Managing debt. Or not.
For many policy-makers on higher education wanting to work out how to fund universities the answer has seemed simple: let students pay, but not at the point of use. This policy, which began in Australia and has spread elsewhere, is based on the view that students should be encouraged to enter university, that they should not pay anything up front, but that the cost of their education should be funded through a loan that eventually they will re-pay (or at least will pay if their salary rises above a certain threshold).
However, outstanding student loans are fast becoming the new major debt burden, in America even outstripping credit card debt. A recent report from Missouri documents a high school teacher who, through ‘a series of unremarkable decisions about college and borrowing’, ran up debts of $410,000.
Large debts also quickly become bad debts. In Australia the total amount of unpaid student loans is estimated to be around AU$70 billion. It is too early to say how this will play out in England, but it is unlikely to follow a completely different pattern. So far, nobody has put any particular thought into how this will be managed, and who will pick up the tab.
As I have said before in this blog, I am in favour of tuition fees, not least because the taxpayer simply cannot afford to fund the entire cost of a higher education system that is internationally competitive. I am also in favour of grants made available to support those who cannot afford to pay, so that nobody is barred from higher education by the inability to pay. But I am not in favour of a loans-based system, not least because the delayed payment makes the student less conscious of the quality or good value (or otherwise) of the education she or he is being offered, and because it appears to absolve the state from bothering with higher education funding at all.
The debt bubble connected with property triggered a severe global recession towards the end of the last decade. It is time to think again about the funding of higher education.