Within the space of 24 hours, legal loan shark Wonga was forced to withdraw its marketing information aimed at students following online complaints. The Helena Kennedy Foundation spoke out after our attention was drawn to their self-serving attempts to promote their short term, high interest loans as an alternative to the Student Loans Company. We were swiftly joined by the National Union of Students, consumer finance groups and an outraged Twitterati, with NUS accusing Wonga of “predatory marketing”. But this episode should raise alarm bells for university leaders, who seem to be living on another planet when it comes to the harsh reality facing students in the current economic climate.
Legal loan sharks like Wonga are going in for the kill, because they realise what many universities do not: some students are experiencing real hardship and are struggling to make ends meet. The ‘bank of mum and dad’ is drying up as much as its real-life high street counterparts. Jobs that were previously taken by students, like stacking shelves or working in a call centre, are currently being pursued by the growing ranks of the unemployed, including graduates. These issues are barely acknowledged in public debate and the scale of the problem has yet to be identified.
The Helena Kennedy Foundation has been providing financial support through bursaries for the most disadvantaged FE college leavers studying in higher education in 1998. We are more than just a bursary scheme: we also provide one to one support, skills training and work placement opportunities, but our bursary remains the most popular aspect of our support. Last year, we had a record number of applications for our support and the demand on our emergency hardship fund was unprecedented. In spite of receiving a full grant, a full student loan, financial support from her institution and a bursary from HKF, one of our students still struggled to cover her basic living costs and resorted to a Wonga loan until we were able to help her out.
Universities need to take affordability more seriously than they currently are. Instead of increasing financial support available to help students in hardship, they are cutting back. Last month, the Office for Fair Access signed off on cuts to university bursary budgets totally £14m. There are honourable exceptions. Some institutions, like the University of East London, have resisted pressure to cut back on bursaries and offer fee waivers because they understand the needs of their students and what will help most. A good number of universities currently sponsor bursaries through the Helena Kennedy Foundation.
Given the extent to which universities will increasingly be judged on retention, progression and success rates, vice chancellors ought to consider the consequences of students getting caught up in commercial debt. One of the greatest concerns we have is the extent to which students like those supported by our charity are less able to devote time to their studies or take up extracurricular opportunities that add value in terms of employability compared to their wealthier counterparts.
Wonga’s rethink is welcome, but the problem of predatory high interest lending has not gone away. There is a brewing crisis in student finance and the sector seems not to have noticed. Those universities that have cut back on their financial support should think again.
Wes Streeting is Chief Executive of the Helena Kennedy Foundation and Deputy Head of the Independent Taskforce on Student Finance Information.
