The proposed expansion of the FE loans system to cover to cover level two qualifications and also younger learners could hit participation levels, the Association for Colleges (AoC) and the Association for Employment and Learning Providers (AELP) have both warned.

The associations have issued separate responses to the government’s consultation on extending the 24+ advanced learning loan system — but they harboured the same concerns that the proposals could affect learner numbers.

The Department for Business, Innovation and Skills is looking to include qualifications at level two, as well as level three from the age of 19, and its consultation closed last week.

Loans for learners aged 24 and over at level three and above were introduced in August 2013, replacing the previous system where the government paid half the course fees, while the learner paid their half  upfront. With a loan, the learner pays all course costs, albeit over the lifetime of the loan.

But the AELP’s consultation response warned that “any reduction in eligibility for full or co-funding will reduce participation in learning.”

It continued: “For many of these groups, particularly the low skilled, people who are unemployed and prisoners, this reduction in investment will be very costly in the long term for both the state and for these individuals.

“For many of these learners taking a loan under conditions will not be a suitable alternative so this will inevitably shift resources from those who need it most to those who might be prepared to take the commitment of a loan.”

The AoC response said precautions would have to be taken to prevent potential learners from being discouraged by the loans.

Its response said: “We agree with the plan to extend the loan system by age group and level but on certain conditions.”

The conditions included allowing courses to remain free for students on benefits and for those taking courses in the lowest level qualifications and maintaining funding for high-cost courses such as science, technology, engineering and maths.

The AoC response also warned that the extension should only be “taken forward when SLC [Student Loans Company] and SFA [Skills Funding Agency] systems are ready”.

Both associations said it was difficult to predict learners’ responses to loans as the current system had only been in place for a year.

However, AoC and AELP warned that learners at level two may not benefit enough from the qualification to make it worth taking out the loan.

The AoC response said: “A larger share of economic returns for level three courses go to individuals (via higher pay) whereas many of the economic returns for level two courses go to the organisations who employ them (eg care workers do not get pay increases when they achieve statutory level two courses but their employer retains the ability to stay in business).”

Even if learners did take out a loan, AoC added, the relatively small economic benefits meant they might never hit the £21,000 earning threshold to pay it back.

The AELP response said: “The government must put sufficient controls in place to avoid problems in FE similar to those identified by the Business, Innovation and Skills Committee in its recent report on loans in HE, which found that inaccurate debt forecasting and failure to collect student loans effectively threatened the continued existence of the current HE loans model because the cost of providing loans is as much if not more than the original funding.”

The consultation document also suggests that rules which prevent learners from taking out more than one loan at once should be abolished, and instead a maximum should be set for the amount of money one person can borrow in their life time.

Both AoC and AELP agreed that learners should be able to take out more than one loan, with AoC suggesting up to four loans at once. And the AoC response agreed a maximum lifetime amount should be set. However, AELP was less sure. It said: “Although setting a single maximum loan amount might appear simpler it would not be easy to establish the appropriate maximum level that should be allowed.”

The government response to the consultation is due to be published on November 13.