Student funding in further education

Research into the financial behaviour of further education students in Scotland, exploring demand for and potential impact of student loans amongst this group.

2. Context

Chapter Summary

  • The current study builds on the evidence gathered to inform the recent independent review of student support in Scotland and aimed to address key gaps in the existing evidence on FE student finance.
  • A desk-based review of existing evidence on student attitudes to finance and debt and student funding in Scotland and the UK was carried out.
  • A total of 19 documents were reviewed, most of which involved primary research with students or the wider population on their attitudes towards finance, debt and student funding.
  • Gaps were identified in evidence relating to student experiences of accessing and using commercial credit or payday loans and the experiences of care-experienced students and student carers.


2.1 This chapter provides an overview of the policy context and existing evidence base relating to FE student finance in Scotland. It draws on the recent independent review of student support and the range of evidence that was gathered to inform and support this. It highlights key gaps in the existing evidence base that the current study sought to address.

Policy context

2.2 In 2016, the Scottish Government commissioned an independent review of Further Education (FE) and Higher Education (HE) student support[3]. The purpose of the review was to assess the effectiveness of the support available and to make recommendations for beneficial change, with a focus on ensuring that the FE / HE system in Scotland was equitable, fair and supported all students throughout their learner journey. The review was evidence-based, drawing on a national consultation, as well as surveys and focus groups with students and stakeholders across Scotland.

2.3 The recommendations from the review were published in November 2017. They included proposals for the introduction of a New Social Contact. The three underlying principles identified for the New Social Contract were: Fair funding; Parity of treatment for students from all backgrounds (and in both FE and HE); and Clarity of systems to ensure that students can understand and access the financial support available to them.

2.4 Of particular relevance to the current study were the recommendations that:

  • All students to be entitled to a minimum level of income based on the Scottish Government's Living Wage
  • Student loans to be made available in further education (with FE loans written off for students transferring into HE)
  • A proposed special support payment system be introduced for students on benefits in further and higher education
  • A single, centralised online portal be developed to provide information to all students on the financial support available to them.

2.5 In response to the review, the Scottish Government delivered a broad funding package in June 2018, raising the threshold on student loan repayments, committing to improvements to existing FE and HE bursaries, and raising bursary levels for care-experienced students.

2.6 In addition, the Scottish Government acknowledged the concerns of the Review Board that there were several important areas the review was unable to consider which required further attention. The Scottish Government committed to considering these areas in more detail. These included:

  • The potential impacts of the introduction of student loans to FE students (from equality and disadvantaged communities) in Scotland
  • A new approach recommended by the Review for students who are eligible to remain on social security benefits
  • All non-core and discretionary support to specific student groups
  • How to develop a more flexible student support payment system.

2.7 The current study forms part of the Scottish Government's commitment to addressing the evidence gap on the potential impact of the introduction of loans to FE students. The research was designed to explore FE students' knowledge of, and attitudes towards, different types of debt, and address the gap in the existing evidence base in relation to levels of demand for student loans amongst FE students. It also explored how the introduction of student loans would impact on students' financial behaviour and / or their learner journeys, alongside any potential displacement effects. For example, whether student loans would be used in addition to other forms of credit or would be used to pay off other debt. See Annex A for the specific research questions used.

Review of existing evidence

2.8 A key aim for the study was that it would build on and add to the existing evidence base on student finance. To this end, the work plan included provision to conduct a desk review of existing evidence, including from the recent independent review of student support. The focus for the desk review was on identifying what was already known about further education student finance, and the demand for, and potential impact of, loans for FE students. The findings were used to inform the sampling strategy, recruitment of research participants and design of research tools. It also helped to identify gaps in the existing evidence that the current research sought to address.

2.9 A total of 19 documents were included within the desk review[4]. These were identified through citation searching (using a snowballing methodology[5], with the initial independent review bibliography as the starting point). The full list of documents was shared with the Scottish Government for review and sign off in early October 2018. Of these:

  • Most were commissioned by the UK or Scottish Governments, or public-sector bodies with an interest in higher and further education and / or student funding
  • Around half focussed on the Scottish context, a further six covering other UK nations or the UK as a whole. Three focused on the international context
  • Most were published within the last five years, although a couple of older publications were included due to their relevance
  • Half involved primary research with students:
    • Of these, six involved research with students in Scotland and seven included further education students
    • Half of the primary studies, the academic and qualitative research, were relatively small scale with 150 or fewer students. However, several of the quantitative survey-based studies were undertaken on a larger scale reaching between 1,000 – 8,000 students.

2.10 The desk review identified gaps in the existing evidence relating to:

  • Student experience and use of commercial finance, particularly payday loans
  • Views on student finance from some disadvantaged student groups, such as care-experienced students and student carers
  • Views on student finance from students from some equalities groups, including students with faith or belief (other than Islam) and students from minority ethnic backgrounds.

Key Findings

Student attitudes towards debt tend to be influenced by their social background and familial relationships.

2.11 Almost half of the documents reviewed connected attitudes towards debt with an individual's social background and their IMD[6] status. One qualitative study involving almost 150 interviews with secondary and FE students aged 14 - 19 considered 'debt avoiders' to be those with: parents without HE qualifications; parents with lower skilled jobs; and those living in the most deprived SIMD postcodes[7]. This was reflected in an equality analysis carried out for the former Department for Business, Innovation and Skills (BIS) on amendments to student support policy, where it was also referenced that lower income households are on average more likely to be debt averse[8].

