OfS turns its attention to franchised business courses with a foundation year

One of the controversies that has surrounded the Office for Students’ inspections regime is the relatively opaque way that it selects providers and programmes.

The most we get is “criteria” for these student outcomes assessments, and we now have confirmation for the 2024 round of the areas it considers create the greatest risk to student outcomes, based on a review of the most recent data.

This academic year it’s going to select providers by considering outcomes on full-time first degree courses, including those with an integrated foundation year, and other undergraduate courses.

Importantly, we’re told that it will also consider business and management courses and courses delivered through sub-contractual partnerships. Additional criteria, such as the number of students affected, will be used to identify the final group of selected providers. And in the middle of that three-factor venn, there’s a very interesting slice of provision.

What is OfS getting at?

The combination of mentions of integrated foundation years, business courses and subcontracting is very interesting – partly because a good hypothesis is that all three characteristics make up a good chunk of the story in the DfE figures on foundation years that were released recently.

We’ve talked before on the site about franchising – but as well as the aspects that concern how those programmes are sold, and the often confusing information that is on DiscoverUni, there’s also some issues to consider when it comes to student protection.

Right now, often clustered around large urban areas, there are a number of fast-growing private providers that focus on business degrees with an integrated foundation year. They don’t appear on the OfS register – because their programmes are all subcontracted from providers either on the register, or elsewhere in the UK.

This means that we don’t get lots of the things we might normally see in the accounts – and those providers aren’t directly held to other OfS standards on, say governance. The position when it comes to duties on things like harassment, free speech or Prevent and so on is also fuzzy – although the OIA is in the process of consulting on a tightening up of complaints practise in this area. OfS also can’t regulate them directly on their finances.

That’s because the standard OfS way of regulating this provision is through the subcontracting provider, over time – so you see the B3 outcomes over 4 years, and if they’re poor this priorities thing then may well highlight a set of those relationships for a closer, in person look.

It’s not great that right now while the dashboards let us see subcontracted provision by registered provider, neither a student nor anyone else can see the totality of those outcomes by the providers being franchised too – but in theory OfS is working on that.

The problem may well be that given these providers can grow very fast, they can also shrink very fast – and that raises question marks both over the “outcomes over time” data and over how students would be protected if something went wrong.

Freedom from and freedom to

As well as a number of universities maintaining a portfolio of providers it franchises to, the end providers often also have a portfolio of providers that courses are franchised from. These are often highly lucrative – any number of the private providers we’ve seen can be posting 30-50 per cent of (mainly tuition fee) turnover as profits, as well as high levels of dividend being paid to a small number of directors, loans to other companies and so on.

Those profits are being made having often paid domestic sales agents to recruit the students onto the programmes, and having paid the universities a franchising fee in exchange for oversight duties and taking on the regulatory risk. Even if you’re not opposed to private profits in HE in principle, you can look at some of the numbers and wonder when we decided that the student loans system was designed for this kind of thing in practice.

It’s good news for the franchising providers too. You get a good chunk of income for not a lot of work, you get to top up your WP scores if you struggle with that back at the main ranch, and there’s some plausible deniability and the ability to teach-out the contract if things start to go south.

There are some big questions that surround the “pull down” of maintenance finance as opposed to tuition fee loans that DK looked at on the site a while ago – and it’s not immediately clear whose job it is between DfE, OfS or the SLC to get across the questions DK raises. What we do know is that Susan Lapworth’s March 2023 board report says that OfS…

…continues to progress cases that involve concerns that SLC funding may be being paid inappropriately, particularly where courses are delivered through sub-contractual partnerships.

So let’s imagine that one of those private providers has a small set of relationships with universities. Then imagine that some of those universities start to get itchy feet about continuation or completion rates in that provider – and so cancel the contract and switch to teach-out.

If that end provider was used to taking out large dividends, or had made financial commitments to other bodies perhaps for a campus or other facilities, higher than average non continuation or non completion rates would make recruiting first “foundation” years really important in that pyramid of income. We also could see a “run on the bank” scenario where the other universities cancel and teach-out too.

So if for reasons of outcomes, or reasons relating to OfS’ fraud concerns, a couple of the university partners were to pull out and teach out – suddenly the business model you’ve established is seriously undermined.

There’s a reason to do the teach-out and take the associated income for a while – but as well as doing the bare minimum to maximise your margin in the process, there’s got to be a point at which (ahead of all the students on four year degrees completing) that the model falls over – and having taken out significant dividends or made loans to related companies, the owners could just cut and run.

Risky businesses

I’ve talked before about the inadequacy of Student Protection Plans at monitoring the effectiveness or quality of teach-out, and in a scenario like this it’s also questionable whether a student would be able to transfer to a franchising university given some of the geographical distances involved in the partnerships.

There are also real questions over the nature of the contractual relationships and the level of access that the subcontracting providers would have to student records or staff in any aftermath.

Tidying up the above may never become necessary – and it might be that OfS can achieve better scrutiny here with its existing powers, or even needs new powers. But it also may be that at some stage someone puts together the TikToks advertising the programmes to students with pre-settled status on the basis of access to student finance, the outcomes, the actual experience, the adequacy of monitoring and the astonishing profits and send the sector into a fresh round of reputational freefall.

It does feel like an exceptionally risky area for everyone concerned – especially for the students, often in the most disadvantaged categories, enrolled onto those programmes. Let’s hope it’s not a risk that crystallises.