Protecting students if a provider is at risk of closure

OfS' Director of Regulation Susan Lapworth explains the regulator's new rules when a provider gets into severe financial difficulties.

Susan Lapworth is Director of Regulation at the Office for Students

If a university or other higher education provider is at risk of closure, its students will have fundamental questions about what that means for them.

Will they secure a place on another course? Will they receive refunds, or credit for their studies to date? How do they get good advice about their next steps?

Thankfully, closures are rare, so the number of students faced with these difficult questions is small. But, it is right that – as the regulator charged with protecting student interests – the OfS has the tools we need to step in where the risk of closure is real.

That is why we have today announced a new condition of registration which will allow us to step in swiftly where there is a material risk of closure, issuing directions to providers to take actions to protect students.

We don’t intervene to prevent a provider from closing, because “market exits” are part of the way the sector operates. But we do intervene to ensure that any closure can take place in a planned way.

We want to avoid a disorderly exit, perhaps in the middle of an academic year, where arrangements have not been put in place to help students to complete their courses.

Rationale

We decided that introducing a new condition was necessary because we were concerned that the pandemic may have heightened the risks for some providers. We had also identified issues with the approach some providers had taken to the development and implementation of their student protection plans, which could mean that in a market exit situation the plans (and resulting actions) may not have protected the interests of students.

Some providers have struggled to understand what good student protection planning entails; others have been unwilling or unable to recognise that market exit was a possible consequence of their situation. At times, these situations can develop quickly, and it can take significant time for a provider to put in place credible plans and actions that would provide meaningful protection to students in the real world. The longer it takes to do this, the greater the risk to students.

We also need to ensure that current and prospective students have reliable information about the provider’s situation when that becomes necessary. They need to be supported to make decisions about their future studies. Consultation responses from students and those representing them agreed with these points.

How and when

The new condition would be used only where a provider is, in our view, at material risk of ceasing to provide higher education in England. Those are the rare cases where it is essential that we can intervene to ensure that a provider has detailed and deliverable plans to help students complete their courses at that or another provider, and that those plans are implemented when necessary to protect the interests of students. The condition does not apply to Further Education Bodies as defined by the Technical and Further Education Act 2017.

Deciding to intervene in this way can be a difficult regulatory decision. Our principles-based approach to regulation means that we consider each case on its merits, and there are a number of factors we take into account as we move from identifying an issue of regulatory concern, to using our statutory powers.

We engage formally and informally with a provider in these circumstances – we recognise that this is important if we are to understand the context in which it and its students are working. The directions we can issue under the new condition can be tailored to this context and a provider’s circumstances.

There cannot be a “one size fits all” approach to student protection, because every provider is different. And the needs of its students will be different too.

Protecting the student interest

Responses to our consultation from universities and colleges were less likely to agree with our proposals than those from students. In many cases, providers highlighted concerns about protecting institutional autonomy. We considered these responses carefully, but concluded that they did not set out sufficiently compelling reasons for the interests of providers to outweigh the interests of students in these situations.

Put more bluntly, we took the view that we need this condition in place so that it can be used when the risks to the interests of students become so acute that they justify intervention that will affect autonomy and create additional regulatory burden.

Debate about the financial risks faced by universities and colleges has increased over the past year. But before any of us had heard of Covid-19, the OfS was regulating to protect students from the potential impact of market exits.

The new condition of registration we have introduced gives us a sharper and much needed regulatory tool to do that in a wide range of circumstances – and that’s in the interests of students during the pandemic and beyond.

2 responses to “Protecting students if a provider is at risk of closure

  1. “We don’t intervene to prevent a provider from closing, because “market exits” are part of the way the sector operates.”
    Is it, though? This is a relatively new concept, and not the manner in which the bulk of the sector wants it to operate or has historically operated. If it is true, it seems to only be so due to the decision to let people join the ‘market’ who are at risk of failure down the line. I have some faith that this condition will serve some use in protecting students when needed; but haven’t students been more let down by the active creation of a situation where it is needed?

  2. “Haven’t students been more let down by the active creation of a situation where it is needed?”
    100% correct!

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