All entries for Wednesday 13 October 2010

October 13, 2010

Higher Education: Who Else Should Pay?

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A Browne study

The Browne report, Securing a sustainable future for higher education in England, says higher education should be paid for by those that benefit from it: our graduates. It also says they should pay later, in easy instalments, and only when they can clearly afford it, with all risk transferred to the government and universities.

It looks to me like a no-brainer ... Yet lots of people are showing signs of moral outrage.

A question the critics seldom address is: Who else should pay for my degree?

The taxpayer is usually implied. But here's the problem: tax-financed higher education involves a lot of poor-to-rich redistribution.

Robin Hood in reverse

Today's students are a large chunk of tomorrow's wealthy. Today's taxpayers, in contrast, extend well into the ranks of the poor. In the UK, you start paying income tax at an annual income of just £6,475. Under the Browne proposals, student loan repayments won't kick in until annual income reaches £21,000. If the graduate's income doesn't make it to that dizzy height, you pay nothing.

Somehow or other, there are people who figure it's fair for the guy on £6,475 to start paying for someone else, but not for the guy on £21k to start paying back. (If you take expenditure taxes into account, which everyone pays, it's even worse.)

I'm sad to see clever people, like Warwick's own student representatives, dressing up in the mantle of social justice to call for poor people to go on paying to make others richer than the payers will ever be.

They say that one thing clever people are good at is defending the indefensible. Is it them or is it me? Well, the reader can make that choice!

Better than a mortgage

The private net present value of a degree, according to an interesting but underexplained chart in the Browne report, is at least £100k (the actual figure shown is a bit over $200k, which is useful for international comparisons, but still confusing). If you include the "social contribution" from today's taxpayer, then it's a little more. For the sake of argument, let it be £120k.

Warwick University Students' Union puts the likely burden of student "debt" (I'm putting it in quotes, because it's not real debt like a mortgage, where they come after you if you can't make the payments*) under Browne arrangements, at "well over £40,000."

That sounds bad. But, the last time I checked, £120k minus £40k would still leave around £80k to enjoy. Nice.

* A roof over your head is a more fundamental right than higher education. Millions of working families, who have not had the benefit of higher education, take on much larger sums of mortgage debt in order to own their homes. If their incomes fall and they have to skip payments, they must sell up or risk repossession. Don't you think they'd jump at exchanging that for "debt" on the terms proposed by Browne?

And finally

My experience is that student finance is the one topic that attracts lots of comments. Feel free to say what you think. Right now, I don't promise to reply. That's not because I don't care or don't have an answer. It's because I've got to turn away from this to earn my salary! And do some teaching!

I am a professor in the Department of Economics at the University of Warwick. I am also a research associate of Warwick’s Centre on Competitive Advantage in the Global Economy, and of the Centre for Russian, European, and Eurasian Studies at the University of Birmingham. My research is on Russian and international economic history; I am interested in economic aspects of bureaucracy, dictatorship, defence, and warfare. My most recent book is One Day We Will Live Without Fear: Everyday Lives Under the Soviet Police State (Hoover Institution Press, 2016).

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