Dealing with debt

As the global debate continues about how to resource higher education, there are some strong voices suggesting that the only way to generate sufficient cash to pay for educational excellence without discouraging the less affluent from entering universities is through tuition fees funded through student loans. Under such systems students pay nothing on commencing their studies, but rather take on a loan, with the sum of the loan representing some or all of the cost of their courses. That loan is later repaid by instalments when the student, now a graduate, is in employment or economically active and earning more than a specified income.

This system, it is suggested, is superior to ‘free’ higher education (i.e. studies funded entirely by the taxpayer) because it secures more resources for universities than the taxpayer could afford to provide, and to a tuition fee-based model because the student pays nothing up front or during the course of their studies and so is not excluded by lack of means. It is used in Australia (where the Higher Education Contribution Scheme – HECS – was introduced in 1989) and more recently in England (and not, as is sometimes suggested, in the United Kingdom as a whole).

The introduction of a similar scheme in Ireland has been proposed by some for a while. The Irish Universities Association began to argue for the ‘introduction of a system of income contingent loans and top up fees’ by 2009. More recently the new President of University College Dublin Professor Andrew Deeks, in an interview with the Irish Times, said:

‘My personal view is that the contribution system that has worked in Australia for the past 20 years now provides a good model. It is a deferred payment of a debt, which is accumulated module by module as students progress through the course.’

There is little doubt that the Irish system of higher education is now seriously under-funded. It is also easy to see the attraction of a resourcing framework that does not create a financial entry hurdle for students. Whether the Australian model is as good as is suggested could however be open to argument. One of its significant features is the by now very high level of unpaid debt. It is estimated in Australia that over A$30 billion in student debt is outstanding, of which up to A$7 billion will never be recovered (nearly £4 billion). Now one of the live issues in Australian politics is the question of whether student debts owed by people now deceased can be recovered from their estates. Other studies have suggested that the prospect of high indebtedness is also discouraging some poorer students from entering higher education.

Nobody has yet found the silver bullet for funding higher education, and all debate and exploration should be welcomed. As countries in the developed world identify the need to promote universities that are resourced to host world class discovery, attract very high value industry investment and provide graduates with top skills, it is clear that the funding burden is not an easy one for the taxpayer to carry. Equally it remains of vital importance that appropriately able people from all socio-economic backgrounds are encouraged to pursue a university degree. However, whether a loan system is the answer is, in my view at least, somewhat doubtful.

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6 Comments on “Dealing with debt”

  1. V.H Says:

    I don’t usually disagree so fundamentally, but on this essay we are truly a gulf apart.
    You are viewing this as an inside and are attempting to solve a problem which was formed as a result of insane distortion.
    After the second world war the US universities expanded vastly on the back of federal loans to students. They were in the happy position of being the only provider and could set whatever fee they wanted. They were not even in the position of the doctors since they didn’t have to be aware of the money available while the student was undergoing the ‘education’. In fact where the insurance companies pre-funding model could keep a degree of control over the market, long term loans are nothing but a blank cheque.
    Now to Oz. There was a cohort who undertook loans that could never repay them. Poor people reading for an arts degree. Poor people reading for any degree where one two three years of free work is needed “to pay ones dues” as if we’re back building one of Woolsey’s palaces. And I’m including higher education in this. Under what delusional set of circumstances can we have baby lecturers on pocket money until their mid 30s AND expect brilliance. Where is their home life. Where is their HOME. They sure as shootin cannot afford to breed, at least not unless they’re playing the London LEAs game where teachers are subsidised by their spouses.
    And what the devil will this notion of yours do to level the difference between fee paying high schools and those funded by Vote. All it will do is copper fasten and then widen the current inequality.
    Oh, the term Taxpayer is perhaps one of the most racist terms bandied about these days. It has a history synonymous with townsperson, or settler. And wherever you find it deployed you’d better examine the argument closely for it’s speaking to those within the walls, insiders. But what makes this especially problematic is that it isn’t even close to truth for those on the dole pay more of their income as a percentage in Tax.
    The real question, and the answer will provide your funding track, are you a business or a public good. Remember Harvard is in the first, designed to educate presbyterians and a skim read of Calvins principles will explain why, and they seem to manage the funding issue quite well what with their 32 billion plus the 300 million to keep the wolf from the door.

    • Wendymr Says:

      I would suggest that US student loans are somewhat exceptional: fees charged by most universities are considerably in excess of what is charged in other countries (because subsidies still exist in other countries). Then, of course, what students actually pay – borrow – varies so much, dependent on where they were born/live, or whether they qualify for scholarships or other deductions. That said, it’s not unusual in the US for students to run up debt well in excess of $100,000.

      In Canada, in contrast, fees are considerably lower, and student debt is therefore lower. A two-year community college diploma averages around $10,000 including books; a four-year university degree would cost between $25,000 and $30,000.

      Of course, the cost of being a student extends far beyond tuition, other fees and books – living expenses, and the opportunity cost of studying, but that’s another discussion entirely.

  2. Are there no opportunities for efficiency gains to lower the cost of provision like other areas of human endeavour? Is there a hidden cross-subsidy of research by undergraduates? Do we even have the right to ask?

  3. anna notaro Says:

    Maybe the UCD President should read this before making up his mind on a particular funding model:

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