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Grade inflation

New data available on grade inflation

The Office for Students has released new data today on grade inflation at English universities. Take a look at our charts showing the rising proportion of graduates achieving first class degrees across the sector and the rising number of these first class degrees that the OfS consider ‘unexplained’.

Read the full OfS analysis here.

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Demographics

New population projections change the long term game for UK HE

The Office for National Statistics this week released its ‘2020 based interim’ UK population projections, offering an update on the previous ‘2018 based’ series. The dramatic increase in the number of 18 years olds as we progress through this decade that was indicated by previous projections – the demographic surge that is now well known to the sector – has gone no where and has been subject to only very minor revisions. Longer term however these new projections look strikingly different to what we’ve seen before, with major downward revisions to the anticipated 18 year old population from the late-2030s onwards.

The ONS previously anticipated the 18 year old population of 2040 to be 10.0% larger than that of 2020 but it now estimates it to be only 2.4% larger. Meanwhile whilst it had previously thought 2040 would be close to the post-surge trough, with some renewed growth having been achieved by 2050, it now expects decline to continue throughout the 2040s. By the time we reach 2050 it’s now expected that the 18 year old population will only be 0.3% larger than it was in 2020.

It’s no surprise that the dramatic revisions to these projections begin from 2038, seeing as that’s precisely the point at which we start talking about people that had yet to be born in 2020. The small uplift in 2037 is worth around 6,500 18 year olds and is likely largely due to the ONS’s elevated assumptions of net inbound migration (from 190,000 per year to 205,000 per year).

Once we have to begin estimating future births however we encounter some serious changes likely resulting from the ONS adjusting its assumption of the average number of children per woman down from 1.78 to 1.59. The outcome is 21,000 fewer 18 year olds in 2038, 52,000 fewer in 2040 and 69,000 fewer in 2050.

Whilst the sector can be confident that the anticipated demographic surge will still arrive as promised, what the future looks like after the surge falls away now looks very different. It seems that demographics may well turn against the sector as quickly as they started helping it.

Demographics are of course only one factor among many that determine demand for HE. University leaders already have their hands full trying to understand any number of potential changes to the funding policy landscape that could boost or curtail demand long before we reach the 2040s. Providers looking to take decisions soon to lay the groundwork for success 20 years from now, as many need to, should however take this opportunity to both revisit their assumptions and prepare themselves for this to not be the last time that the future changes before we reach it.

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UCAS Statistics

Predicted vs achieved grades in the Covid era

UCAS’ release of its sector-level end of cycle data resources this week has given us an opportunity to interrogate the impact of a second year of dramatic A Level grade inflation in a new way.

Included in the dataset is a measure of difference between an applicant’s predicted and achieved grades. Plotting the distribution of this difference clearly shows the extent to which we have departed from pre-Covid precedent, with more applicants than ever before achieving or over-achieving their predicted grades.

Looking at each difference group as a proportion of the total confirms that 2021 further cemented the trend established in 2020 for the most likely outcome to be for applicants to achieve exactly (equivalent to) their predicted grades. Prior to the pandemic the most likely outcome had been slowly shifting from underperforming by one grade to underperforming by two grades.

If we look back to 2019 and split by POLAR4 quintile, we can see that the less likely those around you were to enter higher education the more likely you were to underperform your predicated grades.

Two years into awarding grades without exams and, despite a very differently shaped distribution, this trend still holds. 58% of Quintile 5 applicants (those from postcodes with the highest HE entry rates) achieved or overachieved their predicted grades, whilst only 49% of Quintile 1 applicants (those form postcodes with the lowest HE entry rates) did the same.

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UCAS Statistics

Medicine reapplicants surge

UCAS’ October deadline statistics, released this week, make for interesting reading as ever. The number of UK applicants to Medicine has risen by a further 4% after last year’s huge increase, bringing the size of the applicant pool to a new all time high.

Breaking out first time applicants from what UCAS terms ‘reapplicants’ however reveals a more complex picture. Whilst the former group have actually marginally fallen in number, the latter have driven all of the growth seen in our headline figure.

Plotting the reapplicant group as a proportion of the total UK medicine applicant pool shows a rise from 14% pre-covid to 22% now, returning the group back to the level of the previous peak seen in the 2015 cycle.

UCAS’ definition of reapplicant here doesn’t require these individuals to have applied to Medicine before, just that they have submitted an application to any course through UCAS in a previous cycle. So these aren’t necessarily those who have already been turned away by a medical school, although they will be a component of this group. Another component however, and likely the one driving this growth, will be those who previously applied for non-medicine courses but having benefitted from the increasingly generous awarding of grades in the past two years have now returned with new aspirations.

