Higher Education Strategy Associates

Category Archives: U.K.

August 04

Summer Updates from Abroad (2): The UK Teaching Excellence Framework

The weirdest – but also possibly most globally consequential – story from this year’s higher education silly season comes from England.  It’s about something called a “Teaching Excellence Framework”.

Now, news of nationally-specific higher education accountability mechanisms don’t often travel.  Because, honestly, who cares?  It’s enough trouble keeping track of accountability arrangements in one’s own country.  But there are few in academia, anywhere, who have not heard about the UK’s Research Excellence Framework (or its nearly-indistinguishable predecessor, the Research Assessment Exercise).  There is scarcely a living British academic who has travelled abroad in the last two decades without regaling foreign colleagues with tales of this legendary process, usually using words like “vast”, “bureaucratic”, “walls full of filing cabinets”, etc.  So news that the country may be looking at creating a second such framework, related to teaching, is sure to strike many as some sort of Orwellian joke.

But no, this government is serious.  It’s fair to say that the government was somewhat disappointed that its de-regulation of tuition fees did not force institutions to focus more on teaching quality.  With the market having failed in that task, they seem to be retreating to good old-fashioned regulation, mixed with financial incentives.

The idea – and, at the moment, it’s still just a pretty rough idea – is rather simple: institutions should be rated on the quality of their teaching.  But there are two catches: first, how do you measure it?  And second, what are the rewards for doing well?

The first of these seems to be up in the air.  Although the government has committed to the principle of assessing teaching at the institutional level, it genuinely seems to have not thought through in the least how it intends to achieve this.  There are a lot of options here: one could simply look at use of resources and presence of qualifications: student/teacher ratios, number of profs who have actually sought teaching qualifications, etc.  One could go the survey route, and ask students how they feel about teaching; one could also go the peer assessment route, and have profs rate each others’ teaching.  Or there’s the “learning gain” model, used by the Collegiate Learning Assessment, which was part of the AHELO system (from which, by the way, the UK has now officially withdrawn).  Of course, everyone knows that most of these measurements are either untested, or can be gamed, so there’s some fear that what the government really wants to do is to rely on – what might generously be called – lowest-common denominator statistics; namely, employment and income data.

Why might they want to do something this bell-ended, when everyone knows income is tied most closely to fields of study?  Well, the clue is in the rewards.  British universities have – as universities do – recently been clamouring for more money.  But according to this government, there is no more money to be had; in fact, at about the same time they announced the new excellence framework, they also announced a £150 million cut to the basic teaching grant, spread over two years.  So the proposed reward for good teaching is the ability to charge higher fees (so much for de-regulation… ) But as I explained a couple weeks backraising tuition doesn’t help much because, thanks to high debt and a generous loan forgiveness system, somewhere between 60 and 80% of any extra charges at the margin will end up on the public books circa 2048, anyway. 

But… if you only increase tuition at schools where income is the highest, the likelihood is that you will get a higher proportion of graduates earning enough to pay back their loans, over time.  And hence less money will need to be forgiven.  And hence this might not actually cost so much.  Which is why there is an incentive for government to do the wrong thing here.

Still, on the off-chance the government gets this initiative at least partially right, the impact could be global.  Governments all over the world are trying to get institutions to pay more attention to teaching; expect a lot of imitators if the results of this exercise look even half-promising.  Stay tuned.

July 22

Summer Updates from Abroad (1): England’s Demented Student Loans Policies

You’ll recall that the UK had an election in early May in which the Conservative Party, contrary to most polling, won a majority of seats, and thus was able to form a government without need for a coalition.  On July 8, the new government delivered its first budget, which contained a lot of policies that – to put it mildly – had not exactly been fully outlined to the electorate eight weeks earlier. In student aid, what that meant was the outright abolition of maintenance grants, and their replacement with student loans of slightly higher value.

Rewind a little bit here for some history: before 1992, the UK was a free-tuition, all-grant system.  In that year a student loan program was set up because the government felt it couldn’t continue to increase maintenance grants.  In 1998, means-tested tuition of up to £1,000 was introduced, and maintenance grants were abolished in favour of an all-loans system.  After 2006, when tuition was effectively hiked to £3,000, maintenance grants of up to £2,900 were re-introduced, alongside loans for fees, and maintenance loans of up to (roughly) £4,000 pounds (amounts were indexed).  The maintenance loan and grant system remained unchanged when fees were effectively raised to £9,000 in 2012 – that is, unchanged until now.

