Should students pay their fees on a credit card?

Sometimes, things can go wrong for students. And when they do, they can be up against huge administrations that (naturally) will seek to defend themselves.

For our wicked problems season, the Office of the Independent Adjudicator’s Ben Elger wondered what would happen if you’re a student at a university that goes under, pointing out that regardless of any student protection plan, an insolvency would position students as unsecured creditors – at the back of a “long queue for a vanishing pot of money.”

An actual university collapse is quite an extreme example – but there are plenty of other things that can happen. What if your campus closes? What if your course turns out not to have the accreditation promised? How about if the “optional” modules closely related to your chosen career path disappear along with the lecturers that taught them? What if the “spacious, well stocked” library turns out to be more like the 5.05pm Avanti from Euston to Manchester? What if your international agent has outright lied to you about the uni or the course? And how about if “access to industry professionals” turns out to mean ten email addresses and a “good luck” note?

Inflatables

It is relatively inevitable that a competitive market will encourage inflated claims about courses and providers, or claims that end up hard to deliver on over the life of a degree course as demand and finance fluctuates. Regulation in the English system has so far focussed on the biggest “hard to deliver” risks – but even the protections for students right now for these things are pretty weak.

Student Protection Plans only cover “institution, course or campus” closure, or the shuttering of “material components” of courses – and even they are only being defined as “core modules” by most. Meanwhile OfS is looking at whether regulation might be deployed over the “inflated claims” end of the problem through both its admissions review and its student contracts work – but that will end up being generalist work – it’s not a body that takes on individual cases.

There is another way to discourage inflated claims and protect students – give them proper rights that they can enforce. The Competition and Markets Authority Guidance couldn’t be any clearer, but defining students as consumers remains controversial with student organisations, consumer “champions” like Which? and Martin Lewis are curiously silent on the opportunities, the OIA is only tentatively guessing what the courts would do if a case ever got there, and rare actual cases have a habit of being quietly settled out of court.

Daddy, the milk is warm

All of which had me thinking. Just before Christmas our fridge packed up, and (attempting to support the high street) we ordered a new one from a little shop in North Watford. It all seemed fine for 24 hours, but then we noticed that it didn’t actually seem to be keeping anything cold. We were offered a repair – but it came back visibly damaged. And by the time we complained again, the store had collapsed.

The good news is that because I had paid for it on my credit card, the purchase was covered by Section 75 of the Consumer Credit Act 1974. It’s a bit of UK consumer protection law that means your credit provider must take the same responsibility as a retailer if things go wrong with a purchase.

The problem for students has long been that the credit provider in their case doesn’t count – the Sale of Student Loans Act 2008 exempts the loans from regulation under the consumer credit act. This means lots of things – they can’t involve the Financial Conduct Authority in a dispute, the terms they are bound to pay aren’t fixed at the point of taking out a loan (the government can change them), and it also means that Section 75 wouldn’t work. It means that legally, those buying a university gym membership have more legal protection over the quality and standard of the equipment in there than the lectures they’re late for.

What’s interesting is that Section 75 applies for any purchases between £100 and £30,000 – so would include the vast majority of annual tuition fees across home and international, as well as UG and PG. The law also allows you to claim for “consequential losses” arising from a problem. Traditionally that means cancelled concerts meaning non-refundable hotel and rail fares, but it doesn’t take long to think through potential “consequential losses” for students. Section 75 casework has even offered compensation for “inconvenience caused” over problem cars and questionable kitchens.

Penny for your thoughts

The immediate problem is that it would very unwise for a student entitled to undergraduate funding to use a credit card to borrow the cost of tuition fees – but the good news is that you get the protection for the whole cost of an item or service, even if you only pay for a part of it (even just 1p would count) on credit. The next problem would be getting SFE/SLC to loan you (say) £9,249.99, but SFE says that taking out a partial loan is fine – you pay the penny to the university and it pays the rest.

All of which might well mean that unless and until the protections for students improve, we would be very wise to advise all students on a course with fees to pay a penny towards them on a credit card. They’ll get the assistance of a global credit card company used to paying out, and a Financial Ombuds service with real teeth that can make them. Provider collapse will still be a disaster, but at least students will be properly protected. And for less dramatic scenarios, universities will face real legal challenge from those card companies over dodgy claims or unjustifiable changes. Insurance premiums either won’t cover it, or will rise, and behaviour will change in the student interest.

Can anyone think of a reason why not?

For more on this theme join us at The Secret Life of Students in March – booking now open. 

Leave a Reply