Hefce deputy warns universities over buying graduate debt

That was the view of Steve Egan, deputy chief executive of the Higher Education Funding Council for England, who also warned when he spoke at an event on higher education finances and efficiency today that there were “real threats” to the future of the ring-fenced £4.6 billion research budget.

Capital spending by English institutions is currently at “record levels” of about £3 billion a year “in response to student demands and higher competition” as well as low interest rates, Mr Egan told the Westminster Higher Education Forum event.

But he warned that the wider public funding environment was “a real risk” given that cuts are set to continue after the next election. He said that given that the government is currently estimating that it will write-off 45 per cent of outlay on student loans, the “outlook is challenging” and only after the next comprehensive spending review will the sector “know what that may be”.

During questions from the audience, he discussed the government’s plans to sell pre-2012 income-contingent loans – which George Osborne, the chancellor, has stated is the means of paying for the abolition of student number controls after 2015.

Mr Egan said that interest from investors in the loans was “limited at the moment” and private buyers would “demand huge premiums” for taking on the risk of the loans.

David Willetts, the universities and science minister, has proposed that sales could be achieved by universities buying the debt of their graduates.

Mr Egan said: “Some institutions are interested in taking it on themselves.” But he thought they may discover that the “risk of it is really quite high” and that it “may not be the smartest investment, in purely investment terms”.

He said of the future of the government’s ring-fence around the research budget in the long-term: “There are real threats to that.”

He also warned that any future higher education legislation after the election must ensure the “principle of institutional autonomy is in no way eroded”.

john.morgan@tesglobal.com