A matter of contract

International students are a success story the UK’s universities can’t afford to end. Damon Jones reports

Fees sourced from international and domestic students are HE’s lifeline, but their acceptance represents an important contractual commitment. Damon Jones looks at how institutions can mitigate against potential risks

International students are a success story the UK’s universities can’t afford to end. With some students paying up to four times as much as their UK peers for study – up to £35,000 a year for medical courses – the income they provide helps universities to subsidise additional syllabi and further international business ambitions. They also offer a host of related benefits to Britain, claimed business leaders who wrote an open letter to the Financial Times in February this year, which argued that they were “vital to the future prosperity of the UK,” and contributed around £7 billion to the nation’s economy every year. The country is still riding high in this global marketplace – with a 13% share of the international student market, second only to the US.

Statistics are also encouraging, despite headlines which anticipated student flight from an ‘unfriendly’ UK migration regime. Figures from the Higher Education Statistics Agency (HESA) indicate numbers of non-EU undergraduates increased by 5% during 2013/14, with their postgraduate counterparts evidencing 3.1% growth. Nonetheless, even though significant changes, such as amendments to postgraduate work Visas, have not inflicted the catastrophic impact some had forecast, recent amendments have prompted renewed concern. Non EU students must now pay an annual £150 “health surcharge” to access the NHS for 12 months, and from November 2014, the threshold of Visa refusal rates for sponsors of international students was reduced from 20 to 10%. This means that if student Visa applications (which are largely outside a HEIs control) should exceed the 10% threshold, then the risk of an institution losing its valuable sponsorship license greatly increases. If this occurs, the impact on a university’s revenue could be severe, since it would then need to wait for two years before reapplying for this status, and admitting new international students.  

Post election, this policy trend looks set to continue, with David Cameron recently pledging to get tough on Visa ‘abuse’, although conceding there would be no cap on overall international student numbers. Speaking in May 2015 after the publication of migration figures, the Prime Minister said that “we must go further on curbing abuse, shutting more bogus colleges, being more robust with institutions that have high rates of students overstaying and looking to toughen English language requirements for students.” Such manoeuvres could potentially limit undergraduate recruitment through FE pathways, with the NUS estimating that, following the suspension of 65 private colleges’ Visa sponsorship rights in June 2014, up to 12,000 students may have been affected.

“April 2015’s changes have definitely exposed universities to new risks”

“April 2015’s changes have definitely exposed universities to new risks,” argued Tijen Ahmet, an immigration solicitor at SA Law. “They mean that a university’s sponsorship license application or renewal can be refused if the key license personnel have been involved, or linked to a license which has been revoked in the past.” 

She also noted the ‘cooling off’ period for reapplication was formerly six months, whereas it is now two years. Future policy changes in this area, she anticipates, “can only become more rigorous”. To mitigate against these hazards, Ahmet suggested: “Universities need to be cautious as to whom they appoint to these key personnel roles in relation to their sponsorship licenses. They should also ensure they are fully up to date with Tier 4 Sponsorship Guidance”. Another important aspect of a university’s role here, she said, is to retain all relevant immigration documentation (such as passports, valid short term vignettes, biometric resident permits, ATAS certificates and police registration certificates) and address details, in case UKVI wish to make enquiries or contact students. “If there are any changes in a student’s status – a change in course, periods of study abroad, unauthorised absences, termination or withdrawal from studies – it is also essential to let UKVI know as soon as possible” emphasized Ahmet.

Given this strict approach, resulting in overseas media disseminating notions of an ‘unfriendly’ UK, universities may wish to extend the support they offer to overseas students to enhance their experiences once they arrive. Mike Jones, Managing Director of YourGuarantor, believes he has identified an ideal opportunity to deliver such a service to overseas visitors, by enabling universities to assist them in securing accommodation. “My company is focused on providing a guarantor for overseas students,” he explained. “Most landlords will tend to ask for this, as students aren’t credit worthy, don’t have a record, or are unemployed.”

