Higher Education Strategy Associates

Tag Archives: England

November 10

An Update on England’s Teaching Excellence Framework

Last week, the UK Minister for Business Innovation and Skills (which is responsible for higher education) released a green paper on higher ed.  It covered a lot of ground, most of which need not detain us here; I think I have a reasonable grasp of my readers’ interests, and my guess is that the number of you who have serious views about whether the Office For Fair Access should be merged into a new Office for Students, along with the Higher Education Funding Council for England, is vanishingly small (hi, Andrew!).  But it’s worth a quick peek into this document because it puts a bit more meat on the bones of that intriguing notion of a Teaching Excellence Framework.

You may remember that back in the summer I reviewed the announcement of a “Teaching Excellence Framework” wherein institutions that did well on a series of teaching metrics would be rewarded with the ability to charge higher tuition fees.  The question at the time was: what metrics would be used?  Well, the green paper is meant to be a basis for consultation, so we shouldn’t take this as final, but for the moment the leading candidates for metrics seem to be: i) post-graduation employment; ii) retention rates; and, iii) student satisfaction indicators.

Ludicrous?  Well, maybe.  At the undergraduate level, satisfaction tends to correlate with engagement, which at some vague level correlates with retention, so there’s sort of a case here – or would be if they weren’t already measuring retention.  Retention is not a silly outcome measure either, provided you can: a) control for entering grades (else retention be simply a function of selectivity), and b) figure out how to handle transfer students.  Unfortunately, it’s not clear from the document that either of these things has been thought through in any detail.

And as for using post-graduate employment? Again, it’s not necessarily a terrible idea. However, first: the regional distribution of graduate destinations matters a lot in a country where the capital city is so much richer than the rest of the country.  Second: the mantra that “what you study matters more than where you study” works in the UK, too – measuring success by graduate incomes only makes sense if you control for the types of degrees offered by each institution.  Third: the UK only looks at graduate incomes six months after graduation.  Presumably, a longer survey period is possible (Canada does it at three years, for instance), but the only thing on the table at the moment is the current laughably-short period.

So, there’s clearly a host of problems with the measures.  But perhaps even more troubling is what is on offer to institutions who do “well” on these measures.  The idea was that institutions would pay attention to “teaching” (or whatever the aforementioned load of indicators actually measures) if doing so allowed them to raise tuition above the current cap of £9,000.  However, according to the green paper, the maximum an institution will be allowed to increase fees every year is inflation.  Yet at the moment CPI is negative, which suggests this might not be much of an incentive.  Even if inflation returns to 1% or so, one has a hard time imagining this being enough of a carrot for all institutions to play along.

In sum, this is not a genuine attempt to find ways to encourage better teaching; rather, it is using a grab-bag of indicators to try to differentiate the sector into “better” and “worse” actors, and in so doing try to create more “signals of quality” to influence student decision-making.  Why does it want to do this?  Because it desperately wants higher education to work like a “normal” market, the government is trying to rationalize some of its weirder ideas about how the system should be run (the green paper also devotes quite a bit of space to market entry, which is code for letting private providers become universities with less oversight, as well as market exit, which is code for letting universities fail).

Though the idea of putting carrots in place to encourage better teaching has value, an effective policy would require a lot more hard thinking about metrics than the UK government appears willing to do.  As it stands, this policy is a dud.

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.