Anyone else see the headlines re 3 unis possibly on the verge of bankruptcy????

[CartwheelCath]

Any one else see this in the news?

The papers say 2 south coast universities are amongst the 3. My ds has 3 south coast unis down on his UCAS application. How concerned should we be?
Anyone else concerned at all?

www.mirror.co.uk/news/uk-news/least-three-universities-on-edge-13516261

www.dailymail.co.uk/news/article-6340045/Three-universities-brink-BANKRUPTCY-student-numbers-plunge.html

BBC news link www.mirror.co.uk/news/uk-news/least-three-universities-on-edge-13516261

DH thought it might be the universities of Beer, Windermere and Rye! Everywhere has a university now!

There is a similar shakeout going on now in the US due to the same dip in the birthrate around 2000. There are about 300,000 fewer students attending now than at the peak.

The good news is that the competition for students has lowered net prices as uni's here offered more scholarship money to compete for the students they wanted. DS just started uni this fall and it's saved us thousands.

US financial experts are helping out here apparently. The competition for students in the uk has raised the number of unconditional offers, lowered entrance requirements and inflated the number of first class degrees awarded.

The cost remains the same for the vast majority of students though as scholarship money is scarce as we don’t have the same rich alumni and well established scholarship funds as US universities do. It’s interesting they spend more to fill the universities by offering money off! That would, presumably, make financial woes even greater if the discount doesn’t produce shed loads more students. Here, the less good universities might think twice about that tactic now we know 50% of students don’t get graduate level jobs. Students may not want some universities even at a discount if the degrees remain poor value for money and employment goals are not realised.

@BubblesBuddy was

US financial experts are helping out here apparently.

a humorous reference to my post or are there actually American HE finance people consulting on the situation in the UK?

There has never been a cap on tuition here for private universities, so the full tuition is a bit like the price of a house or a new car. It's a starting point for negotiations that few people pay now. When demand exceeded supply universities distributed funds dedicated to scholarships but didn't go beyond that with discretionary funding. That kept their operating margins high and allowed them to avoid dipping into their often substantial endowments.

The scholarship my son received is about a 30% discount off of his tuition, 20-25% off if you count housing and meal plan. He had even better offers from less selective schools that wanted him more.

The economics of a university are a lot like those of a hotel or hospital. Occupancy drives everything. Most costs are fixed and when you're full up you do fine. At 80% of capacity you're probably losing your shirt because of the fixed costs. So it still make financial sense to lower prices enough to pass the break even point.

Most universities here are stable financially because they've always focused on fundraising and building endowments. It's often joked that Harvard is a hedge fund with a university attached. It's the smaller, lower quality ones that are in trouble.

It’s true. It has been reported in the uk press that a US financial company. which advises US universities on how to dig themselves out of trouble, has set up offices here with personnel to advise the universities.

I have my occasional attempts at humour but this appears to be true and it’s not so surprising as we don’t have a track record with these problems. It’s all new!

Substantial endowments are the key words. Few universities have them here. The newer universities certainly don’t. I agree about fixed costs and of course our universities are about bums on seats too. However, the universities don’t lower the price. The model was set up to have varying prices for degrees but no university thought their degrees were worth less than £9250. Their costs are probably similar so that’s why they all charge the same. Cheaper degrees might be considered second class so they didn’t choose that pricing strategy. The fact that some degrees are very much second class is just dawning on the student population and with fewer numbers, there are vacancies where courses are perceived as poor value for money. Why pay for a degree if you don’t get a degree level job?

My DD was offered a place at a us university a few years ago and her scholarship wasn’t worth much in terms of the overall package. The fees alone were $40,000 a year plus all the other costs of around $25,000 for 4 years. Even a 25% discount wouldn’t have got the fees and costs down to uk levels. Perhaps we could have negotiated? The money situation in the us is totally different and there is a history of endowments and parents saving up and expecting to pay. Not so here.