With means-tested grants being replaced by loans, and those loans being placed on top of the £27,000 (C$54,000) in fees that a three-year degree will bring, there are a lot of lurid headlines (like this one) about how the poorest students are now facing the largest debts – possibly over £52,000 (C$104,000) at the end of their education.  That figure is, strictly speaking, accurate – but it doesn’t quite capture the weirdness of what’s going on.

As I explained back here, there’s a certain fantasy element to student loans in England.  Repayment occurs in strict income-contingent fashion, with no payments on the first £21,000 (C$42,000) of income, and 9% of any income on top of that.  At the end of thirty years, any outstanding balance will be forgiven.  This creates some odd incentives: if you expect to pay back your loan at some point, there is a reason to accelerate payment because the loans are (barely) interest-bearing; on the other hand, if you don’t think the minimum payments will end up repaying your loan, there’s absolutely no incentive to try to repay the loan, since it will eventually be forgiven anyway.  In essence, for people in the latter group, these aren’t loans, but rather a 9% surtax on income over £21,000, which stays in place for 30 years.

Depending on whose estimates you’re using, it turns out that anywhere from 60 to 80% of present-day students are not expected to repay their loans (the range exists because, frankly, predicting repayment rates 30-years out is a bit tricky, and depends a lot on initial assumptions).  As a matter of logic then, if you load more debt onto these people by replacing grants with loans, it simply isn’t going to be repaid – it’s going to wind up as forgiven debt sometime in the late 2040s.  True, very poor students who end up among the wealthiest quartile of graduates will end up paying more, but for the most part this is just an accounting trick: the government is lending money to students now with the full intention of forgiving most it (with interest) in thirty years time.

Here’s the central dilemma: under the English loan system, raising student contributions is almost impossible unless you either change the repayment threshold, or you change the repayment rate.  The problem is the Tories initially promised they wouldn’t do either of these things, so now they’re “examining” the weasel option of raising real contributions over time by de-indexing the £21,000 threshold.  That will bring in more money, but it doesn’t change the reality that, in the main, this is just exchanging grants now, for loan forgiveness later.

A decent accounting scheme or auditor-general wouldn’t allow it.

For those want to know more, here’s the Institute of Fiscal Studies’ take on the budget changes; more reasonably, have a look at the excellent Andrew McGettigan’s summary thereof.

March 03

Lowering Tuition in the UK

So, the UK Labour Party has decided that if it gets elected this spring (odds: probably just less than even), it will bring tuition fees down from their current maximum of £9,000/year to a maximum of £6,000/year.

Progressive, right?  Not in a million years.

As I pointed out back here, the weirdness of the UK system of fees and income contingent loans is that fees have risen so high that very few people – about one in five – are expected to pay it back given how the repayment system is set up (no payments on income below £21,000 [C$40,300], and 9% on the everything above it).  The rest – 80% or so – are expected to see at least some of their loan forgiven.  So if/when tuition gets reduced, those who were not expected to repay more than two-thirds of their loans will not see any benefit.  All that happens is that the debt they wouldn’t ever repay gets paid to institutions in advance, rather than lent to students and later forgiven.  Neither will universities be any better off: all that’s going to happen is that public funding will replace government funding pound for pound.

The benefit, in fact, would only accrue to those who were expected to pay more than two-thirds, and the largest benefit would go to that 20% who was expected to pay off their loans in full – i.e. the very best-off graduates (they don’t quite get off 100% scot-free; some part of this gain will be clawed back through higher interest rates on wealthy graduates).  This is why the BBC ended its Sunday interview with Labour higher education spokesman Liam Byrne, by asking the pointed question: “why propose something that benefits the Goldman Sachs graduate more than the social work graduate?”

Fair question – and so it was no surprise that Byrne ducked it, and stuck instead to his talking point that “the present system is unsustainable”.  I think by this he meant that the exchequer will spend ever greater amounts in future on forgiving loans – but if that’s the rationale, it’s hard to understand how bringing those payments forward makes it any more sustainable. And indeed, it’s worth remembering that the cause of the unsustainability (i.e. all that loan forgiveness for lower-earning graduates) is the thing that makes it at least somewhat tolerable and lightly progressive.

