New breed of postgraduate loans could help plug PhD gap

Breaking the bank. Piggy bank image via Shutterstock

Following the resounding silence on postgraduate funding in the 2010 Browne Review of Higher Education, the government has had difficulty working out what to do about it. Without access to funding, postgraduate taught courses may increasingly become the preserve of those who can rely on the “Bank of Mum and Dad”. The question of how to make postgraduate education affordable to all remains a major challenge.

It should not be underestimated. Finding enough money to fund upfront tuition fees, together with the cost of supporting yourself for a year, is beyond most students. Yet for many professions, a masters degree is increasingly seen as essential to provide the high-level skills required by employers.

This need is particularly acute for science, technology, engineering and mathematics (STEM) subjects that will provide the driving force for the government’s technology strategy and address the Eight Great Technologies challenge of David Willetts, minister for university and science.

Out of the shadows

Paul Wakeling’s article on The Conversation has highlighted that postgraduate funding is perhaps no longer quite such a Cinderella in higher education. The Higher Education Funding Council’s (HEFCE) new £25m Postgraduate Support Scheme has funded 20 pilot projects within universities with a view to testing how to increase the proportion of UK students transitioning from undergraduate to postgraduate study. The results from the pilot will inform how HEFCE commits a further £100m of funding from 2015-16, when current postgraduate funding arrangements cease.

While this new funding may seem substantial, the only viable option in the long term is for students to pay their own way. If they cannot find the money then they will need to borrow it, but that is currently an expensive business. One of the few available routes is to take out a career development loan.

These are available from a small number of providers but they have some major disadvantages that prevent them being taken up more widely. You can only borrow up to £10,000 – not enough to pay tuition fees and live for a year. You then have to start repaying within a month of finishing your course, even if you are not yet in employment. CDLs are also expensive with a 10% interest rate and a maximum five-year payback period. All these combine to make them singularly unattractive to students.

Other bank loans are also hard to come by for students. For example, in 2011, HSBC withdrew their loan scheme aimed at MBA students and more recent discussions between universities and banks seem to be making little progress.

New ways of funding

Encouragingly, some new approaches to lending are being piloted through the HEFCE scheme, including using a Credit Union with a common bond of staff, students and alumni to provide loans for members to undertake postgraduate study. Durham University is currently undertaking a feasibility study to establish whether such a model can be developed and sustained long-term. The intention is that this will inform the sector’s learning in this area and identify whether there is market demand for such a product.

Another approach developed by Cranfield University in collaboration with Prodigy Finance Ltd provides an affordable community funding model. The Cranfield Postgraduate Loan Scheme evaluates the credit risk of applicants not only on their past income (as banks do) but also on their predicted future earnings.

This HEFCE-sponsored scheme for UK and EU STEM masters students aims to seek funding from major industrial partners. The “sweet spot” is to bring together companies that recognise the severe skills shortages in their sectors with students who would love to work for them but can’t afford to take the masters course that will make them employable. From the students’ point of view the scheme is much more affordable than a CDL, providing a loan of up to £15,000, which can include maintenance for UK students, with repayments only commencing six months after graduation and with seven years to repay. However attractive this pilot might appear in theory, the acid test is whether it will attract students who wouldn’t otherwise have gone on to postgraduate education.

The continued demand for postgraduate study from students from outside the EU, highlighted recently by the British Council, shines a spotlight on those areas of the world where education is highly valued by individuals as the key opportunity to enhance their careers and their lives. The question is whether UK students can be encouraged to recognise the value of postgraduate education and can then find the funding mechanism that will allow them to realise that value.

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