2.12 Conversely, the evidence suggests that those students comfortable with debt tend to live in the least deprived areas and have parents in managerial or professional occupations[9]. Affluent HE students also tend to show more accepting attitudes towards debt as a 'normal' part of their lifestyle and these students are also likely to take out debt by choice[10].

Student attitudes towards debt tend to vary by age and other equality characteristics.

2.13 There was little evidence of attitudes towards debt being influenced by ethnic background in the documents reviewed. The few references to black and minority FE students suggested they were more likely to be debt averse, possibly a reflection of lower socio-economic backgrounds[11]. The lack of evidence may be due to a greater research focus on black and minority students in HE as they are more likely to participate in HE than white, British students and more affected by changes to HE student finance[12].

2.14 The desk review also revealed attitudes towards debt are not gender-neutral. It appears that female HE students tend to be more debt averse than their male counterparts. Female students (at all levels) are more likely to be single parents and feel their participation choices are affected by financial considerations[13]. Older female HE students are also more likely to be debt averse if it is possible the debt will affect their dependent family members[14]. In addition, Muslim female FE and HE students appear to also be more debt averse as some do not have the independence to make financial decisions as this is undertaken by family members[15].

2.15 In general, the desk review only found evidence of Islamic faith affecting attitudes towards debt. Muslim students in FE and HE appear to be more debt averse for religious or cultural reasons. Some students believe the Islamic law, Sharia, does not permit interest bearing loans and only permits ethical lending, from within the Islamic community. Informal loans are often taken out collaboratively between families and so it is collective attitudes towards debt that influence the decision[16].

2.16 The mixed methods research undertaken for BIS suggests that FE and HE students with disabilities are more likely to accept the need to take on debt to meet their needs as they often do not have enough finance to meet their costs independently[17].

2.17 Finally, the literature reviewed suggests that younger FE and HE students tend to feel more positive towards taking on debt because they have a longer-term perspective towards the repayments[18]. Conversely, it appears mature FE students are more debt averse as they tend to have other financial commitments and perceive a short timeframe for repayments[19].

There was little representation of the views of care-experienced students or student carers in the literature reviewed.

2.18 The 2016 Diamond review into student support in Wales reflected that care-experienced students faced additional challenges to engaging in HE and would require additional support[20]. The consultation undertaken for the Scottish review of student support also acknowledged care-experienced students were the group most likely to benefit from a minimum income guarantee. While there is a recognition that care-experienced students may need different support within student finance systems, there is limited research detailing their views or experiences.

Commercial credit appears to be used by FE students, but there is limited evidence as to why students take out commercial credit, or how they use it.

2.19 Six of the documents reviewed included references to student experiences of using commercial credit. Yet only three of these documents (two large scale quantitative surveys and one qualitative focus group study) referenced the issue in any detail. These studies identified three main themes on commercial credit.

  • Commercial credit was being used by students as supplementary income, to bridge the gap between their expenditure and student support income. NUS Still in the Red survey of over 7,400 FE and HE students reported that 53% of those surveyed had been forced to resort to using commercial credit in this way[21]. A YouGov poll of over 3,500 FE and HE students also reflected this with 9% supplementing their income with credit cards and 5% using other loans[22]
  • Commercial debt was identified as a factor which negatively affects students' studies with 32% of young students and 39% of mature students in the sample reporting this view[23]
  • Muslim FE students had little experience of commercial credit with focus group participants citing family influences as a reason for avoiding credit cards or commercial debt[24].

2.20 There is a need to explore this issue separately with FE students to gain a more specific understanding of the use of commercial credit in the FE sector. Further gaps that need to be addressed include: the reasons behind commercial credit use, the type of expenditure credit is used to cover and the potential impacts this has on FE students, specifically those from different equalities backgrounds and disadvantaged backgrounds.

The demand for student loans seems to be mixed with students identifying a range of circumstances that influence their views.

2.21 There appears to be little additional evid ence on the demand for student loans from FE students, and other stakeholders, to that gathered by the consultation carried out for the prior review into student support[25]. From the almost 100 respondents, around half thought that all students should have the option to access student loans regardless of their level of study[26]. A third of respondents were opposed and offered a variety of reasons for this including: concern over the impact on benefits or bursaries; concern about increased debt; and 'double debt' for FE students progressing to HE.

2.22 The two mixed methods studies conducted for the former UK Department for Business, Innovation and Skills are the only other sources of insight into demand for loans among FE students[27]. Sampling over 700 FE students between 2012 and 2013, the research found that 50% of respondents who viewed being in debt as negative said they would 'probably' or 'definitely' take out a student loan. The conditions cited for this was their opinion of the quality of the course and the perceived future benefits of undertaking it[28].

Conclusions and implications

2.23 The findings from the desk review provide a suitably robust and recent evidence base relating to student support systems in FE and HE. While the existing evidence points to student attitudes towards debt as being influenced by equality characteristics and social background, most of this research lacks depth and a specific FE focus. Further gaps in the evidence base relate to representation of students who are care-experienced or carers. There is also a lack of detailed evidence of student experiences of commercial credit and payday loans.

2.24 The results of the desk review were used to inform the current research design and delivery. In conversations with college contacts, the research team sought to over-sample from students from disadvantaged groups, particularly those who were care-experienced, parents and carers to ensure their views were represented. The briefing of focus group facilitators also highlighted the need to be aware of and probe on specific themes if they arose such as experiences of commercial credit and payday loans.



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