Now, one shouldn’t give the ruling Tory party too much – or indeed any – credit here.  The current fee/loan system was more or less designed by mistake; the Tories were under the delusion that very few universities would jack up fees to the maximum £9,000, and so the size of student debts (and hence loan forgiveness) came as a complete surprise to them.  If they could do it again, they’d undoubtedly make it far less generous to lower earners – and indeed, now seem intent on doing so by stealth, by freezing the repayment threshold and allowing inflation to erode its value.

None of this, of course, is to say that more public funds wouldn’t be welcome in the UK.  The question is, if you had a couple of billion to spend, as Labour now seems to want to do, would you: a) give it to institutions so they can improve the education they provide?  b) give it to students from lower-income backgrounds by reducing their tuition upfront (as the UK did between 1998 and 2006)? or c) hand it over to the richest tranche of graduates?

For some reason, Labour’s answer is c).  And on the politics of it, it’s hard to say they are wrong – in a poll taken over the weekend, 60% of UK voters say they back Labour’s policy.  And of course it’s easy to understand why; if you’re not paying attention (and let’s be honest, most people aren’t), you might think the tuition fee policy was actually going to make life easier for all students.  And who wouldn’t vote for that?

Apparently UK politicians – like Canadian ones – seem to think it’s better to play populist games with tuition rather than to actually do things that help low-income students.  That’s deeply unfortunate, but unfortunately not surprising.

January 13

Packaging Student Aid

One of the things about student aid that makes it such great fun as a policy area is that it’s as much about framing as it is about actual policy.  For instance, which of the following two policies would you like to have?

a)      A policy where students are asked to bear a huge amount of debt – over $100,000 in some cases for an undergraduate degree – over 25 years, and where three-quarters of students will never repay their loans in full; or:

b)      A policy where graduates are asked to pay a 9% surtax for 25 years, up to a maximum of about $100,000, but much less (possibly even $0) if their earnings are low.

If you’re a regular reader of the Guardian, you’ll probably recognize the first policy as being the one implemented by the Cameron government in 2012, to cover fees in English universities.  That’s the one the progressive types are always pointing at and shouting: “Look!  Students are being horribly indebted AND the government is losing lots of money through the program!  Quelle fiasco!”

But here’s the thing: that second program is also the English loan scheme.  As I’ve explained before, for the three-quarters or so of graduates not expected to pay off their loans in full, the scheme is simply a graduate tax.  It’s not explained that way, but that’s what it is.  It’s a packaging issue.

There’s something similar going on in student aid policy in the United States; namely, the interest in something called “Income Share Agreements”.  It’s been kicking around for awhile (the American Enterprise Institute wrote about it a year ago), but is getting more of a hearing these days because Florida Senator, and potential Presidential candidate, Marco Rubio is now backing it.  It’s basically a Human Capital Contract – someone gives you money today, and you agree to give them a set portion of your income for a set number of years.

If that sounds like a Graduate Tax, that’s because it’s exactly how a graduate tax works – the difference in this case simply being that you’re not giving that money to government, but rather to an individual who has chosen to “invest” in you.  The beneficiary is different, but the flow of funds is precisely the same.  But that difference is enough to get the idea some love from a Tea Party favourite.

And that is to say nothing of our experience in Canada where the CFS, which absolutely hates income-contingent loans, and has done so for years, applauded the introduction of the Repayment Assistance Program (RAP) – which basically makes the Canada Student Loans Program fully income-contingent – because the government simply chose not to call the program “income contingent”.

This all goes to show: in student aid, few people actually look at substance.  The real debate is about the packaging.

November 11

An Update from England

In 2012, the UK government allowed tuition in English universities to rise from a little over £3,300 to ($5,500) to about £9,000 ($15,300) in a single year.  Well, technically, they de-regulated tuition up to a maximum of £9,000, but since charging less than the maximum would obviously imply that programs weren’t top-quality, pretty much everyone went to the maximum immediately. Actual average tuition jumped to about £8,600 ($14,620).

