Students should be given legal protections in the event of a university closure while institutions should be asked to pay into a fund that can cover expenses for those left stranded, according to the sector ombudsman.

A??published by the Office of the Independent Adjudicator for Higher Education (OIA) concludes that the higher education sector ¡°remains largely unprepared¡± for?university closures, with inadequate protection for students and a lack of guidance for institutions among the key areas of concern.

While recent closures in the English sector have predominantly affected ¡°small, private, unregulated institutions¡± offering validated or franchise degrees, larger institutions and universities are becoming more vulnerable as a result of rising costs and declining income, the report says.

Writing in the introduction, Charlotte Corrish, head of public policy at the OIA, says ¡°a more structured approach would be helpful¡±.

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When examining institutions that have closed down in the past, analysts from SUMS Consulting, who authored the report, found contributing factors included ¡°optimism bias within executive teams, their unwillingness to listen to hard messages, and a failure to manage risk effectively¡±.?

Although not mentioned in the report, management team members and the governing council at the University of Dundee ¨C which was?bailed out by the Scottish government?after it emerged the institution was on the brink of bankruptcy ¨C have faced scrutiny for?failing to anticipate and respond?to the scale of the financial problems the university was facing.

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¡°Realism and early recognition by boards and executives once warning signals indicate?the organisation may be unsustainable are essential¡± to allow ¡°sufficient time¡± to consider risk-mitigating options, the report says.

The study also highlights ¡°major concerns¡± about student protection plans, which are viewed variously as ¡°weak, aspirational and irrelevant in real-world closure scenarios¡±.?

Meanwhile, the?lack of a special administration regime?for higher education ¨C akin to the one that exists in the further education sector ¨C ¡°makes legal and regulatory processes complex and uncertain¡±.

¡°In recent closures where the [higher education] providers were private companies, students affected were treated by the administrator or liquidator as unsecured creditors with no additional protections,¡± the report says.?

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¡°It is unknown what would happen if a Royal Charter Institution or a Higher Education Corporation were to become financially unsustainable in future.¡±

The OIA recommends making legal changes to ensure all providers can enter into an administration scheme, rather than liquidation. This is seen as one way of ensuring students are prioritised above other creditors.?

¡°Ideally, this would involve arrangements for higher education providers to have structured and orderly closure that allows a pause in insolvency and sufficient time to consider and protect students¡¯ interests,¡± it says.

Providers should be asked to pay into a ¡°student protection fund¡± that can cover tuition refunds, relocation and living expenses to support students who have ¡°no redress through a compensation route¡±, it further recommends.?The flexibility of student loans should also be increased, with ¡°automatic eligibility for additional loan years in cases of disruption¡±.

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A?¡°student transfer portal¡± should further be created, which the report says could function as a way of helping students to ¡°map out alternative academic paths or career options, then find and apply to alternative institutions quickly¡±.

The report provides a framework to support providers in the case of market exit, covering areas including strategy and finance, legal and governance, and students and academic delivery.?

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¡°Ensuring students are protected during a provider closure should be paramount,¡± said Corrish. ¡°It¡¯²õ vital that we all understand that student protection isn¡¯t just a compliance issue ¨C it has a very direct impact on the experiences of students in higher education, and we must all be ready.¡±?

helen.packer@timeshighereducation.com