With this same grade generosity having pushed many medical schools over capacity in the 2021 cycle and their offer making in this cycle likely to be even more cautious than normal as a result, these reapplicants chances of securing a medicine place unfortunately may not be a high as they’re hoping – even if they’re sitting on top grades.

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Student loan

A 23k repayment threshold?

As the FT reported on Monday (paywall), the government is said to be considering lowering the student loan repayment threshold to £23,000, down significantly from a little over £27,000 as it currently stands. It remains to be seen if, in the event that this comes to pass, the government attempts to apply these changes retrospectively to those already holding Plan 2 loans or settles for establishing these new terms for new graduates or new students, perhaps alongside other headline grabbing changes to HE funding recommended by the Augar Review.

If the threshold is lowered to this figure however then those subject to it will feel the impact on their take home pay particularly strongly in the next tax year thanks to it coinciding with the previously announced rise in national insurance rates (see here for our previous work on this topic).

The two changes together would shave around £640 a year off the take home pay of a graduate earning £30,000, or around £53 a month, compared to the current tax year.

Assuming a standard 5% auto enrolment pension, our graduate on £30,000 would go from taking home 76.2% of their gross pay to taking home 74.1% of it.

With high inflation already eroding living standards any move to extract further bonuses for the Treasury from young workers would no doubt prompt future school leavers, especially those from the most disadvantaged backgrounds, to reconsider if higher education is worth the price.

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Student loan

The cost of a student loan

This week saw the announcement of a 1.25% increase in the main and higher employee class 1 national insurance contribution rates. Whilst student loans and national insurance don’t impact upon each other this is a good opportunity to review what the total burden of tax (and pensions) on graduates will be in 2022/23 and how this will differ from those without student loans to repay.

In the below we compare Plan 2 student loan holders with those without student loans and assume the following:

  • That both contribute 5% of their salary into a standard auto enrolment pension
  • That student loan repayment thresholds rise next year in line with recent historical precedent
  • That the employee class 1 national insurance contribution threshold remains unchanged at £9,568

We can see the divergence begin between our two individuals as they pass the Plan 2 repayment threshold at approx. £28,000 and widen from here on out.

Gross annual payTake home annual pay – no student loanTake home annual pay – Plan 2 student loan
£25,000£19,719£19,719
£50,000£35,406£33,429
£75,000£50,050£45,823
£100,000£64,238£57,760

If we plot take home pay as a percentage of gross pay we can see the proportional burden of tax, student loan and pension on our two individuals.

Gross annual payTake home % – no student loanTake home % – Plan 2 student loan
£25,00078.9%78.9%
£50,00070.8%66.9%
£75,00066.7%61.1%
£100,00064.2%57.8%

As ever larger segments of the young working age population find themselves burdened by student loans repayments it is essential that these student loans are included in discussions about changes to tax structures, or else we risk badly misjudging the impact of such changes on graduates.

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UCAS Statistics

Measuring the deferrals hangover

As The Times reported on Monday, UCAS statistics show that this year there are a record number of placed applicants who have deferred starting their studies. Approximately 29,000 applicants placed in this cycle are deferred in total.

This isn’t just a product of a higher total number of placed applicants but instead represents a notable rise in the proportion of placed applicants deferring their studies.

This rise in the deferral rate is being driven by UK and EU domiciled applicants. Whilst UK domiciled applicants continue to be most likely to defer, their EU domiciled peers have seen the biggest jump in their likelihood to defer – no doubt connected to their changed fee status. Meanwhile applicants from outside the UK or EU have bucked the trend and reduced their deferral rate from the unprecedented high observed in 2020.

Within the UK, it is applicants from England that continue to be most likely to defer and that have contributed most to the rise in the overall UK rate, although the rate for Scottish applicants has risen also. Welsh applicants meanwhile have deferred at almost exactly the same rate as in 2020 and Northern Irish applicants are less likely to have deferred this year than in the last.

At this point it is difficult to gauge how much of this rise in deferrals is due to the preferences or concerns of applicants and how much has been manufactured by incentives to defer offered by over-subscribed institutions. It is however already clear that one of the many admissions hangovers for providers moving into the 2022 cycle will be the substantially higher number of deferred applicants on their books.

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UCAS Statistics

Grade inflation is reshaping the HE sector

The well reported inflation in A Level grades this summer, significantly above even the generosity of grading achieved in 2020 by the u-turn to issue Centre Assessed Grades, is driving a dramatic reshaping of the HE sector.

