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Is a student loan restriction feasible?

Is a student loan restriction feasible?

The government’s higher education funding review has many people worried. The view from government appears to be that imposing a free market capitalist view on universities is the ultimate goal, the idea being that increasing competition will increase quality.

This idea seems dubious and has been described as “morally objectionable, intellectually bankrupt and technically incompetent,” among other things, but the government has pressed ahead with the review anyway. The latest leaked proposal from the review – that young people with sufficiently low grades should be blocked from applying for loans – appears to embody all three criticisms and could threaten to remove as many as a third of students from many institutions.

The effects of this move to recognise nothing but test scores would be twofold; firstly, the poorest in society would lose out more than any other group and find it even harder to access higher education. Secondly, universities would suddenly enter a funding crisis and many would struggle to stay open.

According to the free market ideology underpinning the government’s review, this is fine. The tenets of capitalism state that a business should fail if it isn’t competitive. Putting aside the fact that modern capitalism keeps afloat many businesses which shouldn’t survive through extreme tax cuts and corporate bailouts, this government analysis ignores the key point that universities are not businesses. They fulfil a function much more important and wide ranging than that.

A university is often one of the largest employers in a town or city and a significant regional presence which brings in tens or hundreds of millions of pounds - but that only tells part of the story. The research undertaken at higher education institutions often kick starts whole new industries which boost towns and cities permanently. A good example of this is the University of Manchester which is at the forefront of the graphene revolution.

And as important as the research itself is the people who undertake it. Universities bring young people to places which otherwise might not be much of a draw. These young people are trained to a high degree and many choose to stay in their university town, embedding the social and economic benefits they bring for the long-term.

For all of these reasons it seems unlikely that this proposal will be implemented, and investors should not worry about their tenant base suddenly declining. Simply put, the pushback is already enormous and it is probable that objections will both increase in volume and become more vociferous as time goes on. It seems nobody with knowledge of the sector thinks that this idea has any merit whatsoever.

Nick Hillman, director of the Higher Education Policy Institution think tank, says that the proposal would “dramatically damage overnight the government’s plans to get more working class young people into university,” and that “to lose that many students would be a massive blow to an institution. If you had an exceptional VC [Vice Chancellor] who had somehow prepared for it, or valuable properties in central London, you might survive it. But many institutions aren’t in that position.”

Simon Marginson, professor of higher education at the University of Oxford, points out the damage this proposal could have on towns and cities, saying: “Generally a university is one of the biggest employers. It’s like closing a hospital – losing it would change the environment and make it a harder place to live in. These aren’t just businesses, they are public institutions that are subsidised by the state for good reason.”

Professor Graham Baldwin, vice-chancellor of Southampton Solent University, says he is “horrified” by the proposal, noting that: “in 2017 more of our graduates who came in with three Ds or less were in professional or managerial roles than those who got three Cs or better.”

Likewise, Professor David Phoenix, vice-chancellor of London South Bank University, said that writing off young people from poor background purely due to academic grades was “morally abhorrent,” arguing that “a student’s performance in school is often not an indicator of their performance at university, especially when they are studying a subject they really enjoy, taught in a way they haven’t experienced before.”

All of this opposition is only the beginning – the proposals have not even been formally released as of yet. With that in mind the idea that there will soon be a massive reduction in the number of students in higher education in the UK seems farfetched and investors should not worry too much.

Controversial proposals are often leaked to test the critical reaction to them. Anything which gets immediately slapped down as hard as this is almost always rowed back or changed before the final publication of a report and that is the likely fate of this proposal. It is clearly a mistake and we are unlikely to see it implemented.

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