Alternative providers and student debt in the US: could it happen in the UK?

This article was previously published on the Leadership Foundation website.

The Financial Times (FT) has published a major article entitled 'Lessons to last a lifetime' about student debt in the United States (US). The article explores the rising level of student debt, default rates on student loans and concerns relating to the operation of privately owned, for-profit colleges (FPC).

FPCs have expanded significantly since the turn of the current century, seeking to meet demand that public and non-for-profit colleges in the US failed to satisfy. In particular, the FT suggests they targeted non-traditional students who did not have the qualifications to gain entry onto a 4-year undergraduate programme, and who might wish to attend college while working part-time.

In recent years, FPCs have come under greater scrutiny as a result of high default rates on loans by their students, and suggestions of overly aggressive marketing. The FT cites the case of Corinthian Colleges having to close, and explores whether investing in higher education by students remains a good investment.

The FT’s article highlights the risks of allowing FPCs to operate with insufficient regulation, some of the subsequent regulatory action taken by the current US administrative and the prospect of additional actions being introduced by the next in-coming US President.

For a view of how some of the issues from the US might translate into a UK context, it is informative to read Martin Wolf's article on higher education, 'Running a university is not like selling baked beans', also published in the FT.

On Friday 10th March, the FT returned to the topic of higher education (HE), reporting that 'Cameron sets university challenge for private sector in echo of Thatcherism'. The article suggested that the Prime Minister, David Cameron, wished to increase competition in HE and was seeking to remove barriers to entry for new entrants in the UK. To enable this to happen, the government was intending to include a bill in the Queen's Speech due before the summer recess. A related article. 'Universities face change by degrees' in the same edition of the FT, explores some of the issues on new entry to HE in greater detail.