17 days out from A Level Results Day, UCAS reports that there are marginally fewer total placed applicants that at the equivalent point in 2020 – approximately 610 lower at 499,850.

The sector’s undergraduate intake is therefore due to be almost exactly as it was in 2020. Where these applicants have been placed however is a different matter. The higher tariff third of the sector has continued its dramatic growth and is now the largest component of the sector by intake for the first time.

Whilst the higher tariff group’s growth in 2020 was faster it roughly balanced with the growth of the sector overall, leaving the medium and lower tariff groups with little change in their intake overall. This year however, as higher-tariff institutions either deliberately embraced further growth or misjudged the extent to which they needed to curtail offer making to prevent it, even higher grades meant growth for the higher tariff group at the expense of the medium and lower tariff groups.

The other high level change this year has been the dramatic drop off in placed applicants from the EU, triggered by the Brexit-induced change in these applicants’ fee status and foreshadowed by the similarly dramatic fall in EU applications observed in January.

Stripping out this change and focussing only on the UK shows that whilst the medium tariff group did here achieve some growth, the higher tariff group’s growth was even more dramatic, coming in at 9.5% higher than in 2020. This leaves the higher tariff group’s intake a fifth higher in 2021 than pre-covid.

Whatever is to be done about the now pressing need to stabilise A Level grade distributions, the only way that the sector can now navigate the coming demographic surge without a capacity crisis is by finding a way to restore some balance. With many higher tariff institutions now likely to have limited capacity to grow any further for the next few years, it is the many high quality medium and lower tariff institutions that must be supported to grow in the short- and medium-term if we want to meet demand for higher education.

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Demographics

Emerging from the demographic dip

Those involved in recruitment, admissions or planning within UK higher education will be well aware of the ‘demographic dip’ – that the national population of 18 year olds has been declining since its peak in 2009. This trend has in many regards been obscured by rising HE entry rates, particularly since the lifting of student number controls, and stellar growth rates at some institutions will have made it all but invisible for some. With year-on-year falls in the number of school leavers picking up pace since 2017 demographics have however recently exerted significant pressure on some providers (the consequences of 2020’s A Level u-turn notwithstanding).

With the trend projected to have bottomed out in 2020, demographics is now beginning to become a story of growth once more. In fact the rate of growth will be greater than the previously experienced rates of decline, such that by 2024 the UK’s 18 year olds will again be as numerous as they were in their 2009 peak. Growth won’t stop there though and is projected to push on to set a new peak in 2030.

Notably England and Wales, the UK nations with the least remaining student number controls/funding cap mechanisms, are projected to experience ever so slightly higher growth than the UK as a whole.

As well as an unequal distribution of growth between UK nations, growth within England will also be unequally distributed between its regions. Institutions will therefore experience the demographic surge to different degrees according to the representation of regions in their recruitment. Those that recruit highly locally or highly unevenly across England are likely to experience a trend significantly different to that which an unadjusted UK-wide view would have them expect.

The Office for National Statistics’ population projections broken down by English region only report by age groups (rather than individual ages, as in higher-level projections) but we can re-weight the change in the 15-19 year old group according to the weighting of each region in an institution’s 2020 application pool using UCAS end of cycle data. This exercise allows us estimate the increase in English demand an institution is likely to experience and it reveals some significant differences.

Below I’ve plotted the projected experience of two institutions: Institution A is a University in Yorkshire and the Humber whilst institution B is a University in the South West. Whilst they track very closely for the next few years, Institution A tops out at several percentage points lower than its southern counterpart and this gap persists as we reenter decline and eventually stabilisation. Note the more rounded trend here reflects the broader age group.

All regions are projected to experience some growth and the trend is therefore a positive one for all institutions. Whilst this will be welcome for those who have been facing recruitment difficulties in recent years it shouldn’t be missed that the demographic surge will have wide reaching consequences. Much of the sector is already well-advanced in plans to meet the capacity challenge but with high-tariff institutions having already exploded in size in the past five years many will inevitably have to reimpose harsher selectivity and risk progress in widening participation unless there are meaningful changes in UK HE admissions.

HEPs can and should be making greater use of demographic data to inform student number planning and that means going further than simply looking at national projections. Planners need to know how many of the soon to be much larger group of school leavers will be knocking on their doors and that requires modelling matched to the characteristics of their applicant base. Bringing unequal HE entry rates into the mix only makes this work more crucial for providers reliant on regionally-specific recruitment.