A Decade in Debt

Neill MacKinnon reflects on 10 years spent at STA helping Universities collect their student debts. It’s been a decade of constant change with HE finance staff facing one challenge after another: Neill’s warm-hearted summary shows the enjoyment he’s had supporting the universities and the fine people who work at the coal-face for them. 

I never thought that when I joined STA more than ten years ago that I would spend the noughties in debt, nor in recovery …. But I have spent it in both …. Debt recovery! And for all that time working with the HE sector in student debt recovery. So, as I was preparing for a recent meeting with a potential new university client I reflected on that ‘decade in debt’ and some of the changes that have taken place affecting that debt, as well as reviewing the volume and value of debts placed, and resultant performance. As many who know me will vouch I ‘beat the same drum’ – that performance is all important…..

Top of the list of changes is the racking up of tuition fees – from £1,000 to £3,000 to £9,000 – and graduates leaving their alma maters with debts as much as, and in many cases greater than, my first mortgage. In fact they are mortgage style debts: taking similar periods of time to pay.

I would say the second major change that has affected debt, and chasing it internally, is the OFT Report and recommendations on the use of academic sanctions on non-academic debt, which, if I paraphrase it, essentially said that institution shouldn’t / couldn’t use academic sanctions for accommodation and other non-academic debt recovery. This saw the gnashing of teeth within the credit control functions across the university sector, and howls of “how are we going to get them to pay now?” It became one of the most talked about topics at our University Discussions Forums across the country and has led some institutions to refer current students for collection by external agencies.

Borne out the demise of the OFT has also seen the tightening up of the rules and regulations around the need for a Consumer Credit Licence now administered and regulated by the FCA who are taking a far more rigorous approach to regulated debt. Had the rules not been changed then any institution offering fee payment in more than 4 instalments would have had to go through the rigorous process of the application. As it happened, the relaxed rules meant the number of instalments increased to 12 over a year. But nevertheless, further rules, regulation and compliance affecting the collection and payment of fees that impacted, and continue to impact, predominantly, the income teams of the institutions. When I last looked at the FCA web site they listed about 50% of all HEIs as making an application for either full or limited permission.

In addition to these external forces affecting the internal collections of student fees we have seen a great level of ‘restructuring’ across all university departments and this ‘restructuring’ has certainly impacted the income teams; essentially meaning there is ‘more for less of them to do.’ I have also seen in this ‘decade in debt’ a great shift and improvement in process and procedures across the sector with regard to credit control and fee collection. I would like to think that the exchange of best practice and sharing of joint challenges with the ensuing debate at the Discussion Forums we facilitate has contributed to this in some small way (36 forums over 6 years).

In terms of debts placed with us in that period, we’ve seen £195M of student related debt across more than 105,000 students as shown below.

Last year we saw about £30M / 15,000 students being placed from 84 university clients. According to HESA there are about 160 HEIs across the UK so estimate there is at least £60M+ of uncollected fees across the sector being referred for recovery. This may rise as the impact of uncapping student recruitment numbers is felt.

During the same period, from this aged debt, we managed to recover over £66M with a further £10M in active instalment plans and a further £34M being actively pursued. Not bad when you consider that amicable (pre-legal) recovery to legal debt recovery was 95:5% respectively.

As I presented these results to the income manager and members of the team the key question was “how have you managed to limit the level of legal action?” It’s not rocket science I said, it’s the three “P”s: process, procedure and people; working within the guidelines of ‘treating customers fairly’ to preserve client reputation, and leading to the fourth all important ‘P’ for performance.

I shall be at the BUFDG in Lincoln and if any readers who will also be there want to have a chat or perhaps use some of our statistics as a performance yard-stick please seek me out or email me.

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