The impact of student finance: actions are needed to ensure a better understanding of the true costs

Blog posts

30 May 2019

Emma Pollard, Principal Research Fellow

Two IES reports (see here and here) are published today alongside the long-awaited Augar Review. The review, or to give it its official title the ‘Independent panel report to the Review of the Post-18 Education and Funding’ report, has collated and assessed evidence on the present system of student finance across further education (FE) and higher education (HE) and presents recommendations on how it can be changed. It draws on a wide range of evidence and contributions including commissioned research studies: two of which were undertaken by IES.

The first of our studies focuses on a proposed Alternative Student Finance model which could help make higher education more accessible for students who feel unable to take on interest-bearing loans for religious reasons. The need for an alternative model was highlighted in a consultation in 2014 and set out in the HE White Paper (Success as a Knowledge Economy, 2016) in the context of improving choices for all students. A model was developed by DfE with support from a range of experts and this would be distinct from traditional student loans but would not provide any relative advantage or disadvantage; and would be open to everyone in England regardless of background or faith but would be compatible with their religious beliefs.

Our study with current Muslim students, graduates and potential students explored decisions about HE and the role that cultural and religious beliefs and student finance play and interplay in these decisions, and explored views on the proposed new model. The research, undertaken in partnership with NatCen, extends our joint work on student finance in HE, building on our successful series of large scale surveys of student finance – the Student Income and Expenditure Survey (SIES).

The qualitative research identified a wide diversity of experiences but illustrates how student finance can have a profound influence on choices and also experiences for those who do go on to HE. It finds that the key aspects of the current system that are troubling are the accrual of interest, which was often not well understood; and the size of the debt, which is larger than the amount borrowed due to the interest that it attracts from the moment the loan is taken out.

This leads individuals to find solutions that will avoid the interest and/or minimise the debt burden, and these ‘solutions’ can narrow choices: to local institutions, to courses with funding support (now rapidly dwindling), to institutions and courses that garner family approval, to postpone HE, or to decide against HE altogether. Also these solutions - including taking on paid work, living at home and feeling an obligation to live frugally - can negatively impact upon the student experience which is an important aspect of the university ‘package’, particularly reducing opportunities to engage fully with the social and community aspects, and potentially negatively impact upon outcomes. The study also highlights the importance of university-based bursary support and government grant support as an important safety net or facilitator.

These experiences and strategies are unlikely to be limited solely to Muslim students and indeed is reflected in our second study that reviewed the evidence on the impact of the student finance system on the participation, experience and outcomes of disadvantaged young people. The literature review assessed over 70 key papers alongside statistical data to identify the impact student finance has on socioeconomically disadvantaged young people across the whole of the student lifecycle, and to identify how the significant changes in the student finance system have played out.

We conclude that student finance is one of a number of challenges to FE and HE entry and does have an influence.  Although evidence shows that increasing tuition fees at undergraduate level has not overall deterred entry to full-time HE study among less advantaged young people, this and other aspects of and other changes to the student finance system can directly and indirectly influence study decisions, student experiences and the potential to stay on course.

The student finance system in FE and HE is complex – involving a wide range of mechanisms each with different eligibility criteria and features, that operate at national, local and institutional levels; and is constantly evolving. This creates confusion, misunderstandings and myths, and genuine concerns. As individuals get closer to making decisions about HE and (for some) move through the HE system and out into the labour market their experience of the student finance system changes and their worries and concerns change, and thus the potential impact of student finance changes.

Financial issues and worries can: create concerns about whether studying is worth the costs; serve to narrow institutional choices (to those closer to home and/or those perceived to offer better employment prospects); create concerns about how to cope with the day to day management of finances; limit time and resources to engage fully in student life; and create concerns about the impact on lifestyles and choices beyond studying (once graduated).

Both these studies show how student finance matters and much could be improved to understand and address the real concerns and experiences of potential and actual students, and how they change over the student life-cycle. Actions are needed to:

• Ensure a better understanding of the true costs but also benefits of study and an understanding of the workings of student finance and its implications for individuals so they can make more informed decisions.
• Simplify and stabilise the student finance system in order to reduce complexity, confusion and potential inequities.
• Better target support and align it with need, with a strong call for the reintroduction of grants.
• Consider the terminology used around student finance, so that it is informative and transparent but viewed as accessible.
• Gather further evidence of the impact of student finance on those choosing not to go into HE, and the impact beyond FE and HE upon life, work and career decisions and experiences.

Emma Pollard is a Principal Research Fellow at IES and leads the Institute’s work on Higher Education. 

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.