Over in another corner of Wonkhe that Jim Dickinson is building a compelling case for serious problems within the student loan and graduate repayment system.
The whole article is well worth engaging with, but in essence he is arguing that because the composition of the student body – and thus the pool of graduates making repayments – has changed to the extent that the underlying government assumptions about repayment no longer hold.
Put it like this. Over the last decade or so students, proportionally, are doing different subjects at different providers. They come, proportionally, from different backgrounds – the mix of entry qualifications and ages has very likely changed too. And all of these aspects, we know from looking at LEO data will have an impact on earnings: and thus repayments, and thus the affordability of the entire loan system.
Lagging indicators
Like much in the financial world, our understanding of the contribution of higher education to graduate earning potential is founded on a series of predictions based on past performance. On one level this is problematic: nobody predicted that the (actuarially speaking) long-overdue global pandemic would happen in 2020 rather than any other year, nobody predicted that hype around large language models would build to such an extent that it would have an impact on graduate recruitment this year.
On another level this is simply the best available data: if we didn’t use past performance the only other option is to guess.
Whichever we choose, it feels like a worthwhile exercise to take at least some account of the way the sector is changing and has changed. So (with a little bit of HESA statutory data collection magic), that is what I am trying to do here.
The places they’ll go
Exhibit A, here, shows the proportional difference in student numbers by provider over a decade (2014-15 to 2024-25). You can filter by subject area at CAH3 level, allowing you to really get into the weeds of the growth and decline of quite small areas of provision – though by default I am looking at totals. And as you might expect, you can also filter by level and mode of study. While the dots show proportional changes over the decade – and that’s what we are sorting by – the bars underneath and the lines below show numerical changes.
The proportional indicators are notable in that the bits of the sector that have really expanded (looking at full time undergraduates here) are either what we loosely term “alternative” providers (largely for profit, have joined the state-funded part of the sector since 2017) or more traditional universities that have greatly expanded their franchise and academic partnership programmes in recent years.
In England and Wales the only constraints on the growth and decline of providers is the demand among prospective students. There is no strategic design behind changes to the shape of the sector beyond about 2012, and what we see now is the result of the absence of that strategy. Nobody in any centralised position of power decided in 2014-15 that things would be better if we increased the number of business and management students at Ravensbourne University (formerly a specialist arts provider) by 8,290 per cent over the course of a decade; or that King’s College London needed to spin up around 1,000 extra undergraduate psychology places in that time, from a starting point of just 25.
In both cases there may be a reason, but the reason was not linked to any assessment of societal need by the government on behalf of the taxpayer. The providers in question are responding to what the market will sustain – and they know if (eventually) there are concerns about graduate outcomes the Office for Students will be on them like a ton of bricks (one could argue that a cyclical process of inspections would get there a bit quicker, and on stuff like teaching quality too).
Disciplinary process
As is fairly well understood, business and related courses have seen sizable expansion in recent times. In 2014-15 just 15 per cent of undergraduate full time students took business courses – that had risen to 20 per cent by 2024-25. Again, it is worth labouring the point that this is purely the action of the invisible hand of the market: nobody has ever decided that what the UK needs is about 150,000 more business students but that is what we have been given.
The size of the student body overall has grown too, so for a subject area to grow as a proportion of the whole requires some substantial increases in student numbers. Going from computing subjects representing 4.5 per cent of all undergraduate provision to 6.8 per cent represents a doubling in student numbers.
That’s just at a top level – we can also drill into subjects at a much finer level of granularity (for ease of viewing you need to select a subject group of interest here). You might have spotted, for instance, a growth in social science subjects on the main chart, but may be surprised to learn that the fastest growing full time undergraduate subject within that grouping is health studies – a discipline that covers health and social care in public policy.
What is not clear is whether that subject has grown as a result of demand from the NHS, the Department of Health, or local government – or whether it has increased in popularity due to public interest.
Over in business and management you will be surprised to learn the growth has been focused in more general business provision – with the proportion taking courses linked to specific disciplines like management, tourism, accounting, and marketing falling over time. It appears that we are educating large numbers of business generalists – and it is not clear why this would be so.
Group work
You might have spotted that I have included a filter for “mission group” within most of the dashboards above. Loyal Wonkhe readers will recall that I am not a fan of the use of self-selecting membership bodies as a proxy for provider strategy or teaching quality, but the names are a well-known shorthand in the sector for both.
In coverage of undergraduate recruitment you will be familiar with the idea that the Russell group is growing at the expense of other providers, and indeed we can see that we are looking at an increase of just under 30 per cent over ten years. I tend to split the grouping into the big seven (Oxford, Cambridge, UCL, KCL, Imperial, Manchester, Edinburgh – very much a distinct subgrouping based on sheer scale and financial power) and the mainstream Russell group: the latter has an extra 72,000 full time undergraduates compared to 2014-15.
But in terms of proportional growth (which bits of the sector have gotten larger) these achievements are dwarfed by those of specialist providers: alternative providers are twice the size that they were, with those who happen to be members of IHE growing even faster. Mainstream specialist providers – arts universities and conservatoires, for example – may be small individually but have grown by 75 per cent over ten years.
So that’s one version of student choice: niche providers have grown to meet specific applicant interests, and the diversity of the sector has improved much as the politicians behind recent reforms had hoped.
Another version of that story could be told via the growth of franchise and partnership provision. It is fair to say that recent years have seen this part of the sector: originally a way to support niche provision (hello Doreen Bird!) and outreach, it has become increasingly associated with low quality, high volume provision at unregistered providers. Some growth at smaller modern universities is going to be due to that kind of provision, and we may be able to use charts like these to watch it unwind as larger delivery providers register with OfS and begin submitting their own HESA data.