The Brits don’t get the chance of financial help in the us as we don’t qualify for anything. Believe me, I looked!

Even a 25% discount wouldn’t have got the fees and costs down to uk levels. Perhaps we could have negotiated?

I think that the fees in the UK are likely below the actual cost of providing the education and supporting the university. Don't the universities get some government subsidy?

Because uni's in the US are so competitive, everything is driven by the ratings. There are many companies and organizations that provide rankings and ratings for US universities and one of the key inputs into the ratings are the average standardized test scores of the incoming students. If you are above average for a particular school and will pull their numbers up, they incentivize you to come with scholarship money. If you are at or below their average incoming test scores they generally won't, unless you bring something else they really want. That is how "merit" aid works. My son was offered more merit aid by schools that were less selective and desirable because his scores helped their averages more.

There is also "need based" aid. Students applying from families with lower incomes and assets can also get this type of aid, some of which comes in the form of low interest loans and some (less) of which can be outright grants, either from the federal government or the university.

The really elite schools that are at the absolute top of the ratings don'e offer merit aid because they don't need to boost their ratings. They do tend to offer more need based aid.

We have too much income to qualify for need based aid, so we had to look for universities where he would qualify for merit aid. DD, who will start uni in two years, has the test scores to get into one of those really elite schools that don't offer merit aid, and if she goes there we'll be completely screwed financially. Paying $60,000 per year for her to go to Harvard or Yale would be a huge burden for us too.

There is a culture of saving for college here. We started when the kids were toddlers and have had a lot of help with the college fund over the years from my genuinely lovely MIL. With a bit of luck DS will graduate with no debt. We'll have to see what happens with DD.

Sorry, I didn't realize how long this was going to be. It's probably way more than you wanted to know.

£9250 in the uk can be above the actual cost but can also be way below. It depends on the intensity of the course and whether it’s a science or not. It’s a form of cross subsidy. The government has a huge problem in the future because only around 50% of students will earn enough to pay back the loans so in effect a lot of students are getting a very good deal and the government is subsidising them. Not that you would see that from all the wailing about debt. It’s not debt, it’s a graduate tax.

My DD got a merit scholarship. As we are uk based and not remotely hard up, we didn’t realistically expect any need based aid.

There is a different attitude to university expenses here where the state has payed for courses in the past and made a huge contribution to living costs as well. The huge expansion of the university sector meant funding had to change but parents didn’t have much of a chance to save up. People are risk averse and don’t like the notion of debt, even though it isn’t a debt because many never repay it. They just make a contribution.

The difficulty some universities are facing is under population due to over expansion and poor value for money. My “joke” above tells you that every low level higher education college is now a university. It doesn’t matter if a university is top of the tables or at the bottom, they charge the same. This isn’t a sustainable model in the long run and has led to the lower ranking universities marketing like mad and students don’t understand the difference between the university of anywhere and somewhere much higher up the league tables. Studying some degrees at some universities really isn’t good value for money and students are beginning to realise this but a drop in the birth rate is shrinking the sector too especially as Brexit deters students.

Sorry for my essay. I do find the US model interesting though.

People are risk averse and don’t like the notion of debt, even though it isn’t a debt because many never repay it. They just make a contribution.

People here don't like going into debt either but many have no choice if they want access to higher education. Many people here also default on their student loans, but it is really debt. It can't be discharged in bankruptcy and the government can garnish your wages and any tax refunds to get it. Defaulting will also rubbish your credit score.

It doesn’t matter if a university is top of the tables or at the bottom, they charge the same. This isn’t a sustainable model in the long run

You're quite correct, it's not a sustainable model. Here the lower ranked universities have to cut prices to put bums in seats and they typically have the smallest endowments. A few have closed. For many years demand exceeded supply, which kept everyone full and led to expansion. It's a very different game now. But the shakeout is healthy in the long run I think.

