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Colleges are independent self governing organisations but they have always relied heavily on government funding. The percentage of income from public sources typically exceeds 75% but the routes it takes to reach individual colleges are complicated and keep changing.

College funding basics

  • Courses free at the point of use: Colleges get funding to keep education and training free or low cost for young people (aged under 19) or for adults to overcome some form of disadvantage
  • National and formula-based: A national funding formula has been used for colleges for 25 years
  • Funding is a tool of policy: Government uses funding to influence behaviour (eg. Funding is uses to ensure colleges enrol right students on the right course at the lowest cost).
  • Education activity drives funding: Who students are and what they do, affects income
  • Data: Vast data collection systems make everything work.

There are several funding systems in further education and they differ from the systems used to fund schools and universities.


Main funding lines

  • 16-to-18 education: The Education and Skills Funding Agency (ESFA) pays colleges based on the numbers of students they are expected to enroll using national funding rates adjusted by a weighted average calculation based on their characteristics. Colleges need to offer study programmes including A-levels. Students without GCSE in English or maths at grade 4 have to resit. National funding rates did not change between 2013 and 2019, were increased by 4.7% in 2020-1 and by 8% in 2022-3 (to pay for extra teaching hours)
  • Adult education budget (AEB): ESFA uses a different formula for adults. About half of the adult education budget has been devolved since 2019-20. AEB is used to support courses at lower levels, including English and maths to Level 2, first full level 2 and first full level 3 up to age 23.
  • Apprenticeships: ESFA is manages funding for apprenticeships. Levy paying employers get an account and contract directly with approved providers at rates determined by a formula. Colleges and providers have an allocation for non-levy paying employers using the same formula.
  • Student loans: The student Loan Company administers tuition fees on behalf of HE and FE students