student finance arrangements for students ordinarily resident in Wales will be communicated through the Student Finance Wales website and other established channels involving our delivery partners in local government and the Student Loans Company. Recommendations 38. Cabinet is asked to agree that we introduce a system of tuition fee support for part-time students that replicates the full-time system with a lower maximum tuition fee level of 7,000 (option 1b). This option is affordable, offers some additional income to the HE sector together, provides appropriate support for undergraduate part-time learners and has support from key stakeholders in Wales. 12 Leighton Andrews, AM June 2011