Because this guarantor must be from the UK, international visitors – who will have typically resided in halls for their first year – won’t even have recourse to the resources of their parents. Lacking a guarantor, the majority – or all – of their rent will need to be paid up front, or students forced to find a landlord who will accept them without a guarantor. Not only is this expensive, argued Jones, but it also significantly weakens the bargaining power of the tenant, in the event of disputes.

“The only way to deliver choice and a level playing field is through an institutional provider, who can help universities to deliver this service to all of their international students, without discriminating who they offer this option to,” contended Jones. Although he admits that some universities already have their own guarantor schemes in place, he contends that, as these are typically underwritten by the university, such arrangements expose them to significant financial risk. Because of this, they are usually offered to limited numbers of students, and only guarantee low value tenancies. “Universities want to act as guarantors, but lack the expertise,” continued Jones. Critically, he said, the OFT has recently ruled that universities cannot not punish students for accruing non-academic, rent related debts, which also leaves them powerless to enforce action against defaulters.

Jones’s solution is a web-based platform for students to apply for a guarantor, combined with an industry recognised insurance policy, and a team which can help universities roll out the service. This moves guarantor liability away from the university and onto the insurer, and does not entail any cost for the HEI. YourGuarantor’s proposition is currently limited to EU and non-EU international students in their second year or above, and Jones is currently in talks with several universities concerning its introduction, whilst planning to roll the service out to domestic postgraduates in future. An institution’s role in the service, he clarifies, will be limited to verifying the applicants’ academic credentials, and notifying the insurer of any contractual breach. The offering is estimated to be around 60% to 80% cheaper than another commercial guarantor company in the market and could significantly improve the experiences of overseas students. Jones added: “By enabling universities to deliver this service, they can do the right thing for students and actively discuss this issue openly with them and overseas reps, as they have a solution for the problem.” 

Such measures could preclude dissatisfaction and ensuing complaints – numbers of which increased in 2014, according to statistics from the Office of the Independent Adjudicator (OIA), which handled 2,040 in 2014 – up from 1,972 reported in 2013.

“The introduction of the Consumer Rights Act 2015 will make it easier for authorities to investigate and prosecute breaches of consumer protection legislation”

Tabitha Cave, a Partner at education law firm Veale Wasbrough Vizards, suggested awareness of consumer protection in HE has likely been heightened due to increased tuition fees, which have made it more explicit to students that the relationship between them and their educator is fundamentally contractual. Although, since the introduction of the Consumer Contracts regulations of 2013, legislation is little changed in this area, the forthcoming introduction of the Consumer Rights Act 2015 – set to come into force in October – could have significant consequences for universities. “The introduction of the Consumer Rights Act 2015 will make it easier for authorities to investigate and prosecute breaches of consumer protection legislation” said Cave. “It will introduce a requirement for providers to repeat courses, or reduce prices in the event of breach.”

If the repeat requirement cannot be met, or fulfilled in good time, the price ‘reduction’ could be as great as the entire price the student paid for the service. These penalties could arise if a course was substandard, or failed to meet the terms of an initial contract. An important provision of the act is that HEIs cannot exclude liability for not providing educational services with reasonable care and skill – and that terms limiting their liability to less than the total contract price are unacceptable. Moreover, the CMA (Competition and Markets Authority) intends to conduct a sector-wide compliance check in October 2015, to ensure that universities are meeting existing obligations publicised in March. These require them to give clear, timely and accurate information about courses, and ensure their complaints handling procedures and terms and conditions are fair. An additional risk this creates for universities is that students could complain to the CMA about their conduct – creating negative publicity and the possibility of enforcement against them. “The CMA Guidance has helped providers to understand the scope of their obligations to students as consumers, and has been widely supported and publicised, including by Universities UK,” explained Cave. “Many providers are already preparing for the new Act and are arranging training for their marketing, admission and complaints handling staff, to ensure a joined up approach to student issues.”

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