Student funding in further education

7. Conclusions

7.1 This report contains the key findings from research into the demand for and potential impact of introducing student loans to the FE sector in Scotland. This final chapter provides summary conclusions structured around the research questions specified in the brief for the study.

What are the general attitudes to debt and taking out loans between the different equality groups, including knowledge of different types of loans?

7.2 The study found a high proportion of FE students to be debt averse. This was particularly true of younger students, whose attitudes towards debt were often influenced by their parents and their wider socio-economic context. For those in financial difficulties, particularly lone parents and those from deprived backgrounds, debt was often regarded as something that would add to their problems rather than relieve them. This aligns with previous research, which found that those from more deprived socio-economic backgrounds were more likely to be debt averse^[36].

7.3 Debt aversion was also found to be linked to financial literacy (or lack thereof). The study found a lot of misinformation and misunderstanding about student loans, particularly in relation to interest rates.

7.4 Taken together, these attitudes and lack of understanding suggest that if student loans were to be introduced to FE students, some work would be required to clearly communicate the terms and conditions – not just to students, but also to parents and the wider sector.

Are FE students taking out other forms of loans in the absence of student loans?

7.5 In the absence of student loans, friends and family are the most common source of lending for FE students. Around one in ten survey respondents reported using loans from friends or family while at college.

7.6 Commercial credit use (including credit cards, online shopping accounts and bank loans) was reported by 10% of all survey respondents. Use of this type of finance was more prevalent among focus group participants. Lower uptake of commercial credit is due in part to debt averse attitudes among lower income students. This is also related to experiences of being ineligible for some types of commercial credit. Some students, particularly younger students, are not in need of additional finance.

7.7 However, this reliance on familial finance rather than commercial credit is placing greater pressure on wider family members, particularly those living in more deprived areas. As a result, students risk not being able to meet their essential needs if their extended network can't support them and these experiences were expressed frequently in the focus group discussions.

Are specific groups more or less likely to take out commercial credit and / or "payday" style loans?

7.8 Students in debt through commercial credit are most likely to be parents, particularly lone parents, with almost three quarters of lone parents reporting debt in the survey. Female students were also most likely to be in debt, reflecting that the majority of lone parents are female. Carers are also far more likely than average to rely on commercial credit, with over half of survey respondents who were in debt reporting caring responsibilities.

7.9 Student groups least likely to use commercial credit tend to be younger, under the age of 25, and those who are living at home with their parents. It is also clear that those students living in the least deprived areas (SIMD90) are less likely to need access to additional finance and therefore would be less likely take up commercial credit. From the survey results, male students are also identified as less likely than average to be in debt.

Is there demand from FE students to access student loans?

7.10 There is a clear demand for student loans from FE students. Almost half of all students surveyed (45%) would be 'very likely' to take out a student loan if it was available. There is higher demand among specific student groups with over half of parents and lone parents reporting they would be 'very likely' to take out a loan. This was also reflected in the focus group discussions where parents and lone parents were facing more financial barriers to access college. Over half of all students aged 45 – 54 years old would also be very likely to take up a student loan in comparison to less than a third of those under 18.

7.11 A relatively small number of students reported being 'unlikely' or 'very unlikely' to use a student loan if they were eligible. These students tend to live in the least deprived areas (SIMD90), are male or are care-experienced. This can be interpreted in a similar way to the reasons for lower commercial credit uptake, in that some students may not feel the need for additional finance or may be too debt averse to take up a student loan. Around a quarter of all students responding said they were unsure and focus group participants required more detailed information on which to decide.

How would the introduction of FE loans impact on different groups of students?

7.12 For some students, particularly lone parents and carers, having access to a student loan would help reduce the current high levels of poverty being experienced by many FE students and their families, particularly those in deprived areas. It could represent a lifeline enabling them to stay in college and support their families.

7.13 Access to student loans would enable some students to work less hours, which would have a positive impact on their general health and wellbeing as well as their college attainment. A further potential positive impact of student loans is that they could provide an incentive for older returners in their 30s and 40s to return to college to re-train or up-skill. This is the cohort of students surveyed that was found to be most worried about their financial situation while studying.

7.14 However, the evidence does point to some potential negative impacts of introducing student loans to certain groups of students. In general, there are currently high dropout rates amongst FE students and any introduction of student loans would have to be structured so as not to burden ex-students with excess debt. Loans would also have to be protected against mis-use from students not intending to study as well as students who do not 'need' a loan and may use it irresponsibly.

7.15 Applying student loans to further education would also require reconsidering the attendance requirement to receive bursary income. This requirement is currently being considered in the wider programme of work initiated by the student support review recommendations.

7.16 Means testing is another feature of bursary and student loan finance systems which may need to be reconsidered for FE students. The study has shown that not all students can rely on income support from their parents. Some parents' incomes may be considered sufficient to support their child through further education, but they are unable to do so due to other financial commitments such as housing expenses or other dependent children.

7.17 It would also be appropriate to consider what additional support could be provided around the application process to further education students who would be eligible to apply for a student loan. As the research has shown, students struggle with navigating the bursary application and evidence process and this suggests the application and deferment paperwork for student loans may pose a challenge. It is important students are supported in these processes so that they do not lose their motivation to continue their education.

7.18 It is also important that any impacts of student loans on other sources of income, particularly welfare benefits, are clear to students in order that they can choose the most appropriate type of financial support for their circumstances. This is a complicated area, heavily dependent on individual circumstances.

If FE students had access to a student loan, would it stop them taking out commercial credit?

7.19 A relatively low proportion of FE students who participated in the study reported that they had taken out commercial credit during their time at college. They were more likely to have taken out loans from friends and family. In this context, there was limited evidence to suggest that introducing student loans to the FE sector would stop students taking out commercial credit.

7.20 However, many students did report that if they had access to a student loan they would use this to pay off existing debt, suggesting that loans could help reduce overall levels of debt (including commercial debt) amongst the FE student population.

Would FE loans make a difference to those in financial difficulty or those who have withdrawn from FE?

7.21 The evidence suggests that student loans could potentially make a considerable difference to FE students currently in financial difficulty, many of whom were found to have limited other options or sources of financial support. Lone parents, carers and older returners were found to be the most worried about their financial situation and most likely to take out a student loan if it was made available to them.

7.22 Whilst the current study did not engage directly with students who had withdrawn from FE, many of the research participants (at least one in each focus group) said that they had seriously considered leaving college for financial reasons. Many others referenced high drop-out rates amongst their fellow students because of financial difficulties. It could be reasonably assumed that having access to a student loan would provide an incentive for people to stay in FE who may otherwise have withdrawn.

Implications for the evidence base

7.23 This study has contributed more detailed evidence to the existing research base on student finance in further education. The desk review identified gaps in the existing evidence which this study has gone some way to addressing through conducting research in a Scottish FE context by focusing on students within FE or with experience in FE, engaging almost 2,500 students across 11 college regions in Scotland.

7.24 The findings add evidence on student experiences of commercial finance by showing that its use is generally low. Further, use of commercial finance is likely to increase in student groups who do not have access to financial support from family or who live in more deprived areas. Only a minority of students had experience of payday loans and the numbers were too small to allow further analysis.

7.25 By oversampling students from disadvantaged groups for the focus groups such as those with care-experience or roles as carers, the research reflects their financial experiences in terms of their income, debt and attitudes towards student loans that hasn't been detailed previously.

7.26 However, gaps in the existing evidence still relate to views on student finance from students from some communities, such as students with faith or belief as the people in the study sample predominantly identified with no religion.