Give us a loan?

As the complexity of higher education funding, and the scarcity of available resources to provide funding, has become greater, an increasingly popular method of addressing it has been the idea of student loans. When the Westminster government introduced its recent framework for increased university fees for England, ministers emphasised that a university degree programme was still accessible to students without paying anything up front, and indeed without repaying anything until a reasonable salary threshold has been reached. By providing student loans, the system allows students to embark upon their studies without either them or their parents having to fork out anything at that point.

So is this as good as it sounds? No financial hurdles for students while studying, but financial benefits for universities from fees? Actually, England was not first to try this idea. Australia has been operating a fees/loans system for some time. It was introduced in 1989 as the ‘Higher Education Contribution Scheme’ (HECS), which has more recently been replaced by the ‘Higher Education Loan Programme’ (HELP). This scheme has been used as a model for higher education funding programmes contemplated or introduced elsewhere, including in Ireland. Student loan programmes are also common in the United States.

However, all these schemes are somewhat problematic. In Australia it was estimated in 2010 that outstanding student loans debt was $15.8 billion. In the United States student debt overtook credit card debt around the same time. Furthermore, it has been revealed in America that where graduates begin to re-pay their student loans, nearly 10 per cent default within two years. It is not unlikely that this pattern will be repeated in England, and if it is, it will create a whole new funding issue as the expected resources from loan repayments do not fully materialise.

There is, I believe, a strong case for tuition fees paid by the well off, with financial support for those who cannot afford to pay. There is also a case for state funding of higher education fees, provided the state understands the scale of the funding requirement. There seems to me to be no convincing case for loan schemes. They deter students, and they create unpredictable financial issues. It is time to move away from the whole idea.

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7 Comments on “Give us a loan?”

  1. Steve B Says:

    Totally agree. To burden a young person and in all probability the Nation with a large debt, payable over their working lifetime is hardly a good legacy for the future. I for one did not vote for such a mad system to be imposed.

    I have three children at University, thankfully in Scotland (RGU as a mater of fact) so no insane fees to be paid and they will all start out on their working lives debt free.

  2. Anna Notaro Says:

    It seems to me that the current framework for increased fees in England is an excellent example of the illusory art of procrastination, while repayment is procrastinated to a later date, a loan is presented as a reasonable option, one than can even allow students from disadvantaged backgrounds to access HE. And yet when the illusion is over a whole generation is left to cope with the grim reality of debt. As this piece puts it rather cogently, ‘The Student Loan Debt Bubble Is Creating Millions Of Modern Day Serfs’ ( It might sound intellectually passe’ to revive the old concept of class here (evoked by the term ‘serf’), and yet of all the issues that concern HE, widening its access remains the most prominent, the one where the battle for emancipation and social justice is fought. The Westminster government policies are misguided in that they apply to education the same economic philosophy that has brought about the debt bubble and the financial crisis, in so doing education becomes (unwillingly) complicit in crystallizing unfair class structures. The saddest paradox of all 😦

  3. Eddie Says:

    My brief comment: The article is a bundle of delusion.

  4. There are two main issues with loans. The first is very practical: the costs of administering loans systems (and especially of hassling bed debtors) are high. The costs tend to increase with the complexity of the loan system, and in the case of the UK higher education loans, there’s a lot of complexity. The second is more structural, and Anna has pretty much dealt with it in her comment above.

    You also say that you favour tuition fees for the well off. I agree with this in principle. Free higher education is socially regressive, because higher education is primarily enjoyed by the most affluent classes. It follows that the benefits of higher education are also mainly enjoyed by the well off. While access is open to all on the basis of merit, in practice the results of schools based examinations also favour the well off. So the case for free higher education can not really be based on social equity.

    However, it does not follow that the full costs of higher education should be met by the well off. As well as the benefits to the individual, there are also wider social and economic benefits. A purely fee-based system sends the message that these wider benefits are unimportant. It seems to me therefore that the Coalition has gone too far in charging (effectively) £27,000 for a degree.

    But a means-tested system, with fees only for the well off, is also costly to administer. I therefore favour the idea of a charge to the graduate rather than to the student. And I like the principle of triggering the charge after the graduate’s earnings reach a certain level. I would set the level at close to the national average salary. And the costs of administration would be minimised by collecting the payment through the taxation system.

  5. Vince Says:

    Since you started in on this a few year ago I went and did a good bit of reading on the subject.
    I tried to simplify the issue, but the more I did that the more I entered one or another field that tacked me into ground that I felt wasn’t a good place for the sector. Take for instance the usual financial method, there you simply deny huge sections entry. But the good that comes is that it levels the follow on in the professions. So it solves that nasty little result of current system where only those that can afford if enters the higher professions or anything requiring an internship.
    Then you’ve the social method, but that tracks into free fees and the entire sector becoming an annex to the civil service.
    Then you’ve the Harvard model, where those that can pay, pay through the nose. They are soaked with unashamed and truly professional dexterity. And the excess is used to top up those that cannot afford the fees.
    I wondered how they came up with the idea. And it’s actually simple enough. Communities that existed on the frontier needed a parson but could never afford to compete with the trading ports if a straight market existed so they worked a transfer system. Little else works a seamlessly and this has the beauty of being designed for the sector and not grafted from outside. And it also had that beauty of creating a notion of Good in Giving.

  6. James Fryar Says:

    I’ve always wondered where employers might fit into the scheme. After all, if you’re a multinational who wants to employ PhD educated graduates, then why not ensure that these companies partially pay for the education of the people they want to employ.

    Ah, you’ll say, the companies pay tax. But actually, in Ireland, they pay a relatively low corporation tax. At the moment these companies not only have their cake, but are eating it too: the Irish taxpayer funds a ‘free’ education system, the graduates are employed by the multinationals who don’t have to worry about graduates negotiating higher salaries to offset student loans, and then pay a reduced corporation tax.

  7. OMF Says:

    The problem is pretty simple: Everyone wants more graduates, but nobody wants to pay for them.

    The solutions are less so.

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