Funding higher education: policies for access and quality House of Commons Education and Skills Committee
Опубликовано на портале: 14-11-2003Организация: London School of Economics and Political Science (LSE)
- This paper puts forward a strategy for achieving two objectives in higher education – improved access and increased quality – about which there is unanimous agreement.
- DIAGNOSIS. The introduction of income-contingent repayments in 1998 was a genuine and enormous advance. However, two strategic problems remain. First, income-contingency is little understood, causing unnecessary fear of debt (solutions are discussed in section 4. Second, all the funding problems of the current system go back – directly or indirectly – to the subsidised interest rate on student loans. Australia and New Zealand face identical problems for identical reasons.
- Interest subsidies create three problems. They are badly-targeted, mainly benefiting highearning graduates in mid career. They are expensive (a recently-developed model estimates conservatively that out of next year's lending to students of £2500 million about £700 million will never come back because of interest subsidies). Third, because loans are so expensive, the Treasury rations them. Thus interest subsidies, like most subsidies harm the people they are meant to help. There was an experiment with subsidies called Communism. It did not work. The result is that loans are too small, leading to student poverty and extensive use of credit card debt; and loans are meanstested: thus parental contributions and upfront costs continue.
- PRESCRIPTION. If graduates pay an interest rate equal to the government's cost of borrowing (not the bank overdraft rate), repayments increase from about 50% of total borrowing to about 85% (the remaining 15% shortfall being mainly due to low lifetime earnings), largely eliminating the fiscal impediment to expanding loans. The move is politically less difficult than it sounds. Interest rates are currently low, so that a move to the government's cost of borrowing involves only a small increase to the rate that graduates pay. Second, a graduate's monthly repayments depend only on her income; thus an increase in interest rates has no effect on monthly repayments, instead affecting the duration of the loan – making it clear that repayments are simply a form of targeted income tax.
- POLICIES. Removing interest subsidies is the single essential key to solving current funding problems. The considerable resources thereby released underwrite the strategy for quality and access in section 4. The strategy has three mutually reinforcing elements: flexible fees, a wide-ranging loan system and active measures to promote access.
- Flexible fees are necessary to reflect diversity, to arrest quality decline and to assist some redistribution of teaching budget towards institutions with more remedial teaching. Specifically, fees should be increased initially to £2000, but with institutions free to charge less. All fees should be fully covered by a loan entitlement.
- A wide-ranging loan system.
- Loans should be adequate to cover living costs and tuition fees, making higher education free at the point of use, thus addressing student poverty and freeing students from high-cost borrowing such as overdrafts and credit card debt.
- Loan entitlement should become universal, eliminating the unpopular and complex income test and, at a stroke, getting rid of parental contributions. The combined effect of these twin elements is equivalent to bringing in universal grants in combination with an income-related graduate contribution (section 4.2). Additional options include extending loans to students in further education and to postgraduates.
- Active measures to promote access. There are two impediments to access –
and information poverty. The strategy outlined in section 4.3 aims to address both.
- Grants and scholarships for students from poor backgrounds.
- Extra personal and academic support when students from poor backgrounds reach university.
- Raising the aspirations of schoolchildren.
- More resources earlier in the system, including financial support for 16-19 year olds.
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