On the 8th of September I was very kindly invited to attend an event held at The Royal Foundation of St Katharine on the topic of building a credit union for universities. The event, chaired and hosted by Bruce Paterson of Changemaker Credit Union at the University of Northampton, proved to be a very interesting one detailing the challenges and vision of bringing ethical finance into an academic arena.
And my word it is needed! When you consider a recent report by the Sutton Trust which found that freezing the threshold at which students pay back debt will disproportionately affect students from low-income households, alongside the changes to maintenance grants, and the fact that students could end up seeing their average debt rise to more than £50,000, we can plainly see why financial woes are a major barrier to choosing a university education.
But this is only the ‘student debt’ issue specifically. Let’s not forget that students are also among the rising number of working poor households in the UK, too. The need to supplant wages with consumer credit is taking its toll on the student population as well. Recently Citizens Advice said that people aged 17 to 24 asked for advice on 102,296 debt issues in the last year, a 21% rise on the previous year.
Even more worryingly, the National Union of Students found last year that around 46,000 students took out a payday loan which, when you compare to many other forms of consumer credit, or hardship grants that are becoming increasingly rare in universities today, is a very expensive and very risky form of borrowing.
A survey, published recently, found that 75 per cent of UK parents of children aged under 18-years-old felt their children will need more financial support in their early adulthood than they did themselves because of university tuition fees, property inflation and rising living costs.
In the same survey, over two fifths (42 per cent) of parents said they were concerned about their children leaving higher education with large debts. In a recent blog I wrote I quoted the author Daniel Gross by saying the UK was creating the ‘It Sucks To Be Me’ generation.
But is access to more affordable credit for students forthcoming?
That’s the conversation we had at the event, though the discussion really started at a conference held in October 2014 at the University of Nottingham where it was agreed that to stop the rise of payday lending among the student population, improve financial education, and help stop university dropout rates, a university credit union whose common bond included all students, staff and even alumni was needed.
In June 2015, at an event held in Durham called New Developments in Community Finance, jointly run by the Political Economy Research Centre at Goldsmiths University, Fincan, the Centre for Social Justice and Community Action, and Thrive, it was agreed that moving forward with a university credit union was a very welcome idea.
Back in London, we heard from Adrian Davies, the Senior Subject Matter Expert at Cornerstone Mutual Services, who gave a very useful perspective on the challenges of setting up a large scale credit union, particularly given the changing regulatory environment that will affect the make-up of credit union staff and compliance.
Dr Daniel Tischer, who co-authored the PERC report Gaining Interest, looked at what can be learned from the way community finance has been set up and organised in wider Europe, particularly Germany, showing the myriad ways that credit unions operate today, whether employer-led or as challengers to the high cost credit industry, that the British universities credit union can potentially learn from.
We also heard from Mark Lyonette, the chief executive of the Association of British Credit Unions (ABCUL), who – importantly – welcomed the creation of the universities credit union, and who laid out some of the challenges of brand new credit unions such as whether founders should instead take an existing credit union as a ‘shell’ and organise within that rather than starting from scratch, as well as day-to-day operational issues such as IT and back-office integration that are key to a successful project.
Attendees were given time to discuss the practicalities among themselves, while we were given steer by Charles Roe, the director of financial services at Grant Thornton, to think as ‘dreamers’, ‘realists’, and ‘spoilers’ while discussing the potential for getting the universities credit union off the ground.
Next steps will include drawing up a detailed feasibility study, to identify share of market and operations costs, but given the size and expertise of the consortium of the willing (those who signed up to be part of the ongoing process, of which I am signed) the next six months look key to the eventual creation and founding of the only British universities credit union.
Carl Packman, 14/10/2015
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