Whatever you think about the way the higher education “market” works in England and the clear position of not bailing out failing providers, we can all surely agree that students in the system must not be collateral damage.
Back in 2020 the Office of the Independent Adjudicator for Higher Education (OIA) put provider closure forward as a wicked problem, having recently seen the closure of GSM London after it was placed into administration in July 2019. As part of the taskforce we heard first hand the impact on staff both at GSM and the validator, and saw through the subsequent complaints the impact on individual students’ wellbeing, mental health and finances. We published our reflections on the closure as well as a briefing note on dealing with complaints where there is a provider, course or campus closure.
Since 2020 there has been another closure of a small provider, the Academy of Live and Recorded Arts (ALRA), which was unable to go into administration and went straight into liquidation, closing doors with immediate effect leaving students and staff without any recourse at all to the provider.
There have also been other cases where the Office for Students (OfS) has used its powers to intervene and subsequently the providers’ financial positions have improved.
Readers of Wonkhe will be familiar with the current financial position of the sector, leading to concerns around the increasing possibility of market exit as highlighted in several recent sector reports and speeches. It seems only a matter of time before the sector experiences a sudden “disorderly” exit (rather than a managed teach-out), due to loss of financial viability, probably on a larger scale than we have seen to date.
What can we learn?
The OIA’s perspective of market exit is different from other parties, drawing on our experience of handling student complaints arising from course, campus and provider closure and resolving, as far as possible, any individual impact on students.
What we have seen in recent years is a remarkable stepping up from other providers in the sector to offer courses and places to students. In the case of GSM a number of providers offered places to students, with Coventry University London teaching at the same campus and offering bursaries to avoid an increase in fees. In the closure of ALRA, Rose Bruford offered places to all students and other drama schools and those in industry also offered support.
We have also seen similar acts in other situations, for example where there have been sudden course closures, and often staff at both delivery providers and validators are working tirelessly to try and help these students under difficult circumstances. These transfers have not always been entirely straightforward and in our view, there are valuable lessons to be learned from these experiences from providers and students. We are acutely aware that there may not always be a receiving provider in a position to offer students places as there has been to date.
The impact of any sort of closure on students’ unions cannot be underestimated. Dealing with a course or campus closure and understanding and collating the students’ views is complex. We have seen students’ unions at receiving providers working hard to ensure the students feel part of their institution and support them through the transition.
A level playing field?
The OIA reviews complaints from HE students in the FE sector and, after the establishment of the Commission for Tertiary Education and Research (CTER) and the new tertiary regime, we will be reviewing complaints from FE students in Wales.
Even though the context and attitudes towards marketisation of education is different in Wales, the Technical and Further Education Act 2017 established an insolvency regime that applies to further education and sixth form colleges in England and Wales. This introduced a special education administration regime, which protects learner provision for existing students at insolvent colleges with the overarching duty to the learner.
While we understand that any attempt to translate this to HE may not be straightforward, and wider consequences would need to be considered, as an ombuds scheme which may be dealing with complaints resulting from a closure in both sectors it’s hard not to be concerned with differences in the protection for students where there is a sudden closure.
Even within the HE sector the differing corporate forms of providers means there are different insolvency tools available in different situations with some providers likely to have to go into compulsory liquidation where there is a tension between the legal duties of the administrator towards creditors and regulatory requirements for student protection. It is also unclear what the Charity Commission or Pension Regulator’s role would be in this situation.
What tools are available?
There are of course specific regulatory tools in the OfS’ powers which can be used where there is a material risk of a provider ceasing delivering higher education, such as Student Protection Directions which can mean the development of a market exit plan. In addition, all registered providers are required to have a Student Protection Plan (SPP) which shows how students can expect to continue and complete their studies if their course or campus or institution closes.
However in the event of a sudden exit and insolvency, the funds required to deliver any plans and compensation are unlikely to be protected and prioritised over other creditors. It is unclear how much weight an insolvency practitioner or administrator will give to these documents and plans when discharging their duties.
