Withdrawal Symptoms

Smita Jamdar

Reports recently that student drop-out rates are increasing got me thinking about undergraduate refund policies. More specifically, how they overlap (or don’t in some cases) with payment of money by the SLC to institutions. As is so often the case, the more I thought about it, the less clear it all seemed.



Here’s what’s troubling me:

  • Students are contractually obliged to pay fees to their institutions; usually, however, those fees are paid by the SLC and then repaid by the student over time.
  • The SLC pays the money to institutions in instalments, currently two, but from next year three.
  • If the student leaves before an instalment becomes payable, the SLC does not pay the money to the institution. However technically that doesn’t affect the student’s obligation to pay, which will instead depend on the terms of his arrangement with the University, and specifically the refunds policy.
  • Most refunds policies specify a date or dates after which, if the student withdraws, the balance of the fees for that year are not refunded and/or remain due and owing. Often that date is some time in the first term.
  • So there is the prospect of a student withdrawing, and owing the institution, from next year, anywhere up to 75% of annual tuition fees.

These are not new issues, and apply equally to the current “top up fee” regime. However, as the amounts involved will be greater, the impact may be more keenly felt. Collecting these fees may not be straightforward, nor is there any guarantee of success given the financial status of many would-be undergraduates. Also, if the above analysis is correct, then isn’t true to say (as many have been doing) that there is no up-front financial risk to students under the new tuition fee regime. There is if they withdraw, as around 30,000 of them did last year.


Comments -
  1. Gravatar

    University drop outs do seem to be increasing as students are asked to pay more.

    I saw some figures recently in a University College Union press release in which the general secretary of the union warned of an increase in drop outs during the next academic year and she pointed to figures for 09/10 when drop out rates were 7.2% up from 6.5% in 08/09.

    Away from the education sector many of my manufacturing and uutility clients protect themselves against the loss of income from defaulting customers by taking out credit risk insurance and I wondered whether such products are available to protect HE institutions against the loss of revenue associated with student drop outs.

    A couple of telephone calls to the education services teams at Zurich Municipal and Markel UK revealed that at the moment there are no such products on the market. However the manager I spoke to at Markel was quite open minded - to the extent that he said that he will conduct some risk research into this area.

    Perhaps as the fee changes bed in insurers may look to offer products which protect institutions against sharp increases in student drop outs allowing institutions more certainty as to their projected student fee income.

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