Further education and skills sector misses out on £250m in FE loans cash

Shadow Skills Minister Gordon Marsden has called on the government to “get a grip” after new figures showed that providers missed out on almost £250m in FE loans cash last academic year.

Figures released by the government showed that the total amount awarded for 24+ advanced learning loans in 2014/15 was £149m, which was 62 per cent less than the £397m allocated for the FE loans budget.

Mr Marsden, who was critical of the government’s decision not to create a national marketing budget for FE loans when they were introduced, said the figures showed the “sluggish uptake” on FE loans.

“Ministers need to get a grip urgently before funding, that is crucial for skills and training to give older adults improved life chances and as a key mechanism for improving our productivity, is snaffled up permanently by the Treasury,” he added.

David Hughes, chief executive at National Institute of Adult Continuing Education, said: “Not only has the number of learners making use of the loans decreased, it is also severely under-utilised. Imagine what that £250m of lost learning could have delivered for people if the loans system was functional?”

He called on the government to improve uptake by making loans “available for smaller qualifications, modules, units and professional qualifications”.

The system currently applies to learners aged at least 24 and studying at level three or four — but a government consultation last summer proposed that they should apply to level two and 19 to 23-year-olds.

No changes have been implemented yet, but Skills Minister Nick Boles said in the consultation response that the government would “look again at these proposals” through the spending review.

Independent education consultant Mike Farmer said the £250m of lost funding showed “these loans haven’t been as successful as the government hoped”.

“It’s a shame that more money available wasn’t taken up — it’s one of the few areas of public spending where there is spare cash lying about,” he added.

The latest figures showed that while the number of applications received for FE loans fell from 70,820 in 2013/14 to 67,280 last academic year, applications approved for payment rose from 56,220 to 56,870 over the same period.

But figures also showed that 72 per cent (48,670) of applications were by females and 15 per cent (10,210) by non-UK learners.

Meanwhile, 94 per cent (61,930) were for level three applications — with just 6 per cent (4,320) for level four.

Jonathan Simons, head of education at Policy Exchange which called in June for higher education funding to be diverted to FE, said the figures “illustrate the vicious circle that FE has got itself into”.

“Because loans are little understood, and demand from students is therefore low, colleges have little incentive to put on such higher level courses,” he added.

A spokesperson for the Department for Business, Innovations and Skills said: “The total funding allocation for 24+ advanced learning loans does not represent a target, but is demand–led and designed to ensure that any eligible learner seeking to support their studies will be able to do so.

“The take-up of advanced learning loans continues to increase year-on-year.”

Editor’s comment

Overdue loan action

Back in April last year, Leicester College principal Verity Hancock wrote a very interesting and telling expert piece for FE Week.

The article was headlined “The ‘tantalising’ potential of FE loans”.

And in it, she concluded: “Our experience is that a different approach is going to be critical in enabling us to maximise the potential that loans offer.”

Her comment could not be more apposite nearly 19 months later as we learn that £250m of FE loans funding went unused in these straitened financial times.

While this is a potential funding stream that is being ignored, equally, as David Hughes points out, it’s learning that’s not taking place. It’s skills that are not being developed in the time of a skills gap.

Perhaps now, nearly three years after Gordon Marsden criticised the lack of marketing for FE loans, it’s time for ministers to consider a PR campaign at the very least to increase awareness and the attractiveness of FE loans — before the system is expanded further, only for greater potential to be lost.

Chris Henwood


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  1. Tim Buchanan

    There needs to be more than a marketing campaign to invest the recipient needs to see that there is an outcome that they want at the end of their study which can be a job a better job or simply skills gained. At present there is little incentive except where cpd is a requirement to take out a loan, especially when progression is not necessarily linked to further skills development.

  2. FE Lecturer

    How can an FE loan be attractive? Many people are not on a high salary and have high mortgages or rent payments to make every month and may have had zero or very low pay rises for the last two or three years. Many people have a car loan and possibly some credit card debt because bills have gone up whilst their salary remained static.
    Many people will not see the chance to accumulate more debt as attractive especially as most companies (and FE colleges) don’t pay higher salaries when you get extra qualifications.
    We don’t need to waste money on marketing, we need to understand WHY people are not taking out 24+ loans to pay for courses leading to additional qualifications (and additional debt).

  3. Mike Farmer

    One thing the government could do would be to merge the FE loans scheme with the HE loans scheme into a single scheme. This would extend the more generous HE arrangments to FE students, simplify the whole scheme and make marketing the scheme to FE students much easier. This would make FE Level 4+ qualifications on a financial level playing field with equivalent HE qualfications. I am sure that the disparity in the loan arrangements is one of the factors in the rapid decline in numbers of 24+ students taking Level 4 qualifications.

  4. It’s not surprising in my view as we had very little interest when the learners and employers understood the concept. I think the budget should be moved to 19+ Apprenticeships as we always seem to to struggling with this budget each year due to demand. Put the money where the demand is. No point spending big budgets on marketing to promote a scheme with little interest.

  5. Does anyone up there know what’s really happening? The loans allocation process is based on ‘applications’ not actual take up.

    I know of a number of providers who have massively under-delivered (low demand), yet the following year have received a larger allocation. Why? Because allocations are based on learners who apply (ie the number of ‘potential loans’) not the actuals. Many learners may apply, in some cases multiple times, but it’s only the learner that can cancel an application. Basing allocations on this is not really that clever (or not really that honest).

    The real story here is surely, what is the comparison on costs and volume now to pre loans, ie number of ‘starts’ on loans provision and how much public subsidy, including projected non-payment of loans. That would be more telling.

      • Thanks for the link, but I think the take up of loans is only a part of the picture. Where is the information on how many applications, why is that used for future allocations.
        What is the repayment rate, total administration costs etc and how does the overall cost of provision compare the pre-loans Level 3 delivery, when it was directly funded by government. I suspect that delivery under loans versus delivery under direct grant funding costs the public purse a similar amount.
        A cynical view is that the whole process is just a accounting trick to ‘futurise’ government spending and kick the can down the road. The unfortunate consequence is that young people get saddled with debt. Given the disgraceful state of national numeracy, it’s likely that many of these people don’t even know the consequences of their decisions!

  6. It seems that like ourselves, many providers have had their loans money INCREASED each year, despite the numbers of L3 learners falling. In 2014-15, we had a loans facility of £443K an actually used about £195K. For 2015-16 our loans facility has been increased to £554K and we expect to draw down about £170K!

    Of course allocating ever-increasing amounts for L3 loans masks the extent of the real funding reductions. Our allocation on paper looks 10% better than it actually is when you take into account how much loan income we can realistically get in.

    I am sure our situation is replicated across the sector. Most of our potential L3 learners are adults from highly disadvantaged groups/areas of the city – many of them (and their families) are already “in hock” and not in a position to commit to a loan. No amount of targeted marketing will change that. The policy has been a disaster for thousands of aspiring adult learners from areas of high disadvantage who previously gained skills and qualifications that actually led to professional level jobs with good career structures and prospects.

    Monday rant over.