The insolvency process is complex – especially in a large provider which probably has complex funding structures, trusts and restricted funds. Even where there are funds left in an insolvency regime, it is likely that students will be treated as unsecured creditors, at the back of a long queue, and their interest will not be prioritised. The creditor process will not be a quick one and individual students whose provider has suddenly closed could be left to navigate a very complex landscape.
The OfS can only use the tools it has within its legislative framework, and as it noted in its response to the House of Lords report – and unlike other sectors such as finance or energy – there is no system-wide protection or power to make another autonomous provider take additional students, and that may not actually be the best option for students at either provider.
There could also be compounding issues we have not yet fully experienced in a large-scale closure – such as a high number of international students with visas, a large number of students in provider-owned or managed accommodation, or students on unique courses not offered elsewhere which would make transfer an even more difficult option.
Of course, it might not only be the students attending the provider itself who would be affected. If a provider with sub-contractual relationships were to become insolvent, it’s unclear how those students will be impacted and protected.
Although SPPs should include protection for those students it seems unlikely an insolvency practitioner will view all their claims in the same way. Our remit also covers some of the unregulated part of the sector – where there is a regulated partner still in existence there may be some protection, but where students at those providers are on a course not awarded by a university but another awarding organisation, it’s difficult to see where their regulatory protection and resolution might come from. Many students at these institutions are on courses not eligible for student funding and so pay their fees directly to the provider – and so are especially likely to be left significantly out of pocket.
While there might be some changes coming in the sector, for example the development of the Lifelong Learning Entitlement (LLE), which will give an opportunity for providers to think through and develop arrangements for transfer, there will continue to be huge risks for individual students in the event of a closure.
Let’s explore solutions
We have talked before about insurance schemes or a “pot of money” to help students in these situations. We often hear that many providers would not be willing to pay into a system as they do not think such a situation really impacts them.
But the impact on the wider sector, students and the reputation of HE must be worth further serious discussion, and we are increasingly finding that there is an understanding that this situation needs to be addressed. We’d like to move this discussion forward and invite interested parties or individuals to get in touch to explore how we, and others, could play a part in a more effective solution to help individual students who require support in the event of a closure.
Whatever the answer, students should not be the collateral damage. A provider closure can leave students significantly disadvantaged, with their experience of and faith in higher education ruined. The potential impact on some students’ mental health cannot be underestimated. The financial impact, in a system where students are at the end of a long list of unsecured creditors, could create significant hardship and may make it unsustainable for a student to complete their studies.
We cannot just wait for a large-scale disorderly exit to happen before we engage in a serious discussion.
Do get in touch if you want to engage on this important topic- charlotte.corrish @ oiahe . org . uk
The difficulty is where a) provider closes, b) Provider is in region with patchy provision and c) students picked that provider because they wanted or needed to be commuter students.
Many are not or not going to be able to move regardless of what places they are offered elsewhere.
Interesting analysis, which prompted me to check out my own university’s SPP. Apparently “the risk [that it] is unable to operate is considered extremely unlikely” as a result of which “measures [to mitigate the risk of institutional closure] are not required”. It is true that we’re not among the most likely to go to the wall, but good luck to anybody who does ever has to rely on this “plan”…..
I have to ask has Covid taught us nothing. The question is not if such a thing will happen but when, in my view. I, and a number of others, would never have considered Birmingham and Nottingham Councils going bust. But they have.
I think we should learn from “events” and hold exercises to create the play books of what to do in the case of a minor or a major organisation failing. We should do that today.
Provider collapse is well know in the Apprenticeship sector and perhaps it would be a good idea to look at case studies available. The priority has always been how best can the student be supported to finish their apprenticeship but with the added complication of sometimes having to find a new employer for the student to go to when it is the employer, as the provider, who has ceased to trade.
