The decision by the Irish government to repeal the reintroduction of fees has been met with joy by students around the country. But ‘free fees’ promotes inefficiency and propagates inequality, by not imposing the true cost of education on students.
Those who criticised the reintroduction of fees claim that students couldn’t afford to pay them, and that access to education would be limited as a result. Unfortunately, inequality in educational opportunity may stem from differing financial conditions – but free fees does nothing to stop this. As long as wealthier families can gain an advantage through spending, either through private tuition or grind schools, they will continue to do so.
In the absence of fees, rich parents simply purchase the educational advantage elsewhere. A financially disadvantaged student won’t have to pay fees to the most prestigious universities in the country, true. But only if they manage to overcome their disadvantage and gain admission. Under the status quo, the same inequality subsists in education that free fees sought to eliminate – statistics and anecdotal experience show that access has not significantly improved for the po
orest.
But there are state schemes to improve access, I hear you say. If these other programs to increase education amongst the disadvantaged are working, why do they require free fees for everyone? After all, there are certainly students who can afford to pay. Meanwhile, the state can simply subsidise fees for the poorest. There’s no need for more involvement than this – just give them vouchers, and income is no longer a limiting factor in access to education. If necessary, there could be a sliding scale. Problem solved.
The truth is that much educational spending as it is today is highly wasteful. The Cato Institute highlights the problems inherent in trusting the state to decide on matters of education. In China, heads have been rolling as graduates are educated at great expense, only to find themselves jobless and without any way of employing their skills.
However, if students are forced to pay for their education directly, they have a strong incentive not to waste educational resources. Since students who choose subjects with low employment opportunities tend to be wealthier, this is a regressive saving. If you want to study philosophy, how is it fair for everyone else to pay for it? There is limited public benefit. Fees mean fewer drop-outs and unproductive graduates, which are waste of the tax-payer’s money.
Instead, students will direct their efforts towards subjects that yield the highest return in the employment market. Because they will have to pay back their students loan later, they are also more likely to complete courses. Happily, these kinds of subjects are those that the state is currently begging and bribing young people to study. Why waste the effort when self-interest and the market does this naturally? Fees mean more efficient decision-making by prospective students.
But in the absence of state support, would students under-invest in education because many would find it so hard to get a loan for it? Liquidity constraints may be a problem, although this is not immediately obvious. Without huge state spending on education, there’s a lot more money to go around. But it is true that in the presence of risk aversion and reluctance to take on debt, students may be wary of taking on a loan to pay for their education. After all, what if they don’t end up reaping the rewards in employment or end up dropping out?
In that case, it may prove profitable for universities to offer a partial deferred payment scheme to their students. This solves both problems. With the co-operation of the state in enforcement, students could be expected to pay part of their fees after graduation and entry into employment. If you don’t end up getting a job, you might pay slightly less. Since universities are competing for your custom, they will formulate payment plans to make it easier for you to pay them and thus make their programs more attractive. The market strikes again.
There is some moral hazard here, but this can be tempered by only deferring some fees and requiring students to still take on some debt. Unfortunately, the price of discouraging today’s rampant moral hazard is that some risk-averse students will be discouraged from getting an education.
Another problem with ‘free fees’ under the status quo is that top-earners have their training provided by the state. How is it fair to provide free education to doctors who expect to eventually earn €200,000 off the state? If fees are introduced, the prices of these courses could be raised to reflect their true value to the consumer. Fees mean high-earners will pay for the benefit they receive.
They might also precipitate an increase in the places available. After all, students will demand and pay more for the most valuable training, so universities would want to provide it. Wouldn’t it be wonderful if the Irish education system was churning out enough doctors to satisfy the increasing demand for health care? This would improve the health system and reduce costs, by eliminating the monopoly these health care professionals currently enjoy. Fees mean no more closed shops, courtesy of government control.
Universities will also start making their investment decisions based on the return to the university and the students. As things stand, availability of funds determines the ability of universities to reinvest, and without any modicum of cost-benefit analysis. They are also competing for funding from the state, rather than voters. Fees means responsible capital investment by universities, who will be competing for students.
If students are paying fees by choice (as opposed to having their fees taxed off them by the state), they will critically only seek education in Ireland if it’s really the best option for them. Currently, there is a strong bias through this obligated payment to attend university in Ireland. But if students can choose to take their money with them to another country, universities in Ireland will really have to compete with foreign shores for students. Fees foster competition and improve standards of education in Ireland.
Free fees are imposing costs on students, even if they don’t realise it. They promote wasteful decisions by students. That’s bad for the education system. They necessitate higher taxes later in life, which will go unpaid as the highest-earners emigrate from the country. That’s a cost on everyone else. They necessitate higher taxes which are especially less of an imposition on the doctors who got their training for free. That’s hardly fair. They put Irish educational institutions at an unfair advantage in competing for Irish students. That promotes poor educational standards in Ireland. Finally, they encourage under-investment in education, by limiting their revenue streams to the state. That’s especially bad for Ireland’s future. ‘Free fees’ aren’t free. Far from it.