So, of course, we’ve all been wondering what the effects of this would be.  I’ve looked at the evidence a few times in the past (see here, here, and here), but now the UK University and College Application Service (UCAS) has issued a summary of the effects of fee increases on student demand.  Why UCAS – the body that processes university applications, but by dint of which is also the body that monitors changes in applications and enrolments by things like age, race, income, etc. – chose to answer these questions on a very short Q+A webpage rather than with a report with corroborating evidence is a bit puzzling; nevertheless, the corroborating evidence can be found in the organization’s own annual analyses of demand, available here.

UCAS’ conclusions were as follows: that the fee increase did cause a small one-time reduction of demand.  But the long-term trend of increasing demand continued, and application rates are now at their highest level ever.  Most importantly, and I quote, “In terms of demand, entry, and type of institution, differences by background have reduced over this period”.

Got that?  Not only did a $9,000 increase in tuition, with only loans and no grants to offset the higher fees, not increase educational disparities by race, income, etc., they actually coincided with a narrowing of educational gaps.

(For clarity here, neither I nor UCAS is implying that the narrowing of the gap is caused by the tuition increase; merely that the trend was unaffected by the increase.)

The English fee policy is still ludicrous, of course.  Charging a huge fee when you know that students can’t pay it back is just idiotic (current estimates suggest that 50% of all fee loans will go unpaid, and that 80% of students will receive some loan forgiveness).  But nevertheless, it is very striking evidence about how resilient demand is in the face of tuition increases.  You’d think that governments around the world would take a look at this and say, “hey, most everything people claim about the negative effects of tuition fees on access didn’t happen here.  Why is that, and should our government re-consider our policies in light of it?”  You might also think that governments that don’t do this might be guilty of deliberately ignoring evidence in order to preserve policies which harm the long-term health of universities, in service of crass short-term political objectives.

You might think that – of course, I couldn’t possibly comment.

May 15

Does More Information Really Solve Anything?

One of the great quests in higher education over the past two decades has been to make the sector more “transparent”.  Higher education is a classic example of a “low-information” economy.  Like medicine, consumers have very limited information about the quality of higher education providers, and so “poor performers” cannot easily be identified.  If only there were some way to actually provide individuals with better information, higher education would come closer to the ideal of “perfect information” (a key part of “perfect competition”), and poor performers would come under pressure from declining enrolments.

For many people, the arrival of university league table rankings held a lot of promise.  At last, some data tools with some simple heuristics that could help students make distinctions with respect to quality!  While some people still hold this view, others have become more circumspect, and have come to realize that most rankings simply replicate the existing prestige hierarchy because they rely on metrics like income and research intensity, which tend to be correlated with institutional age and size. Still, many hold out hope for other types of information tools to provide this kind of information.  In Europe, the big white hope is U-Multirank; in the UK it’s the “Key Information Set”, and in Korea it’s the Major Indictors System.  In the US, of course, you see the same phenomenon at work with the White House’s proposed college ratings system.

What unites all of these efforts is a belief that people will respond to information, if the right type of information is put in front of them in a manner they can easily understand/manipulate.  The arguments have tended centre around what kind of information is useful/available, and the right way to display/format the data, but a study out last month from the Higher Education Funding Council for England asked a much more profound question: is it possible that none of this stuff makes any difference at all?

Now, it’s not an empirical study of the use of information tools, so we shouldn’t get *too* excited about it.  Rather, it’s a literature review, but an uncommonly good one, drawing significantly from sources like Daniel Kahneman and Herbert Simon.  The two key findings (and I’m quoting from the press release here, because it’s way more succinct about this than I could be) are:

1) that the decision-making process is complex, personal and nuanced, involving different types of information, messengers and influences over a long time. This challenges the common assumption that people primarily make objective choices following a systematic analysis of all the information available to them at one time, and

2) that greater amounts of information do not necessarily mean that people will be better informed or be able to make better decisions. 

Now, because HEFCE and the UK government are among those people that believe deeply in the “better data leads to better universities via competition model” the study doesn’t actually say “guys, your approach implies some pretty whopping and likely incorrect assumptions” – but the report implies it pretty strongly.

