In an article for Label Online, Ellie Mackenzie (Label News Editor) examined directly how the cost of University for those in the UK is rising. I’d like to weigh in on the bigger picture of the University tuition debate.
The current wisdom from many within the National Union of Students (NUS) is that University tuition fees are evil and the raise to £9,000 by the Con-Dem coalition was the monstrous work of the Conservative Party. This line is peddled by The National Campaign Against Fees and Cuts, who have essentially hijacked NUS funding since their candidate for VP Welfare, Shelly Asquith, was elected to the NUS Executive in April 2015. Their next National Demo is to be held at 1pm on November 4th.
This view is driven more by political ideology than pragmatism or economics. Moderates from across the political spectrum (notably many in the Labour party) see the merits of correctly priced and funded tuition fees, but unfortunately many are sidelined and ignored in the student movement. The system currently in place isn’t perfect, but is far fairer than the ‘Free Education’ championed by some.
Scrapping University-tuition fees is regressive and is counterproductive. In England, more poor students go to university than when higher education was free, whereas in Scotland, which has abolished tuition fees, Universities are facing a funding crisis and attract no more poor students than they did.
Free University education isn’t fair. Many of my contemporaries left school without attending University and are now being asked to sponsor 3+ potential ‘gap’ years through their taxes. The increased returns for graduates over their lifetime should be enough to inform the decision over the whether to invest in University tuition.
Free University education devalues the incredible opportunity students have. Just as many abuse the healthcare system as they see no cost at point of use, many students are now more diligently pursuing learning as the primary reason for choosing University, rather than using it to put off adulthood for a few more years.
The current system is free at point of use and fees are only paid back by people who can afford their ‘share’. Some students from a more wealthy background can afford to pay for their tuition and living expenses without needing a loan. Scrapping fees puts the burden of their tuition on the backs of many far poorer tax payers.
The only real debt students have is found in overdrafts and money owed to private landlords because, until the most recent progressive changes, maintenance loans offered by the student loans company were simply not enough to cover the cost of living for many middle income students. The rest of the money ‘owed’ back to the government is only potential debt. I’ll address this, and the NUS’s response to the rejig of the maintenance loans system, in another article.
A better way than debt?
In the United States, many students take real loans and mortgages to fund their much more expensive tuition fees, many paying in excess of $60,000 a year. This isn’t a loan from the government only paid back if a graduate can afford it, it’s real, non-bankruptable debt. Their system is far more broken than ours, students in debt up to a total of $1.2 trillon. In August, Hillary Clinton kicked off plans or a plan to reduce $350billion of this debt, but opponents argue this does nothing to address the real problem.
Enter Marco Rubio, the junior Republican Senator for Florida and presidential hopeful. He has resurfaced a plan to fund students with equity rather than debt, first attributed to Milton Friedman in the 1950s. So what does that mean in practice?
The idea is similar to income based repayments such as in the UK but with a difference. Instead of the government stomping up cash for whichever dubious degree course a University can imagine, a student has a private investor take a percentage of their future earnings in exchange for the investor funding their University tuition. This method of payment can be described as similar to equity rather than debt.
A major advantage of this funding method is that degrees that turn out the best graduates will be most easily funded by equity, while those degrees that offer graduates nothing but a three year gap-year will struggle to find valid funding. If affluent students wish to pay themselves through cheap degrees with a low value-added, they can self-finance and this money can be used to offset costs of other students’ more expensive courses.
As The Economist succinctly phrases: “investors will not fund a booze-up; if a course fails to add value, students will be unable to raise enough cash to enroll.”
In a climate where tuition fees have been reformed twice a decade (or one Engineering degree’s length) we can be sure more change lies ahead.
Have you got a better solution to the funding of University Tuition, or do you agree with Jeremy Corbyn and think we should eliminate fees and hope general taxation cover it? Get in touch or comment below.
