University regulator calls for stronger powers to protect students if universities go bust

England’s university regulator has called for stronger powers to protect students enrolled at institutions that are at risk of financial failure because of the coronavirus pandemic.

The Office for Students (OfS) is consulting on changes to registration conditions that would give it powers to force an institution it deemed “at risk” to impose “a market exit plan” approved by the regulator to protect students.

The OfS’ proposal of a “market exit plan” could include forcing the institution to continue teaching existing students before closing or enabling the students to apply for refunds or compensation.

The institution would also have to make arrangements to transfer students to courses at other universities, and award credit or qualifications to students for partially or fully completed courses.

Other measures include archiving records to give students evidence of their academic attainment in the future and offering impartial information and guidance to students on their options.

Nicola Dandridge, chief executive of the OfS, said: “Nobody wants a university or college to run into financial trouble, but where this happens, it is vital that students are able to complete their studies with as little disruption as possible and receive proper credit for their achievements.

It is vital that students are able to complete their studies with as little disruption as possible and receive proper credit for their achievements

– Nicola Dandridge

“This is a carefully targeted and proactive measure to protect students, particularly during these uniquely challenging times. Where universities and colleges are at material risk of closure, we will ensure that our focus is on the needs of students.”

Because the coronavirus pandemic is likely to cause a significant loss of income for some institutions, the OfS said it must “be able to intervene quickly and in a targeted way” if those institutions appear to be close to financial failure.

Universities must have a student protection plan in place already in order to be registered with the regulator, and this must set out what happens to students should they close.

This is because the regulator’s policy position is not to intervene if an institution is at risk, but only to protect students from “a disorderly exit” when the institution fails.

The OfS said that it had identified many weaknesses with the current student protection plans, including overly optimistic assessments of institution’s market viability and vague wording around what students would be entitled to if the institution closed.

Despite this consult being paused, the increased likelihood of a market exit by a provider due to the disruption by the pandemic has meant that the OfS has brought forward this element of the consultation. 

The OfS has brought forward this plan following the economic damage of the coronavirus pandemic, which has caused severe financial issues for several institutions.

Where universities and colleges are at material risk of closure, we will ensure that our focus is on the needs of students

– Nicola Dandridge

This proposal would be a permanent addition to the OfS’ regulatory framework to ensure protection for students beyond the initial period after the coronavirus pandemic.

If the proposals are approved, they would come into effect in October 2020, but would not apply to institutions in good financial health. Nicola Dandridge remarked that for the “vast majority of universities” the changes “will not have an effect”. 

The higher education sector has been hit hard by the pandemic, with the Institute for Fiscal Studies (IFS) finding that thirteen UK universities face “a very real prospect” of insolvency following the coronavirus crisis unless they receive a government bailout. 

The IFS’ central estimate is a £11bn loss for the higher education sector due to coronavirus, amounting to around a quarter of the sector’s annual income, showing the severity of the disruption.

“This is a carefully targeted and proactive measure to protect students, particularly during these uniquely challenging times. Where universities and colleges are at material risk of closure, we will ensure that our focus is on the needs of students.”