It’s very much worth a read, if for no other reason than to remind oneself that even the best-designed, most well-meaning “interventions”, won’t necessarily have the intended effects.

March 18

How ICRs can Become Graduate Taxes: The Case of England

As noted yesterday, graduate taxes and income-contingent loans have many similar features.  They both defer payments until after graduation, and they are usually payable as a percentage of marginal income above a given threshold.  In England right now, the payment scheme on ICR loans is that students pay 9% of whatever income they earn over £21,000 (roughly C$38,000).  The difference between the two is that with a loan you have a set amount to pay, and when it’s paid you’re finished.  With a graduate tax there is no principal, so you just keeping paying that fraction of your income for as long as the tax lasts.

That sounds like a simple and clear delineation, right?  Well, here’s a twist: what if the loan were so big that you had no practical chance of ever paying it off at the set repayment rate?  What would the difference between an ICR and a grad tax be then?  The answer is: practically nothing – and that’s exactly where England finds itself right now.

Let’s step back a bit: in 2010, the UK government decided to let institutions charge tuition up to £9000.  They also decided to allow students to borrow this amount for tuition (plus more, again, for living expenses) under the repayment scheme described above.  When they did this, they were under the misapprehension that universities might actually try to compete for students on price, and hence assumed an average tuition of about £7000.  Rather predictably, average tuition shot straight to £8500.  As a result, it’s quite common for students to be borrowing £12-13,000 per year, or £36-39,000 for a degree (that’s C$66-72,000 – yes, really).

Crazy, right?  Cue all the “intolerable debt burden” stuff.  But wait: these loans aren’t like the ones we’re used to.  Repayment is based on your income rather than size of debt – no graduate is ever required to pay more than 9% of their income over £21,000 in any given year, so the burden in any given year is pretty limited.  And – here’s the kicker – the loan gets forgiven after 30 years.  So, if you don’t finish paying, your obligation disappears without you having any debt overhang. Exactly like a Graduate Tax.

How many won’t pay it off?  Well, these things are difficult to predict, but even over 30 years, paying 9% of your income over $38,000 isn’t likely to completely pay off very many of these loans.  The government’s own financial forecasts are that 35-40% of the total net present value of the loans will have to be forgiven (others put it 8-10% higher).  At a rough estimate, that probably means 70 to 80% of all borrowers will see some loan forgiveness.

At this point you start to wonder if debt numbers really matter in this system.  Forget ICR: for most people, the current system is simply one in which government transfers billions of pounds in 2014 to institutions using student loans as a kind of voucher system, then turns a portion of those loans into student grants in 2044 via loan forgiveness.  In the meantime, graduates pay a 9% surtax on income over £21,000.

Altogether, a very wacky system.  Not a model for anyone, really.

November 21

The Canadian Style of University Management

I recently met someone who had just moved to Canada from the UK, to take up a decanal position here.  He mentioned that, since his move, the two things that had most shocked him were: 1) how little power he has in Canada, compared to the UK; and, 2) just how much bureaucracy there is here.  He relayed this to me by explaining the difference in hiring procedures between the two countries, which I reproduce below, in tabular form:
















* Indicates a step where a negative vote or decision can send the process back to an earlier stage.

As he was telling me this, I thought about how much of our university decision-making systems seem to have evolved to prevent things from being managed efficiently.  This can be defended on grounds of co-management or collegial governance – values that many hold dear, and which have often served the system well.  But there’s a cost to it.  Multiply that table hundreds of times every year, and across every institution, and you get a sense of how big that cost is.

It also occurred to me: in Canada, I always hear professors arguing that they’re overburdened with committee work, and deans arguing that they have responsibility, but no power with which to make decisions.  Moving to a more UK-like system would solve both problems.  But, in the end, it’s not clear that professors’ dislike of committee meetings is sufficiently great enough to ever allow that to happen.

January 31

UK Tuition Hikes Revisited

To recap: in 2012, average English tuition fees rose by 158% to roughly £8500, with no corresponding increase in grants.  As we’ve seen previously, this resulted in a fall in English applications of about 8%.  The effect was not evenly distributed among all groups: among 18 year-olds, the drop was 1-2% (depending on what base you use), whilst among applicants over 19, the decrease was 15-20%.

