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The ‘Great HE financial swindle’

HE finances in the UK have hit the headlines recently – with the disgusting fat cat approach to pay of senior leaders, the current strikes, where University lecturers are making huge personal sacrifices to try and protect the future of HE in the UK, and then Theresa May ironically calling for a review into university fees.

Image of a student in a libraryIt is the level of tuition fees that I want to focus on in this post, but the other two points are connected and cannot be separated. The title of this post is influenced by the “Great Rock ‘n’ Roll’ swindle” – of the punk revolution in the 1970s, a movement that challenged the then status quo (not the band itself) of the music industry, and I feel that HE needs a similar style of challenge to move forwards, and to break its own historical shackles.

Introduction

Tuition fees where introduced in 1998 under the labour Government, with institutions being able to charge £1,000 per year. Although unpopular at the time there was a reluctant recognition that the cost of HE should partly be funded by the people that directly benefit most from it, and £1,000 per year seems (on hindsight) a fair and reasonable amount to pay. Fees where then increased in 2004, when organisations could charge up to £3,000 – and then again in 2010 to £9,000, and currently sits at £9,250

There are various problems with this model:

Most institutions charge the same

The idea of the introduction of fees, is that organisations can charge up to the set limit – e.g. they have the choice to charge less, and should base the charge on the actual cost of delivery. In reality what happens is just about every single organisation charges the top amount for all courses. It didn’t take a rocket scientist to predict this would happen, which is why I think the current review is so ironic – creating a model that will predictably be abused, and then carry out a review when it is abused – to pretend you are doing something about it!

If organisations where charging based on the actual cost of delivery, then we have 3 options:

  1. They have managed to accurately predict student numbers, manage budgets etc, so every single course costs exactly £9,250 to run.
  2. Courses cost more than this, and they are making a loss on everything they do.
  3. Courses cost less than this,  and the students are subsidising other parts of the organisation – e.g. the fat cat salaries that increase at a significantly higher rate than the salaries of all the other workers.

I think that option 1 is highly unlikely, so if we disregard that, and focus on the other two; it is possible that some courses cost slightly more to run, and some slightly less, and it all balances out – but if that is the case, is it fair that students on the ‘cheaper’ courses are subsidising those on the more expensive courses?

I expect many organisations will argue that option 2, is predominant – and through their good will and generosity they are subsidising the learning from other parts of their activity. This may well be true for some places, and is how traditional universities often functioned, but there are many organisations (e.g. the teaching focused ones) that have limited alternate fund raising ability – they cannot be using this model.

And so the big question is – how many organisations are using option 3 – charging more for the courses, than they cost to run, and effectively profiteering from the students and the system? Having worked with many organisations over the years, I cannot say that I have seen a significant wholesale increase in quality over the last 20 years – there are many good courses, but mixed in with that, there are many courses or units within a course, that are badly delivered, badly run, and not providing good value for money for the students.

The payback methodology is set to fail

The idea that students take out a loan to cover these costs, and then pay this back if and when they are earning enough to justify this, seems on the surface to be a good idea – but charging extortionate interest rates (currently 6%) is simply disgusting, and creates the wrong mentality. If someone studies at HE level, they often do so believing that this will lead to better job opportunities and a better salary. If they believe that they will reach the threshold of having to pay back their loan, then they would be better suited not getting a student loan to cover the cost, but borrowing money some other way, with a lower rate of interest. So why do students take out the student loans? – Because they know that if they don’t reach that threshold then they don’t have to pay it back, or to phrase it differently, they are encouraging graduates to not fulfil their earning potential once they enter the world of work as they will be penalised financially when they do.

Tuition fees hide the additional living costs

Another problem with the excessively high tuition fees, is that it masks the real cost of studying – the cost of accommodation, food, books, sports/lab kit etc. is now often over looked in the media who quote the tuition costs, but miss off the other costs, and many families wanting their children to do well, encourage them to go to HE, without really grasping the size of the debt that they will have on graduation, or the impact that it will have on them for many years following.

It doesn’t represent good value for the tax payer

Possibly the biggest loser in all of this, is the honest, hard working, tax payer. If a student doesn’t pay back their loan (and various predictions suggest this will be significant numbers), then the bill is footed by the tax payer, which isn’t ideal to say the least – but the fact that a large part of that bill will be the unnecessarily high interest rates that are simply boosting the profits of the privately owned loan companies, is quite simply a swindle. It is widely reported and understood that a better educated population, makes a country more profitable, with better output, which benefits all, so we should go back to encouraging people to study not deterring them.

Conclusion

I was lucky enough to attend University when we were given grants to cover most of the costs, and I recognise that model isn’t fully sustainable, and to a certain extent isn’t completely fair – so I don’t have a problem with students making some contributions towards their studies, however the current model is clearly broken. The Lib Dems, made a huge mistake when part of the coalition Government – when they rescinded on their pre-election pledge not to increase tuition fees, yes it is possible that a future Labour Government may change things for the better – but if they do, what do you do with the current set of students that are paying fees? If a future Government does reduce or drop tuition fees, although I would welcome the move, it is a little unfair for the current batch that are saddled with debt – would they get some sort of rebate?

It saddens me, that when I was working at a University full time, I was proud to be part of a system (the UK’s HE provision) that is considered to be one of the best in the world, and highly sought after – and here we now, with a broken system, attracting negative press stories, and punishing the future generations for the current and previous generations, financial mistakes.

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A financial model for blended learning

I was recently involved in a training session with managers on blended learning, and the underlying issue for them was working out a sustainable financial model for this way of working.

