When education secretary Michael Gove announced bursaries worth #163;180 million to replace the education maintenance allowance (EMA), he said that he was giving colleges the discretion to hand out the money however they saw fit, claiming that colleges themselves had asked for the freedom.

The move was in keeping with the Government’s professed love of local decision-making and accountability. Mr Gove argued that educational institutions in direct contact with 16 to 18-year-olds would be able to make the best decisions about who to support.

“Schools and colleges will have the freedom to decide on the allocation of the bursary,” he said. “They are best placed to know the specific needs of their students, and we will give professionals full flexibility over allocating support.”

But as the Department for Education consults on how to make the scheme work for the thousands of students who have already applied for places at colleges next year - but who do not yet know what support to expect - it is also clear that the education secretary has passed some of the most difficult decisions on to colleges and schools.

They will have to decide whether to spread the money as widely as possible or to concentrate larger individual sums on the poorest. They will also have to choose whether to recreate a general entitlement for their students, giving them a degree of certainty and transparency, or whether to stay as flexible as possible to respond to unexpected needs.

Mr Gove emphasised the discretion of education providers. But he also gave out sample figures, saying that the budget provided #163;800 a year for every student whose family income was below the free school meal threshold, suggesting one model for a general entitlement. Colleges will be on their own in deciding which route to take.

In 2006, the Learning and Skills Network (LSN) surveyed colleges for their views of the existing discretionary learner support fund, a #163;26 million a year budget aimed particularly at students such as those leaving care or with disabilities.

It found that when there were budgetary restrictions on learner support, colleges tended to reduce the level of support rather than restrict application numbers. If they maintained this approach to the larger sum available for bursaries, it would imply cutting the support to each student by about two thirds, so even the poorest only receive #163;10 a week.

Eddie Playfair, principal of Newham Sixth Form College (NewVIC) in east London, has the largest number of students claiming the EMA among sixth-form colleges in England. About 70 per cent of the 2,000 who this year are claiming the EMA are on the maximum grant, indicating family incomes below #163;21,000.

Next year, if payments are proportional to the number of EMA claimants, as the DfE has proposed, he can expect about #163;600,000 in bursaries, #163;1.4 million less than students claimed this year.

He said leaving student support to the discretion of colleges risked making them the target of anger from students who missed out on financial support.

“I would rather have a clear system where students know whether they’re entitled to some kind of award or bursary before they start their course, where there’s a clear entitlement,” he said. “I’d prefer that students starting courses aren’t in a position of uncertainty and doubt.”

He said that some of the money would inevitably be held back in a discretionary fund to cope with unexpected hardships for students. But he said: “I’m not a great fan of total discretion because it could lead to inequity between colleges. It could lead to some problems where students receive support in one college but not in another.

“It starts to become competitive, to enrol in one place rather than another because one can offer students more than another.”

The LSN research found that 50 per cent of colleges reported topping up the learner support fund with funds from elsewhere. There is evidence that the same is likely to occur in the larger, more ambitious bursary scheme. The risk is that the very colleges which are most in need of extra money to support students in hardship are the ones that will find it hardest to raise the cash.

So far, three models have emerged to increase the money available for bursaries: making use of other publicly funded budgets, charitable fundraising and local authority support.

In the case of Middlesbrough College, money from the college’s own budget is being used to supplement the bursaries. It intends to add up to #163;400,000 to the bursary fund, to subsidise a free bus service and provide free meals to those in need. It is also making use of college facilities to offer perks such as free haircuts and free gym membership.

At Ealing, Hammersmith and West London College, chair of governors Iain McKinnon has long argued for the need to create a philanthropic tradition in FE.

“Twenty-five years ago, they (donations) were a very modest source of income for British universities, but now they bring in big money. We can do that, too,” he said, pointing to Bournemouth and Poole College, which has raised more than #163;1 million for its foundation since incorporation.

Mr McKinnon has founded the West London Student Trust, which will be seeking donations to help support low-income students. About 18 other UK colleges have similar trusts, several of which already provide extra hardship funding for students.

And Southwark Council has announced plans to use #163;600,000 from its Youth Unemployment Fund to create its own incentive payments to encourage students to stay in education. However, that sum would barely cover the post-EMA shortfall for Southwark College’s student support alone.

Many schools and colleges may not be able to contribute extra funds to bursaries, and the Association of Colleges (AoC) points out that colleges will in fact incur extra administration costs.

Capita, which handled the EMA payments, earned over #163;50 per student each year - which for a college like NewVIC implies costs of #163;100,000 a year.

A DfE spokeswoman said that the high cost of administration of the EMA was one of the reasons why the Government wanted to replace it. But she declined to comment on what an appropriate admin cost would be, or whether colleges would be expected to pass on the full value of bursaries to students. “We are currently consulting on the delivery of the new bursary,” she said.

Not all local authorities are as supportive as Southwark: with many coping with their own severe budget cuts, some are proposing to cut transport subsidies for under-18s. Durham County Council, for example, is aiming to save #163;5.5 million with measures such as ending all post-16 transport subsidy, except where students are not able to travel independently.

An AoC survey found that more than a quarter of colleges had local authorities which did not provide any assistance with student transport.

Several colleges say they are investigating whether they can use bursary money to buy students benefits in kind, such as cheap transport or free meals - two of the biggest financial obstacles to students staying in education.

But Shane Chowen, National Union of Students vice-president for FE, warned against colleges relieving local authorities of their statutory duty to ensure that no young person is prevented from staying in education post-16 for lack of transport.

He said: “We can’t have colleges taking over the legal responsibilities of local authorities, who have to provide a transport strategy. If colleges take up the reins with learner support funds, then it runs the risk that when students suffer hardship they won’t be able to access the money.”

Mr Chowen said: “Applications need to be dealt with swiftly: you can’t have students hanging around, especially if they need course materials and so on.”

He said colleges could also consider trying to reduce up-front costs for exam fees or registration fees wherever possible, and to work on keeping equipment costs as low as possible so they do not take up too much of the reduced bursary fund.

The LSN research found that back in 2006 many students did not know what support was available, something which may become more of a problem as each college implements its own policy. But they usually found the application process relatively straightforward.

What was described as stressful and time-consuming was producing the documentary evidence of financial circumstances to back up an application. If free school meal eligibility becomes the key criterion, however, students may only need to do this once to secure support.

But with colleges not part of the free school meals system, that will require local authorities to open up their data. If colleges have to do this job, then the AoC and others argue they need new tools.

COALITION CONTROVERSY

THE EMA: A BROKEN PROMISE

The education maintenance allowance was introduced in 2004, with grants of #163;10, #163;20 and #163;30 a week for 16-19 students with family incomes below #163;31,000, or #163;21,000 for the maximum grant.

The Insitute for Fiscal Studies credited it with a seven percentage point increase in participation at 17, as well as with gains in achievement. But by the time it left power, Labour was already considering replacing the #163;560 million scheme, as it moved towards making education to 18 compulsory.

Despite promises to preserve it, the Coalition scrapped the allowance, claiming that up to 90 per cent of students would have stayed on without it - a figure that was hotly disputed by students and colleges. Under pressure, it unveiled new bursaries worth #163;180 million, including a guaranteed #163;1,200 a year for 12,000 of the poorest students.

But in an unexpected twist, the Organisation for Economic Co-operation and Development then recommended that the Government re-instate the EMA - to help reduce the deficit. It argued that the improved skills of students would boost the economy and repay the cost of grants.