Perhaps students should be asked to pay into an insurance scheme – this is what we do when we as individuals take on expensive potential liabilities such as building work or holidays. If our students are really consumers as under the CMA, then perhaps we need to acknowledge the fact and embrace it.
Or perhaps Universities should have spent less on vanity projects assuming the international cash cow would never end.
Spending £200m on some shiny new buildings opposite the train station in order to close a campus just under a mile away from the city centre isn’t looking like its going to work out so well in Sheffield, for example…
There are lessons here, good and bad, from the energy sector and from NHS providers as well.
In a lightly regulated and/or entirely self-regulated context, we need the regulators and peers to be held accountable.
When a university goes bad, there could for instance be a legal duty to accept when ordered, as a condition of registration, any particular student from one to any particular other university of their choice, alongside adequate support payments. All of a sudden you might have some actual peer pressure for transparency and good governance. The government need not foot any additional bills for this, but only provide the relevant legislation and powers granted to reallocate to the right independent parties.
At the extremes, and as a market device, this may actually lead to students or companies ‘shorting’ weaker institutions which will basically ensure the strongest/most subscribed universities have the greatest incentive to watch the weakest.
Additionally, individual governors need to be held personally liable as the law already provides for. I’m not sure why this has stopped happening to our institutions when they go badly wrong with people who are supposed to be watching at the wheel.
Couldn’t agree more with this. Instead of the catastrophisation, there are many examples in other sectors of mechanisms to both monitor, prevent, and then respond to exactly this kind of situation, so there are viable protections.
As you rightly say, Governors really need to understand the legal / fiduciary duties and therefore should see this coming so that surprise and immediate failures are very very rare events. Likewise, management and Boards need to understand that financial collapse rarely happens without warning, and there are many interventions that can happen to avoid or mitigate (again see pretty much every other regulated sector). This is where ego/politics really get tested against the barometer of stakeholder interests, i.e. coughing up that an institution is in trouble and needs help rather than internalising to “protect reputation”.
I like the earlier suggestion of a modelling activity of what it would actually look like in practice – a bit of ‘War-Gaming’ scenario style research looking at the consequences for different types of students and alternative provision. That would make a fantastic research project if there as a University willing to undertake it.
This really is a wicked issue. Lets start with some issues:
1 Unlike colleges or apprentice schemes there is no national awarding body, and no national curriculum so transfers are tricky, especially beyond year 1 of a programme.
2 If at all possible research students will want to move with their supervisors, so there will be complex individual negotiations.
3 The OIA of course is concerned for students but there will also be issues for research and research funders, possibly clinical trials, and a whole host of other activites to be sorted out as well as teaching.
4 Institutions are so diverse that meaningful planning would have to be at individual level but at that level the risk of failure is low (and planning for what you will do if you fail looks horribly like suggesting that you think you might).
5 Courses are long, so arrangements for closure may need to allow for students who expected to study full time for 3 years or more, or part-time for double that duration or longer.
Planning should surely focus not on what do we do if a big institution fails, but on making sure that it does not happen, because even the best laid plans for closure will cause huge suffering for students and staff, and damaging consequences for communities and the UK as a whole. Of course this goes against the Government view that market exit is in principle a good thing. Based on past experience, however, this attitude will not survive contact with reality, as politics will trump rhetoric and regulation, and things will be done to keep institutions going, as they have with a number of providers in recent years. The focus, therefore, need to be on ensuring that warning signs are spotted, and that institutions are supported so that they do not close, though painful changes may still be needed.
There are some reasons to be cheerful. As the OIA indicate, institutions have stepped in to help. UUK has sometimes played a very helpful role in brokering transfers. Also, at least for universities with a predominance of undergraduates, the market sends you warning signals well in advance, so you should have time to manage costs down and take other actions to recover the position.
‘we’re too big to fail’
‘it’s too tricky’
‘we’re doing a good job of regulating ourselves’
Sounds familiar.