EDEV_503 Week 7_4

You ask questions about education being free or not. This is a very complex question, and I think that HE specialists need to consider the deeper economic consequences of the costs of tertiary education.

HE can be ‘free’ in the sense that the student doesn’t pay. But as common sense dictates, there are always costs involved. The HE situation in England offers a very good case study in HE costs. There are two basic costs to the student; tuition fees and cost of living fees. Until 1998, tuition was ‘free’, i.e. paid to the HE institutes by the government (Blake, 2010). Students were means-tested, and many received full or high levels of maintenance grants. Upon graduation, student debt was zero for fully-funded students and very low for most of the others, as means-testing assumed that richer families paid for maintenance. This government-side funding was financed by tax revenues. The cost of HE was a relatively simple budget item: the payment out to HEIs and the revenue in from taxes in a fiscal year.

The introduction of tuition fees and the corresponding student loans system complicates the year-on-year calculations. The tax burden is not reduced; the payment out to HEIs is reduced (they get their income directly from students), but the government needs to finance student loans. The benefit to the tax payer (or seen from another perspective, the neo-liberalising of HE) doesn’t occur in the same year. In principle, that benefit is seen when the student loans are paid back post-graduation. Assuming that the same number of graduates repaid loans at the same rate as new undergraduates entered HE, the cost of tuition to the taxpayer would be zero. However, if graduates don’t secure employment or receive high-enough salaries, currently set at £21,000 (Warrell, 2015)—meaning they don’t need to repay the loans—the treasury never recoups that expenditure.

There is a point at which the rate of non-repayment of student loans rises above what the cost of not charging tuition fee would have been. In other words, ‘free’ education (to the student) can be cheaper in terms of the use of tax revenue to the government than having the students pay. As of 2015, 45% of students loans remain unpaid (Warrell, 2015). If this figure rises about 49%, providing free tuition would be cheaper to the treasury (Mason & Malik, 2014).

This calculation is only relevant in countries where student loans are financed by government-owned organisations. In countries (such as Japan) where most student loan providers are private bodies, this question is moot.

Closely tied to this question is economic cost of having families support their student children as opposed to that being paid by the general taxpayer. In many cases, these actors are the same, and the spread of the total cost amongst all taxpayers is a political question.

Jim

Blake, H. (2010 November 10). Grants, loans and tuition fees: a timeline of how university funding has evolved. The Telegraph. Retrieved on Nov 23 2015 from http://www.telegraph.co.uk/education/educationnews/8057871/Grants-loans-and-tuition-fees-a-timeline-of-how-university-funding-has-evolved.html

Mason, R. & Malik, S. (2014, March 21). Unpaid student loans ‘a fiscal time bomb for universities’. The Guardian. Retrieved on Nov 2015 from http://www.theguardian.com/education/2014/mar/21/student-loans-unpaid-debt-problem-universities-adrian-bailey

Warrell, H. (2015 May 21). UK ministers grapple with problem of unpaid student loans. Financial Times. Retrieved on Nov 23 2015 from http://www.ft.com/cms/s/0/13aefac0-fed4-11e4-84b2-00144feabdc0.html#axzz3sJs1BhAY

About theCaledonian

Scot living in north Japan teaching at a national university.
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