The problem of student debt
As longer term readers of this blog will know, it is (and remains) my view that students who can afford to make a contribution to the cost of their university education should do so, in large part because this will allow the use of public money specifically to support those who need financial help in order to access higher education. I am therefore a supporter of tuition fees for those who can afford them – though I also accept that in Scotland there will be no fees for the foreseeable future (in Ireland the position is now less clear).
However, while I doubt whether public funding should be spent to cover the entire university education of wealthier students, I have significant reservations about the use of student loans to fund degree programmes. While it is true that a university degree has the effect of increasing the anticipated lifetime salaries of graduates, there is also now growing evidence that the size of average student (or graduate) debts in a number of developed countries is now such that many will struggle to meet repayments, and indeed many may conclude that the financial burdens they are carrying exceed their expectations of higher pay.
Graduate debt statistics bear out this problem. In addition however there are now increasingly bizarre developments that highlight the issue. So for example the recent suggestion by Sue Rabbitt Roff, a senior research fellow at the University of Dundee, that it should be permissible for people to sell a kidney for transplant purposes was justified, inter alia, with the suggestion that this might be a useful way of paying off university loans. Equally alarming is the sudden rise of websites that offer ‘sugar babies’ to ‘sugar daddies’ – i.e. the offer by female students of ‘companionship’ or sex to older men in return for financial support while at university. While the websites in question are American, one of them claims to have over 200 Irish female students registered for these purposes.
As the trend continues to have high tuition fees for students funded by loans, the consequences of this need to be considered carefully. It is not that loans are never appropriate, but rather that there needs to be a much more sophisticated assessment of when a loan is a viable funding method, or when the resulting debts will simply be unmanageable. This also means that access programmes need to be more than token in terms of students numbers. It is time to take the financial circumstances of students much more seriously.
Explore posts in the same categories: higher education, studentsTags: graduate debt, student debt, student loans, tuition fees
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University Blog 
August 4, 2011 at 3:58 am
I share your views. In the United States, student debt is larger in amount than credit card debt. My astonishment that Great Britain is “learning” from the example here is hard to measure. After seeing the effects of student loan debt among other professionals, I have no qualms about denouncing it as a clear danger toward the future of tens of thousands of students who otherwise could not afford an education. James Pilant
August 4, 2011 at 7:47 am
I saw on the news last night the researcher from Dundee talking about selling Kindneys to recover debt… I tho thought it was an appalling idea. Recently, when the iPad2 came out in Bejing there were at least two reports of young adults trading a kidney for cash to get Apple products… Everyone thought that was deplorable then… What is different here?
August 4, 2011 at 4:16 pm
I don’t see the reason for total repugnance to creating a market transaction in this area. If a fit, healthy 20 year old who will struggle for 15 or so years to play off college debt, why should he/she be denied from entering into a contract (regulated by some sort of government authority) where, in exchange for a kidney (giving the recipient a second chance at life) the recipient agrees to pay for his college tuition?
Even a limited market could be created for this specific purpose. If the market was specific and highly regulated (in the ilk of financial services etc) it could be very beneficial to both parties.
Something like the prospective student could be made carry out a sophisticated cost-benefit analysis (taking into account lifestyle, future health problems, etc) and the kidney recipient’s financial situation / will in the event of death / ability to follow through on the deal could be investigated.
If such a market was created there could be a number of interesting spin off aspects. One I just taught of was perhaps a parent/relative could enter into an agreement that if he/she was to get into an fatal accident their (highly valuable) organs would go into this market in aid of the perspective student – just a taught
Anyhuu, ’tis the repugnance I have a problem with.
August 4, 2011 at 8:20 am
Would it be fair to presume that you are not in favour of encouraging a system that has no incentive for the providers to reduce costs and no incentive for students to pick courses that would lead to an increased ability to generate an income. Fees and loans would certainly help here as students have to more carefully consider their choices and institutions have to control costs in order to attract students.
Again, I would suggest that there are a lot of people saying what they don’t want but few suggesting what will work.
August 4, 2011 at 9:13 am
There are undergraduate tuition fees in Ireland, they’re just not called “tuition fees”. They’re called “student service charges”: they’ve doubled in the last three years and are now a flat €2,000. The NUI has effectively admitted that this is “fees by the back door”. Yes, a council grant will cover that, and provide another €1,000 or so, but that barely puts a dent in the appalling cost-of-living – especially in somewhere like Dublin – and the current near-total absence of the kind of work students can use to support themselves while studying. (Every advertised job, even something like making pizzas, demands years of relevant experience before you will be considered.) There is no organised student loan scheme, and if you go to a bank you might be offered €1,000 at 11% interest – only for the desperate. In short: in Ireland, university is rapidly becoming unaffordable to all but the richest families.
August 4, 2011 at 9:17 am
So, brian t, what do you propose will fix the problem. I agree that the service charges are fees in disguise but in general they seem to be lower than the average student spend on alcohol.
August 4, 2011 at 9:29 am
Oh here we go, the student drinking cliché. Do you think ALL students are like that? It sounds like you are basically contradicting me, since how can any students have financial problems if they are all drinking that much? I know some have the money for that, and it annoys me too: I was talking about the ones who don’t – and yes, they do exist, you just don’t hear about them because they don’t make for good tabloid articles. I don’t know why I’m bothering to talk to someone who gets his opinions second-hand.
As for what to do about it: why is it incumbent on me to provide you with a solution? There’s already plenty of discussion in progress about student loan systems etc, as in the UK, so I’m happy to leave that to the experts, such as the author of this blog. Hopefully they will treat students as individuals, rather than try to lump them all together as drunken time-wasters as you clearly do.
August 4, 2011 at 1:24 pm
I never said the students drank too much. Do the sums. Registration fees run at probably 10% of the cost of providing a course. Divide that over the year and it would not constitute much drinking.
And I do think it is reasonable for anyone who criticizes another’s proposals to solve a problem, to come up with better solutions. Sorry about that. There will never be perfect solutions. The best we can do is to hope to find optimal ones. The only way you can persuade me that a solution is sub-optimal is to show me a better one. I can hear guys whinging about what’s wrong with the country any day down the pub, but I expect something a bit more constructive here.
August 4, 2011 at 6:29 pm
Ferdinand,
Who do you actually think should finance students attending degree programs?
August 4, 2011 at 7:32 pm
If students commited to work organised by the state to pay for their fees??? Some care assistance, educational assistance, etc