By the way, lest anyone think that private universities are the only option here every state runs a university system where tuition is subsidized for state residents. California and New York notably have some excellent, very prestigious universities in their state systems.

As BB says we had to suffer this change (I am paying my sons' £9250 x 2 x 3 years myself at the moment and their other costs - rent etc and am lucky I can afford that but it is much more than I paid for their older siblings whose fees were a norminal £1000, £1000 and for the third £3000. We were never told by the state that there may be the very high fees so did not have time to save up as people have done in the US for a few generations. So I graduated thinkint it would remain only 15% of us who got to university and those very few brightest who could get in (it was very hard) then had their fees paid. We didn't have our rent etc paid so I got a nominal £50 a eyar for that and my parents chose to make that up to the full costs although many parents did not and people could not go in my day. Hardly anyone went to university from my school anyway.

So we have had a vast change - huge increase in numbers and the fee system.

Unlike in the US however if you never earn over the threshold - from memory about £21,000 a year, eg you become a housewife or work in a family business at minimum wage or become an impoverished artist or writer then you never pay a single penny back. In other words pick a poor degree subject for income prospects and the state pats you on the back and syas you don't have to pay. Pick a sensible one and go into e .g. law like my daughters and if you have the loans you pay 9% of salary over the threshold back. One man used his loan to pay his costs to travel to ISIS to fight for them.

It is interesting hearing about the US system by the way so thank you for that. In the UK we have some similarities in that the best universities which are very hard to get into and require high grades eg oxford and cambridge like Yale and Harvard are those which employers wanting the students with the highest grades are likely to recruit from so those institutions tend to be more worth paying for.

The threshold is now £25,000. Many people such as nurses and teachers won’t pay much at all for many years. If women have children and work part time they can pay next to nothing. I am always astounded how many people never work out that “ordinary” jobs don’t pay much back. In the uk it’s not a debt. I have an arty DD who won’t pay much but my other DD will pay it all off fairly quickly if she continues to work. We have taken professional advice about paying it off, and have concluded any unallocated money should go into a pension where the government gives you free money as tax relief. DD is self employed so a pension is important.

I think there should have been greater control over the creation of some universities. If prices vary, will employers think the cheaper degrees are less worthy? Or would it be no change because they think that anyway! What do they think of cheaper degrees in the US? Still worth it because it’s better than nothing?

It’d be interesting to know what the reputation of the cheaper universities are like. Are there any universities who offer much cheaper degrees but also have a very good reputation and are reasonably ranked in the US?

I would imagine it would not be price but more what level of exam grades people need which determines people's jobs (in some careers) so the fact you got your academic scholarship to be an Eton Scholar or the army sponsored you through Cambridge so you had no fees to pay or you went to the best but free state grammar in the UK is unlikely to matter, but whether you did well in the exams there will. If the cheaper places take people with low grades who don't do well and often drop out then I doubt those places will be as well regarded.

In the UL I think think we have 2 at least private universities and one charges about £15k I think from memory and no one thinks they are better than Oxbridge etc.

Perhaps re phrase my question a bit - Do the cheaper universities in America have a good reputation? If not, Are there any that do? I’m specifically interested in the correlation between price and reputation if any.

The top US state universities have strong international reputations - google Berkeley (University of California), for example. In-state tuition fees for state universities are reasonable. Out of state fees are much higher for the very top state universities, for obvious reasons.

But of course there is a overall correlation between total income, quality and reputation. (Total income includes many factors besides in state tuition fees.)

A 2 year and 1 term History and Politics degree at the university of Buckingham is £25,000. BBC at A level will get you on the course. So it’s a bit cheaper overall, but it is asking for fairly average A levels for this degree. There are private Law universities here, eg BPP and Regents University is favoured by foreign students. There are lots of private business schools awarding MBAs.

