Why OfS decisions on for-profits matter for whole sector

The impending decisions from the UK’s Office for Students about whether or not to strip some big for-profit providers of their right to benefit from public student loans money are important for the whole sector.

These are big institutions in terms of their numbers of students with public funding. GSM London, the biggest for-profit college in England, had 4,587 students with Student Loans Company funding in 2017-18 – more than Imperial College London with 3,522, for example.

Via student tuition fees, £152 million of public money went into GSM London in the six years to 2017-18, SLC figures show.

The size of some of these for-profit colleges matters for a couple of reasons.

First, if the OfS does indeed decide to bar some of the biggest for-profit recruiters of students from its register of providers, this would change the outlook for for-profit higher education in England.

Institutions such as GSM London and St Patrick’s College based their business models on high-volume recruitment of students, often mature ones, without the qualifications to go into traditional higher education (but with access to SLC funding). If the OfS refuses registration to any providers of this type, citing dropout rates as a key factor, it could, in effect, kill off such high-volume recruitment by for-profits.

It could look too risky to for-profit providers, and their investors, to recruit large numbers of non-traditional students (which is pretty much the only high-volume market not dominated already by universities).

That isn’t to say there would be no future for for-profit higher education in England. But if the OfS makes a big statement through refusals of registration, the future of for-profit provision would likely be more in niche specialisms or in using UK degree-awarding powers overseas, rather than mass domestic recruitment.

Although providers can still grow rather large in niche areas, the OfS could potentially – and not with this intent – finally kill off the vision of former universities minister Lord Willetts that for-profit providers would compete with universities at scale.

Second, if a sizeable for-profit institution were to get into financial difficulty because it was refused access to loans for new students by the OfS, it would be a test of the regulator and the government in terms of their ability to find alternatives for its students.

The English sector has never really seen a sizeable institution leave. In some of the scenarios imaginable after OfS action, we might get a better picture of what a “market exit” really looks like.

But it is also easy to imagine providers challenging the validity of the data used by the OfS in any refusal decisions (on dropout rates, for example) and perhaps ultimately challenging in the courts any refusals to allow access to student loan funding.

This could be a big battle, with some big implications for higher education as a whole.

John Morgan is deputy news editor at Times Higher Education.