The story of higher education funding in the 21st century is a familiar one. Students on one side, usually holding placards, asking for more money for an impoverished sector. On the other, the government, claiming that they can no longer afford the funding structures of old.
This debate was reignited once again in Ireland by the publication of the report by the government’s higher education funding working group, chaired by Peter Cassells, in July, which recommended three options for the funding of the sector. Since then, students’ unions, trade unions and politicians have quibbled with various details and argued about the feasibility of each option.
No part of the report has received as much scrutiny as option two: an income-contingent loan scheme. No party seems particularly enthused by the idea. The Minister for Education and Skills, Richard Bruton, has refused to offer an indication of his preferred funding model. Fianna Fáil, on the other hand, have been wringing their hands about the impact of loan schemes. Speaking to The University Times last month, the party’s education spokesperson, Thomas Byrne, said his party were “cautious” about such a scheme. No doubt both major parties, eyeing an election in the near future, remember the fate of the Liberal Democrats in the UK, after then-leader Nick Clegg went back on his commitment to oppose an increase in tuition fees after entering into a coalition with the Conservative Party in 2010.
Loans have always been a politically charged policy. The Scottish National Party (SNP) made hay with the issue in their jurisdiction. Alex Salmond’s famous declaration, “The rocks will melt in the sun before I allow tuition fees to be imposed on Scottish students”, speaks for itself.
Yet income-contingent loan schemes are much-misunderstood inventions. Part of the problem comes down to ideology and a slightly myopic view of what loan schemes mean. The debate in Ireland often comes down to loans versus a publicly-funded model. Speaking to The University Times, Prof Nicholas Barr from the London School of Economics (LSE), who helped design the 2006 English loan system, suggests that this is the wrong way to view loan schemes.
“If I were a real socialist, he said, I wouldn’t spend a penny on higher education. I’d spend it all on nursery education”
“It’s not loans themselves that are progressive. It’s loans themselves as part of a wider system. And that wider system has got three elements to it: tuition fees, income-contingent loans are the second and the third is the real policies that widen participation”, he says.
While loans are commonly seen as the worst enemy of students, Barr argues that we should see loans as simply a cog in wider systems that may or may not be “progressive”.
Barr is clear that a loan scheme is simply one part of an overall system – the presence of a loan scheme itself is not what creates a regressive system. Ultimately, it might be argued that politics is what accounts for the differences between the UK and Australian system. Speaking to The University Times , the President of the UK Higher Education Policy Institute, Bahram Bekhradnia, points to the changes in the UK funding system in 2010 as partly a result of the Conservative Party gaining power.
The previous system had seen £3,000 tuition fees, supported by a loan, with a repayment threshold of £15,000 – graduates then repaid 9 per cent of all earnings above this threshold back to the government. As well as providing loans to students, the government also paid a grant directly to fund universities. For Bekhradnia, this system struck a “pretty reasonable balance” between recognising higher education as both a public and private good.
This system, however, did not last. The changes, introduced by the UK’s coalition government, saw the fee increase to £9,000 a year in 2012. Universities, instead of receiving a grant directly from the government, would rely entirely on funding from the increased tuition fee. “It was ideological to a large extent, it was all to do with markets, and creating a market. The government didn’t believe that all universities would be able to charge £9,000”, Bekhradnia says. This was, of course, a prediction the government didn’t quite get right.
“The 2006 reforms got it right. At every other turn, if British governments could get it wrong, they did”
Barr makes a similar point. “The 2006 reforms got it right. At every other turn, if British governments could get it wrong, they did.”
This is a common complaint, of course, from policy makers and economists – the politicians got it wrong. Yet looking at the differences between the English system and the Australian one, it is hard to disagree that politicians exert a considerable influence on the impact of an income contingent-loan scheme.
Yet if politicians exert this impact, it can also be for good. For all the hand-wringing about loan schemes, both Barr and Bekhradnia have positive things to say about aspects of the English system. Surprisingly, their praise is for an area that is often criticised by opponents of loan schemes – that large portions of debt don’t ever get paid back. Yet, as Bekhradnia explains, this is one of the strengths of income-contingent loan schemes. “In England, part of the subsidy, and this has been the case since the original 2006 scheme, loans are forgiven if they haven’t been repaid after 30 years, which personally I think is a very progressive, necessary condition. It means, for example, that women who pause to have children don’t find that they’re saddled with a debt for very much longer than men who carry on working.”
Barr agrees: “Anything you haven’t repaid after thirty years is forgiven. So the income-related formula protects people against low current earnings and forgiveness after 25 or 30 years offers insurance against low lifetime earnings.” Such a condition is the opposite of what Barr calls the “minister for finance” approach – when they’re simply introduced as a cost-cutting tool. Instead, both see loans as performing two key roles in the higher education system. Firstly, they provide a sustainable funding model for higher education and secondly, they allow students to repay only what they are able to.
“They provide a sustainable funding model for higher education and secondly, they allow students to repay only what they are able to”
The Joint Oireachtas Committee on Education and Skills will be looking to both the English and Australian systems as they consider how to develop a new funding model. The Action Plan for Education, published in September, places a heavy emphasis on improving access to education. However, the image of poor students being saddled with debt is a powerful antidote to any politician nursing enthusiasm for loans.
Yet Barr argues that it doesn’t have to be this way – a loan scheme is compatible with improving access. Or at least, attempting to improve access at higher education will only have limited returns.
Barr cites a story of the former Labour Secretary of State for Education and Skills, Charles Clarke, speaking at a student debate: “If I were a real socialist, he said, I wouldn’t spend a penny on higher education. I’d spend it all on nursery education.”
Even grants at third-level, he says, are of less benefit than investing heavily in early-years education, which is the best way of ensuring better access to third-level education: “I’m not in favour of loans for ideological reasons, or even in favour of loans alone. I’m in favour of this package of tuition fees, plus income contingent loans, plus emphatically spending more money earlier in the system.”
Perhaps part of the problem is that loan schemes have been turned into the pantomime villain of funding models? Barr certainly agrees: “English politicians have been appalling at selling this.”
Not everyone will agree. The prospect of being over €30,000 in debt is a tough one to take, no matter how favourable the repayment terms appear. Barr suggests finding a “big political champion” to sell loan schemes. With both Fianna Fáil and Fine Gael remaining quiet on the issue, I wouldn’t hold out much hope on hearing a sales pitch any time soon.
