Cost-Sharing and Equity in Higher Education: Implications of Income Contingent Loans
This paper explores the fitful saga of cost-sharing in European higher education, and some implications of the current (2003) interest in income contingent loans for recovering a portion of the costs either of student living or tuition fees or both. Europe is the last bastion (some might say the last refuge) in the world of fully (or almost fully) tax-supported higher education, extending in many countries beyond free higher education to at least some governmental, or taxpayer, responsibility for expanding higher educational participation and equity with need-based grants covering some of the costs of student living. However, there is a long tradition in Scandinavia of the student bearing all or most of the financial responsibility for food, lodging, and other costs of student living—generally through partially subsidized student loans (in Sweden, loans of the income contingent . This long tradition of student contributions in Scandinavia, plus the increasing expenses of student living costs everywhere in Europe, coupled with low and frequently diminishing (in the UK virtually disappearing cost-of-living grants from the government, has kept the question of student contributions--and thus of student loans--at least on the table in many countries of Europe.
The advent of tuition fees—implying a greater share of the actual costs of instruction borne by parents as well as by students, and which can be seen on a modest scale in the Netherlands, Portugal, and most recently Austria, and on a more substantial scale in the UK--extends cost-sharing to a far more economically significant as well as a more ideologically controversial arena (at least in Europe). The spread of cost-sharing in Europe, then, implying parental and/or student shares of both the costs of instruction and the costs of student living, although still lagging behind most other countries of the world, has profound implications for the spread of market forces to higher education generally as well as for the realization of the virtually universal objective of preserving and expanding equity. And in this saga, student loans—which make possible a student share of this cost burden—will almost certainly grow in importance to European higher education policies.
This paper will look first at the implications of cost-sharing, or the shift of higher educational costs from exclusive or near-exclusive financial reliance on government, or the taxpayer, to being shared with parents and/or students. We will consider especially the implications of cost-sharing to several different notions of higher educational equity. We will then consider the implications of income contingent loans as a means of implementing a measure of cost sharing. We will look especially at the implications of such loans to the two principal (and at least partially conflicting) purposes of any student loan program: (1) to effect a real cost recovery as evidenced by a shift of some of the higher educational cost burden from taxpayers to students; and (2) to expand participation (thus advancing equity) to some who would likely have been excluded in the absence of this cost-sharing—and of the particular income contingent form of student loans.
This paper addresses the theme of higher education and market forces in the policy context of the important and virtually universal goal of higher educational equity, and in the programmatic context of the increasing popularity of income contingent loans (sometimes mistakenly termed “graduate taxes”) as currently employed in Sweden, UK, South Africa, Australia, New Zealand, and to a much more limited extent, the US. (Income contingent loans are also being urged by their proponents in some of the formerly Communist countries in Eastern and Central Europe as well as in many developing countries.) We will look especially at the current (2003) fascination with the Australian Higher Education Contribution Scheme (HECS), which embeds the incorporation of a tuition fee within a system that allows the fee to be either paid “up front,” as a direct tuition fee (presumably mainly by parents) or deferred and assumed by the student via an income contingent loan. This is the system that was adopted in 2001-02 in Scotland as an alternative to the (then) UK “up-front” tuition fee and that is currently (2003) “on the table” for adoption in the rest of the UK according to the Government’s 2003 White paper.