The most recent government release on FE loans indicated that the number of applications from learners aiming to study at level four was being hit. Mike Farmer explains what this might mean for the sector.

There has been plenty of analysis of the impact of 24+ Advanced Learning Loans, but one aspect does not appear to have received much attention — the impact at level four, which appears to be much greater than at level three.

In 2012/13, the year immediately prior to the introduction of the loans scheme, about 10 per cent of learners aged 24 and over studying at level three and above were at level four. In 2013/14, the first year of the scheme, the proportion dropped to 5 per cent, which is consistent with the proportion of level four 24+ loan applications since the start of the scheme.

So, leaving aside the apprenticeship ‘fiasco’, the introduction of the 24+ loans scheme appears to have its biggest impact on the numbers choosing level four qualifications. So far as I can judge, this was not predicted.

The Department for Business, Innovation and Skills (BIS) Regulatory Impact Assessment, published in June 2012, for example, anticipated an overall 45 per cent fall in student numbers, but made no prediction about differential effects on level four.

Why should this be so? And should we be worried?

There are no easy answers to the first question. We all need a much better understanding of this newly-created market and what influences consumer behaviour.

The paucity of detailed published information (eg on qualification uptake) does not help.

By April 2014, for example, nearly 60 per cent of all level four loan applications were in one subject (accounting diploma) — but is that consistent with previous years?

What changes have there been in the types of level four learners? Have employer-supported part-time learners fallen more than self-funded and full-time learners? Since level four+ overlaps with higher education there may be some answers from that sector, on which there is more detailed information.

Leaving aside the apprenticeship ‘fiasco’, the introduction of the 24+ loans scheme appears to have its biggest impact on the numbers choosing level four qualifications

The Higher Education Funding Council for England reports significant recent falls in higher education student numbers on part-time and sub-degree (level four and five) courses such as HNC/HND, DipHE and Foundation degrees following the introduction of the current higher education loans regime.

Employer funding for students is also (consequentially?) reported to have fallen significantly. Could the same trends be happening at level four+ in FE? Policy debate cannot sensibly happen in an information vacuum.

Is the fall in level four numbers a problem anyway? On the one hand the government and just about everyone else is stressing the importance to the nation of higher level skills, particularly in certain key areas (nuclear commissioning/de-commissioning and HS2 spring to mind).

On the other, the loans schemes in both FE and higher education are designed to facilitate student choice, on the basis presumably that the consumer knows best.

However, significant public hand-wringing immediately sets in when consumers make what are perceived to be the ‘wrong’ choices (think ‘endangered subjects’ in higher education).

The recent BIS consultation on the future of FE loans suggested that one of the reasons for a transfer of HND/Cs from the higher education to the FE loans system, was that students at private colleges were ’not in priority vocational areas’ (translation — taking the ‘wrong’ subjects).

For me, the policy lesson is that once you establish a market, you must accept the consequences of consumer choices, although you need to understand them better, and provide better consumer advice.

The dilemma for government is if, in its view, such a market fails for vocational areas where it has a policy on what subjects and qualification levels people should take, it no longer has the financial levers to deliver what it wants. This is exactly what Professor Ewart Keep has pointed to in his paper What does skills policy look like now the money has run out?

Level four is a fascinating test case for this thesis.