Posted tagged ‘graduate debt’

The problem of student debt

August 4, 2011

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.

Fees, debts and loans

March 21, 2011

Amidst the international turmoil around higher education funding, one aspect of the situation has started to encroach on public awareness: student (or graduate) debt. In England it has just been revealed that the 20 students with the largest debts owed to the Student Loans Company together owe more than £1 million, with the highest individual debt being £66,150. In the United States, where debts have been a feature for many years but where, in the light of major tuition fee increases recently, they have grown significantly, there is an overall level of graduate debt that exceeds that of credit card debt and now stands nationally at a staggering $900 billion; but it may be that the English authorities should note that even with those sums the average individual debt in the US is lower than what is now expected in England.

Student loans are sometimes presented as an easier option than straight fees, as higher education still remains free at the point of use. It is however arguable that loans have the potential to create a whole new set of problems. The British universities minister, David Willetts, has recently suggested that in reality the new post-Browne English framework is a form of graduate tax. If that is so, then it would be better to structure it that way, thereby removing what may become the major deterrent effect of large debt. Or it might be better to set fees for the wealthier students only, payable on entry to university, while creating better grants and financial supports for those less able to pay.

And for those who believe that a totally free form of higher education is best of all, it nay be important to reflect on the fact that a university system thrown into penury is in the end not a better outcome.