In neither of those cases do we have a meaningful track record of salary benefits for graduates: something that the government would use to track loan repayments and thus the overall affordability of the sector. There is simply no data available given these patterns of rapid growth.
Into uncertainty
How little we really know about likely future graduate repayments means that there is always going to be an inherent risk in loan-backed student finance. Recent changes to the two major schemes (the threshold freeze for Plan 2, the longer repayment period and lower threshold for plan 5) can be seen as the government shifting large parts of this risk onto graduates themselves.
Comparing the affordability of various systems of higher education across countries is – whatever OECD says – a fool’s errand: the underlying differences in everything from underlying education systems to cultural norms and the state of the job market make a like-for-like approach nearly impossible. But it is fair to note that the UK spends less public funding (as a proportion of total sector income) than nearly any other comparable nation: while retaining what is widely regarded as a world-class system.
If a world-class system of mass higher education is what we need to flourish as a nation in an increasingly unstable world – to be clear, I am arguing that this remains the case – there needs to be a serious reckoning around the way we fund it. And if we are hoping that this results in a larger government contribution it is perhaps fair to assume that the government needs to be a lot clearer about what it is paying for.
What is the unit cost of provision relative to the unit revenue for the subjects which have expanded most rapidly? The universities identify subjects which can be expanded rapidly with higher gross margins, such as Ravensbourne with a new building located in London switching from its failing arts provision. The common feature of the three subjects you picked out of business and management, psychology, and healthcare studies may reflect a personal interest in such information and require a low standard of numeracy for admission, even if a mandatory statistics course is required. Some subjects are undoubtedly driven by fashion and by what students perceive as potentially higher earnings, for example, computer science. Technical subjects requiring more costly facilities, higher standards of numeracy and physical skills in the use of tools for problem solving have declined, for example, civil engineering. Which other subjects are decline? Obviously foreign languages and that situation is a result of schools gradually dropping compulsory foreign study for GCSE since 2004. The pandemic has also had an effect across many subjects.
We can not afford a world-class system of mass higher education at the current scale. What we needed was much better 16-19 education. Get rid of A-levels and fund the English Baccalaureate and technical education at colleges, but the universities do not want these changes as it is not in their interest. The budgets of competing government departments and the unsustainable level of taxes is already placing downward pressure on provision. Some strategic provision needs to be led by the needs of the state and most applied provision needs to be led by the needs of the private sector and the universities will also fund whatever they like together with state subsidies for public good research. The coordination structures are in place, it is just a question of whether the major private sector companies have an interest in recruiting nationally.
What education would you say is required for an unstable world?
The UK government spends £21bn a year on the upfront costs of student loans (is that a low level of government/public spending) and has an accumulated student debt in the loan book of c£275bn which is forecast to rise to £500bn (£0.5trn) by the 2040s (ceterus paribus). It was assumed that would be repaid if the graduate premium is maintained in future cohorts (omnia paria esse vix possunt). The U.K. also has the second most expensive system of higher education among OECD countries with a very significant impact on individual students’ perceptions and for many realities of student debt. As your excellent article makes clear the composition of the sliced and diced amassed student debt has changed and it is difficult to know if future earnings will be enough to repay the loans. If they are not it will mean higher taxes and how that cost would be spread is uncertain. The U.K. may have a world class university system as judged by rankings compiled by academics, but it also has one of the lowest levels of productivity and economic growth and one of the highest levels of youth unemployment. If we’re so clever why are we so poor at making these connection explicit? (Re vera dicis multum debiti subprime esse?)
Great article.
The total lack of strategic controls was one of the main problems with the new fee system, unfortunately totally overshadowed by arguments over costs to graduates. The sectors provision is now driven and shaped by what can be marketed to potential students, most especially fresh faced 18 year olds.
This has led to a shape of provision nobody would choose and over the year billions wasted, at cost to students and the taxpayer, on extremely low quality and marginal provision. Its been a really bad but entirely predictable outcome that was never going to be prevented by a central regulator- even if the OFS didn’t instead choose to spend its time on political boondoggles.
As is becoming unfortunately more common with the old WonkHE data presentation thrown together in Tableau, this is a very disingenuous presentation of the data to suit a narrative. Many of these providers with growth are in the international market and not from UK student loans. Please provide that as a selectable option and reanalyse the results. Or not. Guess it is a question of credibility David.
“It appears that we are educating large numbers of business generalists – and it is not clear why this would be so.” This is surely naïve, David? Unless you really mean “it is not clear why this is being allowed to happen”?
Mature business students are being actively recruited, with enormous marketing budgets, by the likes of Global Banking School. The maintenance loans available even to those living at home – which all of these franchise students will – means these students have no real upfront cost when taking these courses; their tuition is paid and the maintenance loan likely enhances their incomes. Unless they earn the threshold for repayments, which many of them won’t expect to and may even leave the country before they do anyway, they’ll never pay anything. It’s an enticing prospect when work experience is often enough of a qualification to get on the course for these private providers, whose duty of care is only to the bottom line.
You have a small group of universities validating these degrees so they can skim off some of the tuition fee to bolster their ailing finances. Private providers syphoning fees from the taxpayer and delivering courses on a low-cost basis from secondary offices with limited facilities and pastoral care – despite charging the same as proper universities – and making huge profits, hiding behind the idea of “wider participation”. Students who may or may not make any use of the degree they are awarded, rack up huge amounts of debt that will largely just have to be written off by the Exchequer.
And a regulator that is comatose at the wheel.
It needs to be called out for what it is. It is very clear to me “why this would be so” and it has nothing to do with education and everything to do with rapacious profiteers exploiting a scandalously wide open goal.