The easy (but ineffective and ultimately expensive) approach is to simply ask teachers to develop the online learning elements in their own time, and then reward them by reducing their face to face contact time for each unit or module. This results in the teachers then teaching more units or modules in total, which means more marking (which as we all know, teachers do in their own time). Not surprisingly this method doesn’t work, but sadly it seems to be the approach that many are adopting – all that happens, is the good teachers leave to work elsewhere, and the organisation has to go through the expensive process of finding replacement staff, and the associated disruption to the team dynamics.

So the solution is to find a model that works for the students, the teachers and the organisation. This may sound like an unattainable Holy Grail, but it is possible, and  a college I supported recently used such a model in one of their HE areas which I will describe here.

Need

The initial driver came from the students; who didn’t like travelling into college 4 days a week, and then find the lectures were often not ‘focused’, and there were big gaps between lectures. The idea was to reduce the face to face element so they only had to attend on 3 more focused days. Each lecture would be reduced in length by roughly 25% and be replaced by an online element that students do in their own time, either as preparation for the face to face element (flipped learning) or as a follow up from the face to face provision (it varied from unit to unit).

Development

A pile of £1 coinsThe team invested money into developing this model, by actually paying the teachers a small amount to develop each of the online chunks. I forget the exact amount, but it was something like £10 per online session, and they had to develop the relevant resources/activities before they were paid. Most of the staff carried out this additional work in the summer months before the start of the next term, and they were supported by the in-house learning technologists, and myself.

First year delivery

In the first year of delivery, although the face to face time for students was reduced, the amount of teaching time allocated to the teachers remained the same, this allowed them to effectively support the online elements that they had developed – and to reflect on and improve them. This means there was no increase in the teachers marking commitments, and made the model attractive to the teachers.

Second year delivery

In the second year of delivery, the teachers allocation was reduced to more closely match the actual face to face delivery time, but they were still given a one third allocation for the online elements (e.g. for every 3 hours equivalent of online element, they were allocated 1 hour of teaching time). They also changed the pay mechanism, so the basic pay was effectively less, but the teachers were paid for marking on a per assignment basis – e.g. if a teacher has a particularly large cohort, they are paid more for marking than another teacher who has a much smaller cohort. This payment was again relatively small, but an essential part of the whole mechanism, as a long term objective of this process, was to increase the student numbers on the courses, which wouldn’t be possible if teachers are paid a flat fee for the marking.

Subsequent years delivery

Once set up and working, the model then becomes financially attractive for the organisation – even by paying the teachers to support the online elements, and changing the assignment marking element (neither of which were huge additional costs anyway) – the overall staff cost was less than before, but where the real financial gains came in, was in the courses where they were able to increase the student numbers – in some cases significantly, and easily offsetting the initial financial investment required in development and years 1 and 2.

Result

This model worked, as it met the needs of students (who preferred this way of working, and the reduced travelling times/costs). The teachers were happy, as although their work had changed, they didn’t feel like their workload had been increased. At first some teachers were apprehensive, but they recognised that this was happening whether they like it or not, so got on board. Many of the teachers involved in the initial development, found that as well as being paid for this extra work, they actually reduced their overall preparation time that they would have done anyway. And of course the college was happy as this became a very lucrative source of revenue for the college, as well as overall raising the quality of the provision.

Key points

This worked because the college had the ability and foresight to invest sufficiently in this area. They then approached this strategically, by planning, engaging with appropriate advisers, and then following this through. The initial driver for the change, was not financial, but was about raising the quality of the product/service being offered. The financial benefits although expected were secondary, and I think helped to make more money in the longer term. Yes, the college had a model whereby they could change the pay mechanisms for the staff involved, which was essential for this project, and some colleges will say they don’t have that flexibility, but if providers want to survive in these difficult financial times, then they will have to start to do things differently, or rephrasing this – be more business-like. And finally, they picked areas that they were confident they could increase their student intake, which was essential for the longer term sustainability.

Can other providers use this model?

Simply put – yes, of course they can. Many organisations will come up with reasons why they cannot adopt this model or a similar one, but most of the ‘reasons’ will be self-imposed, and if unpicked can be resolved. The key is to identify a small number of areas to do this initially, areas where it is most likely to work, and where there is potential to increase student numbers over time (which gives the financial benefit of economy of size). Once these areas have been set up, and are into years 2,3 and onwards (and thus bringing financial benefits for the organisation) – then start to roll this out to other areas within the organisation.

A different organisation that I worked with, when implementing a similar approach, we developed a model which started with investing in a single area initially, then the next year expanding slightly, and building up bit by bit, until after 7 years, all areas would have been ‘converted’. This required an initial investment in years 1 and 2, but after that, the financial savings of the early adopters, funded the development of the other areas, and from year 4 on-wards, as well as funding the development, would also return a ‘profit’. I am aware that organisations will tell me they ‘don’t have the funds to make the initial investment’ – but this is where the strength of the organisation leadership comes in – in that strong leadership will find that investment somehow, and then commit fully to make this work, to ensure that they get a return on the investment.

I have made reference on a few occasions about the financial benefits of increasing student numbers (which gives economies of scale), obviously there is a finite number of students out there, so all organisations cannot increase their numbers in all areas. I think providers will have to carefully identify which areas they are strong in, and which areas they are weaker in. They will increase their numbers in the strong areas and reduce the numbers in the weaker areas (probably getting rid of that area of provision). Ideologically I don’t like suggesting that organisations should cull entire areas, but the sad reality is that we live in difficult financial times, where education is grossly under-funded and if we want to survive, we have no option but to make these harsh business like decisions.

Image Ref: https://pixabay.com/en/background-british-budget-business-20126/