Title of the slide Second line of the slide LASER Learning Awards Seminar Funding Changes and their implications for Sept 2013 Joy Mercer, Director of Policy Association of Colleges 11 February 2013

Title of the slide Second line of the slide What this presentation covers 16-18/19+ education funding trends 24 + Adult Learner loans Challenges

Title of the slide Second line of the slide Where the education money is FE Colleges £2.7 billion Sixth Form College £0.75 billion College Apps £0.3 billion Schools 3-16 £46 billion School Sixth Forms £2.1 billion 16-18Apprentices £0.5 billion Colleges 19+FE £1.8 billion College Fees etc £0.8 billion £ 19+ Skills £1.2 billion College HE £0.5 billion University Teaching Grant £3.8 billion HE Fee Loans £3.6 billion High cost pupils £0.6 billion FE Loans

Title of the slide Second line of the slide Post-16 education budgets HM Treasury controls mean annual dep’tl budgets. Higher education grant-loan transfer education budget static/declining since Lack of clarity about future SFA funding partly protected in 2010 spending review. Significant risk post Source: BIS/DFE statements plus OBR projection on loans

Title of the slide Second line of the slide education budget Note on allocations Yr 1 numbers drive Yr 2 budget allocations vs FE -3.2%, SFCs -2.2%, SSFs -2.6% Source: EFA funding team DFE has ensured 5-16 Schools budget rises with inflation. Series of cuts made in education in 2010 (EMAs, grants to Councils, Entitlement down to 30) numbers down in and possibly in funding-£4,543 in Funding per secondary pupils aged 11 to 16 at £5,576 - a 22% premium. HE -£8,000 Is £3,900 enough for a core full-time programme?

Title of the slide Second line of the slide What government wants from education? a drive to improve standards in both academic and vocational courses. The Ofsted Chief Inspector's latest Annual report declares that 35% of institutions need improvement. Alison Wolf's review of vocational education prescribed a series of reforms to improve quality. measures to ensure that every young person acquires a basic level of Maths and English by the age of 18 if they did not so by 16. ensuring more young people from poorer families enter selective institutions. reducing the number of young people becoming unemployed and increasing the number of apprentices.

Title of the slide Second line of the slide 19+ FE/Skills funding Academic year figures Allocated Allocated Allocated Budget Forecast ASB2,5392,5922,6022,1601,974 Performance97%96% Total SFA3,8813,8093,9613,6603,638 SFA’s Spending Review cuts backloaded (until Loans start) + Two year’s of underperformance = A really tough allocation round in and no tolerance on New SFA formula creates new issues Adult Skills Budget (ASB) top-sliced to support Employer Ownership plus pressure to fund City Deals/Community Budgets Source: AoC analysis of allocations plus estimates

Title of the slide Second line of the slide Managing 2013 New Funding Formula EFA Funding Update (Dec 2012) Student Number Statements (Jan 2013) Queries to EFA or to Councils (Feb 2013) Final allocations (Mar 2013) New SFA Funding Formula Provisional SFA Allocations (Dec 2012) SFA Funding Rates and Rules (Jan 2013) Final SFA allocations (Mar 2013) 14-16s High need pupils 24+Loans Employer ownership European Social Fund HE Student Number Controls City Deals & Community Budgets Community Learning Trusts Prioritise!

Title of the slide Second line of the slide 24+ Advanced Learner Loans A ground breaking reform Full-cost fees for 24+L3+ Student Loan Company pays the fees HMRC collects them A different student relationship

Title of the slide Second line of the slide Loans in FE – why? Financial Cuts current expenditure because loans are capitalised Grant to SFA cut by £400 mil in BIS takes an impairment charge (estimated at 60%) Other reasons for FE Loans No upfront payment (except for 24+ apprentice loans) Possible to extend existing HE model 9% repayment over £21,000 income Interest rate varies with income tax band after 2016.

Title of the slide Second line of the slide Loan implementation Timetable Plan to introduce FE Loans announced 2 years ago Students able to apply for loans in 49 days time (1 st April) Student Loan Company starts paying loans in August 2013 Protecting the consumer It is likely that students will find it easy to get a loan, the bigger question will be whether they want one.

