Thursday 19 September 2019 4:02 am

Private providers aren’t the problem with student finance, they’re part of the solution

Olga Dolchenko is chief executive of Future Finance.

As our students start or return to their courses this month, so higher education funding has once again come under the close scrutiny of journalists, concerned parents, and young adults envisaging a debt-filled future. 

Student finance has become an annual debate at this time of year, ever since the introduction of tuition fees in 1998. That simmering argument turned to boiling point with the trebling of fees to £9,000 a year in 2012, and the recent Augar review has ensured that the issue remains high on the political agenda. 

The debate about the nature of funding – private versus public, for both student fees and maintenance costs – is a long-term political battle. But right now, we face the urgent issue of how the sector tackles the student funding gap. 

A worrying survey by Moneysupermarket this month found that more than a quarter of students today use sky-high payday loans, compared to one in 10 a decade ago. 

The government provides loans, but the rise in living costs means that, from our own research, only 29 per cent of students find that this fully covers tuition fees and everyday expenses. The Save The Student website calculates that the average student faces a monthly shortfall of £267 once the standard maintenance loan has been exhausted.

This shortfall is particularly damaging to students from poorer backgrounds. Not everyone has access to the Bank of Mum and Dad, or the luxury of time to hold a job (or, indeed, several) to raise extra cash, as this can get in the way of studying.

The problem is worse still for those who live in more expensive cities – many of which are home to some of the world’s best universities, such as London, Oxford and Cambridge. Students can end up paying monthly rent of more than £700, adding more financial stress to the pressure of studying. 

But with no credit history, the funding routes once students have exhausted what is available to them from the government are often severely limited, and may not even consider the fact that the individual is studying so doesn’t have a regular income. 

Providers must be mindful that these are young people, many of whom will be managing their own finances for the first time, so greater financial education is paramount. Short on options, it is no wonder that more and more students may be tempted to turn to payday loans or rack up credit card debt.

Students need to be able to turn to the right kind of finance – a legitimate and transparent option tailored to their needs. As a sector and society, we need a pragmatic debate about the options available. 

This means acknowledging that private funding must be part of the mix, rather than the knee-jerk assumption that any private credit provider in this space must be taking advantage of students. 

A young person’s economic background should not deter them from going to the university of their choice if they have the grades, just because it is in an expensive city. Nor should it prevent postgraduate study, for which, in the absence of similar government loans, funding is even more challenging. 

Let’s not allow this country’s brightest young talent to be deterred from going to university or have their early careers blighted by unmanageable debt because we avoid taking about private finance.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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