But of course, it’s never best to rely on one year of data, especially when the government announced the change a year and a half in advance; notably, some people will move up the start of their studies to take advantage of lower fees before the hike.  This is essentially what happened in the UK after both the 1998 and the 2005 tuition hikes – a jump in enrolments before the hike, then a fall immediately after the hike, followed by a rebound in the second year after the change as the system returned to equilibrium.

As data released yesterday by UCAS  shows, this is exactly what happened this year.

Application rates by Country, 18 year-olds 2007-2013













It’s not entirely clear what’s happened to over-18 admissions since the effective application deadline for mature students has not yet passed; however, initial indications are that application rates continued to fall for the over-25s, but improved, somewhat, for the 19-25 group.

A point of note is the fate of students from the lowest socio-economic strata.  These are the students which one would have expected to be most vulnerable to exclusion by higher fees.  In the first year after the hike, there were no disproportionate drops for poorer students – their application rates fell at about the same rate as all other income groups.  So how did they do?

Application Rates from lowest income quintile, by country, 2007-13













This chart is interesting for two reasons.  First, it shows that application rates from the lowest income quintile are now at an all-time high.  In fact, if we were to go back to the time when students in this quintile had full tuition waivers (2005), we would see that application rates are up 65% since that time.  Second, it shows the difference between England (where tuition is on average £8500) and Scotland (where tuition is £0).  The free-tuition jurisdiction has lower participation from low-income students (13% vs 19.5%), and it also has seen slower growth in participation (4.8% vs. 6.7%).

Again, these are the actual effects of a tuition hike of $9000 with no offsetting increase in student grants.  Send ‘em to your favourite student leader, plaster them to Pierre Duchesne’s head – there’s a prize for the first person who can read these and still make a coherent argument for why a Quebec-style tuition increase would have any effect at all on access.

January 21

The Effect of Tripling Tuition Fees: UK Latest

As most of you know, UK tuition fees more or less tripled this past year. The initial applicant/enrolment data from a couple of months ago (which I covered, here) indicated that applications fell by about 8%, but also that the drop came almost entirely from older students (among traditional-aged students, the drop was just 1%).  Worrying, but not apocalyptic.

Last week, two new interesting pieces of data were released.  The first was application data by race; though Black and Asian (i.e. Indian & Pakistani) students were often thought most vulnerable to changes in fees, data suggests they were actually less affected by tuition fee increases than were Whites.  This year, applications from Whites were down almost 9%, compared to 2.7% for Blacks, and 4.4% for Asians.  With respect to accepted applicants (see here for more information), the picture is essentially the same, except Blacks actually register a slight increase.  Part of the explanation is likely that mature students – the ones most affected by the tuition hike – are just a lot likelier to be White than Black or Asian.  Regardless, it’s not the nightmare outcome many predicted a year ago.

UK domestic applications by race (2007=100).













The other new data is on institutional enrolments.  If you’ve read any English higher ed news in the last 72 hours, you’ve probably seen headlines about “wild fluctuations” in applications and enrolments.  This seems overdone to me.  Yes, the decision to make students pay more did change applicants’ behavior.  But the average university in England always gets about six times more applicants than it has space for, so even if applicant numbers drop by 20% (which they did at a dozen or so universities), keeping accepted applicants (and, hence, paying customers) at roughly the same level isn’t difficult, as long as you tweak your admissions formula slightly so as to get a better yield.  Anyone with major fluctuations in new enrolments simply blew their yield calculation.

The University of East Anglia, for instance, saw a 14% drop in applications, but still had an entering class 1% bigger than the previous year.  Others were simply less lucky, or less astute, in calibrating their yields. Bradford, for instance, saw an 18% drop in acceptances, even though applications only fell 4%.

But the big question: did schools that raised their fees to the full £9000 do better or worse than those who kept their fees somewhat below that cap?  Well, for the 117 public universities with over 1000 applications per year for which I could find both enrolment and fee data, the results can be seen below.  There’s nothing obvious which indicates that higher fees make students go bargain-hunting, and that’s is probably why many institutions are thinking about raising their fees again, next year.

Average Institutional Change in Applications and Acceptances among UK Institutions, by Minimum Tuition Fee, 2011 to 2012.













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