Title of the slide Second line of the slide 24+ Advanced Learner Loans Eligiblity Aged over 24, UK/EU resident, England-based study SFA-approved provider QCF Level 3+4, Access to HE, A-levels, Adv/Higher Apps Anyone allowed four loans (L3, L4, Cert, Dipl) Process Loans – min (£300), max (SFA rate), apps (50%) Online application to SLC from April 2013 College confirms enrolment/attendance/course details Monthly payment, apportioned over course length Payments stop if student withdraws.

Title of the slide Second line of the slide The HE vs FE loans system HE Loans24+ ALLs FeesRegulatedUnregulated Loan amountCover 100% of FeeOnly up to Maximum set by SFA matrix CourseDegree-level but set by institution Approved L3 or L4 qual on SFA database ApplicationDirect to SLC with UCAS help.Direct to SLC Loan distributionHeadcount control Cash quota (fee/ student trade-off)

Title of the slide Second line of the slide The challenge for Colleges Loans in FE are massive challenge for Colleges Sums of money relatively small in Financially, the future for 19+ may be fees and loans Three big issues -planning & pricing -advising -processing

Title of the slide Second line of the slide Planning & pricing Demand Little useful pricing data Low public awareness Many 24+students & apprentices pay nothing at moment Fall in mature and part-time HE students in 2012 Some positives – remove up-front fees, no “firstness” rules Opportunity to expand if you can find the students Relationship between demand and price

Title of the slide Second line of the slide 24+ Adv Loans allocations FY £129 mil FY £398 mil Student numbers 324,000 over 24s on SFA L3,L4 of whom 41,000 pay no fees 91,000 apprentices SLC planning assumption 80,000 in 2013, 150,000 in 2014 Colleges & SFA funded providers 800 have relevant students AY equiv c£220 mil

Title of the slide Second line of the slide The public 24+ L3+ market 250 Colleges, 30 Univs & HEIs, 500 training organisations Average loan allocation £275,000 in academic year £500,000 when 24+L3+ loans fully operational Average student numbers 100 Yr 1 students, 190 full year Fees averaging £2,500 to £3,000 for the full course

Title of the slide Second line of the slide Maximum loan values? A (1)B (+12%)C (+30%) D (+60%) E (+72%) Certificate (13-24) £724£811£941£1,159£1,246 Certificate (25-36) £1,265£1,417£1,645£2,025£2,176 Diploma (37-48) £1,987£2,225£2,583£3,179£3,417 Diploma (49-72) £2,573£2,882£3,345£4,117£4,425 Diploma (73-132) £4,170£4,670£5,421£6,671£7,172 Diploma (132+) £6,602£7,395£8,583£10,564£11,356 Version 2 of the SFA Loan rates matrix, June 2012

Title of the slide Second line of the slide Pricing Pricing technicalities SLC links loan to an approved learning aim SFA confirm prices/issue LARA January 2013 SFA rate is a maximum not a price list Pricing and students Some students will be inquisitive about what fees buy Colleges have found fees a challenge in the 2000s Focus on maximising Fees * Group size * Retention

Title of the slide Second line of the slide Processing Registration of the loan with Student Loan Company Expect Colleges to make a course offer Student applies (with Passport No, LARA, Dates, Loan £) College confirms enrolment after 2 weeks (provides ULN) Attendance and withdrawal Termly confirmation of attendance Changes of circumstances procedure Withdrawal triggers end of loan Compelling personal reasons procedure

Title of the slide Second line of the slide Is it worth bothering? Cons “Students/Employers don’t want them so we’ll lose money” “It’s better not to offer loans than to mess up” “It’s always possible they’ll be canned in 2013 or 2015” Pros “Loans will help students change careers or make progress” “If demand drops elsewhere, there’s room to expand” “Many HE students in Colleges start on Level 3 courses” “Government may extend loans to more students in future”

Title of the slide Second line of the slide Implications Fewer qualifications per student Stepping stone qualifications towards GCSE maths and English Skills for employability General qualifications are getting harder-no modules, limited resits; end exam assessment Competition within the AO market for general qualifications

Title of the slide Second line of the slide Implications for 19 plus Access to HE-reprieve from loans but have to progress to HE; possibly other ‘vulnerable’ groups funded through decline in HE enrolments Loans could be a commercial opportunity to develop programmes for career changers Marketing of loans and qualifications that can deliver quickly and cheaply On line learning and open source learning Development of higher apprenticeships and non prescribed HE- involvement of employers Initial Teacher training L3/4/5