One would think that cheaper universities here, if there were to be any, were admitting they weren’t as good as the competitors because they need loss leaders in terms of price. With our system, we already know students have not always made savvy decisions about which degree and where. Going to a cheaper one might not be the best idea either, should that opportunity ever arise, of course.

Do the cheaper universities in America have a good reputation? If not, Are there any that do? I’m specifically interested in the correlation between price and reputation if any.

As PP pointed out there are some state universities that have quite good reputations and low instate tuition. The tuition at private universities and their reputations don't have a strong connection because the full cost (tuition, fees, housing, and meal plan) all tend to cluster between $50k to $75k per year. If you went to Harvard no one knows if you paid the full rate or very little. The actual price is determined by how much that university wants that particular bum in their seat.

Harvard, Yale, MIT etc. are effectively the luxury brands in the market so they price high accordingly. We could be spending less on DS's university education, but it would have been at a less prestigious school and most importantly, one that would have been less suited for him in terms of location, academic programs, academics support, internship opportunities, athletic options, etc. Cost is just one factor in determining value for a particular student.

That said, I've done a lot of hiring in my career. I've had fabulous employees - extremely bright, hardworking, etc. who went to less expensive state universities because that was all they could afford or they knew that paying more for a better name on the diploma wouldn't make that much difference.

I saw some research recently on the long term payoff of going to a very selective uni here. I'll dig around and see if I can find it, but as I recall the headline was that it only mattered for some subjects.

My question was specifically about US universities because in the UK the dynamics are very different. University education has always been provided for by the government and higher education in the UK is one of the best in the world and of good quality. So why would UK students opt for a private uni when they can go to the likes of Oxbridge for next to nothing, in my time for free. Private universities in the UK eg Buckingham seem to attract a lot of foreign students in particular.

However in the states, university education has never been free and they all charge different fees. The UK fee of £9500 is the maximum, but seems to be what most universities charge. This seems to be driven by the fear that if they charge less, it will be perceived as inferior, sub standard. They may be wrong but no one wants to experiment e.g. perhaps Manchester could afford to charge £7,000 as fees whilst still maintaining high entry requirements. Would the change in fees automatically affect how people view their courses even though they are still providing a quality education?

I just feel there is no need for everyone to be charging the same amount. The fact you pay the same amount to go to Solent as you would to go to Oxford is very bizarre. I also think fees should take into account overheads of the university. Some don't even have sports fields, gyms etc and they still charge the maximum rate.

Sports clubs and facilities are charged separately. Not sure if that actually covers overheads though.

The problem is that we have wanted an expanded university sector without really having the jobs for the grads. The jobs where there are shortages, don’t have enough grads or enough grads who want to do that job. We have too many degrees available in some subjects and others are hugely competitive. There is an over supply of quite a few arts degree grads from lower ranked universities. However people still like these universities in enough numbers for their survival. Plenty of people on MN are quite happy for their DC to take out a loan for a university that’s ok but the job at the end is unlikely to be one that pays back much of the loan. If you go in with that understanding, it might make it worthwhile and you won’t have the A levels and attributes for Oxbridge anyway, most likely.

It would be interesting to know if any RG university would lower fees as a marketing tool. Or would they think this would put off potential students who would think it was second class? Difficult to know. It would depend on attitudes to loans. Some people are so grad tax/loan averse, it could suit them. Others who understand the system would know it won’t make any difference because it won’t get paid back. £2000 a year isn’t a great reduction in the overall scheme of things.

I don't believe students are charged for facilities. They charge for the use of them but certainly not the overheads involved. However, university populations will need to be taken into account because a larger university might actually be able to afford facilities cheaper due to their population size where a smaller university eg Bath might have the same overheads but fewer students.

In argument of the lower ranked universities, there is an assumption that that the aim is to graduate and start working straight away. Quite a few graduates from lower ranked unis already know the score in the job market, and plan to do a Masters course at a higher ranked university upon graduating. I know at least 5 people who have done this and on the top job ladder. So actually they haven't wasted their money at all, just taken a different route to get to the well paying jobs. Many also work their way up from the low paying jobs but eventually get to the well paying ones. It may take them longer than the RG graduate but can still get there. So we can't assume a graduate from a lower ranked uni will never be able to repay their loan.(Now i don't the situation with Arts degrees as neither of my dc are going to be doing Arty courses).

The £7000 was just an example it could be lower than that to be meaningful, all depends and £2,000 could go very well towards accommodation costs.

I also think fees should take into account overheads of the university. Some don't even have sports fields, gyms etc and they still charge the maximum rate.

These are utterly trivial in the context of HE costs. Note that these often generate income, through external parties paying to use them.

No university can survive on 7k per year: fees have been frozen, costs are going up, pension costs are up, Brexit uncertainty is hitting all over the place, research council income is almost frozen, increasing regulation.

On the current fees many universities, including Manchester, are cutting staff. (BTW would you really rather a university has an Olympic swimming pool, even if that means less academic staff...?) If the fees are cut by the Government, with no replacement income, universities are going to be in even bigger trouble.

If the effect is still that you pay 9% of salary over £21k in the UK if you have student loans then whether the fee is £7k rather than £9250 or whatever may not affect people's chocie just as people say if you are going to take a loan you might as well take the fees element and maintenance element as the payments back (the 9%) in a sense do't then vary although they might last longer. I did actually suggest to my boys they did a BPP LLB if they would not get in anywhere else which I think had much lower fees and they could have lived at home with no rent costs (as unlike most parents because I am fully funding the fees it was material to me) but that wasn't attractive to them and in fact they got pretty good A levels anyway, some of the best in the school or grappling around for where they might be able to get in if things went wrong was not relevant and they go to a fairly good university instead where they are doing fine.

BTW lower achieving students actually need considerably more academic input: it is not cheaper to teach them.

And there are huge socio-economic implications of making Oxbridge and its friends significantly more expensive than local post 92 universities. There is already a big problem with kids from less advantaged backgrounds not aiming for the top universities, but settling for local universities. Differentiating the fees would reinforce this further, and drive social mobility in the wrong direction.

There is a big problem with less advantaged children and their parents not understanding the grad tax system! They think you have a debt and you are responsible for paying it all back. Labour, the NSU and others have never put them straight due to wanting political traction. It’s very unfortunate that this has been allowed to happen.

Xenia- it’s £25,000 before fees are repaid. There are very few people who should pay fees up front.

I didn’t mean “arty” degrees either. I meant BA degrees. 50% of grads are not getting grad level jobs. They haven’t all studied photography and sculpture. There are plenty of grads with degrees in Criminology, English, History, Archaeology and Anthrapology who don’t have grad jobs. Even more when you add in the myriad of degrees where you are trained for a job but few vacancies exist, eg museum studies. Museums employ grads from any discipline if they fit the job spec. Law grads proliferate. Many never work in law. Psychology grads never work in that field. None of this matters if they get a job they are happy with but many don’t get grad jobs from the stats now available.

Few grads, in terms of overall numbers, go and do a masters from the post 92 universities. I agree that most want to go and work afterwards. More would want to do a professional qualification sponsored by an employer.

I think we would be better off going back to the HND level of qualification. 2 years full time. Much cheaper. These days though people might see this as very second class. The whole HE sector has changed. Every school leaver with moderate A levels now expects to get on a degree course. The slightly lower level courses, HND level, are reserved for some modern apprentices. When I was at grammar school, only around 60% went to university. 40% either did a HND or went into work with training attached. Some even left at 16 - shock horror. Nearly everyone ended up with decent jobs whatever route they took. The HE colleges provided a link with work, practical courses and solid teaching. They have now become universities trying to deliver expensive courses to people, many of whom don’t get good jobs at the end of it. Recent stats clearly show this. Obviously a minority of grads, but large numbers. They didn’t need the degree at all.