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Why we should all stop claiming the current student loan system will cost more than the old one

  • 1 August 2018

Iain Mansfield, a senior civil servant working on higher education and now an interesting contributor to public debate, has written an article on Wonkhe about influencing policymakers successfully.

There is a huge appetite to know more about this: my own piece on the subject has been more widely read than anything else I have ever written. One point that particularly resonated with people (securing 1,400 retweets) was a point about the limited access civil servants and politicians have to academic output in peer-reviewed journals.

This challenge was one of the factors that once led HEPI to publish a paper proposing a National Licence, which would have provided everyone with a UK IP address access to academic output without charge. Inevitably, it was caricatured as a ‘UKIP’ policy…

It quickly became our most controversial paper ever, and people tied themselves in knots when opposing it – one academic called for the paper to be withdrawn, before withdrawing his call for it to be withdrawn and then withdrawing his withdrawal of the demand for it to be withdrawn. But the paper was an honest attempt to tackle a real problem. Sadly, those who opposed our way of tackling the problem did not have a good answer on how to provide access to previously-published, rather than new, research for policymakers, health workers, teachers, staff in FE etc etc etc.

But I digress. The point that really stood out for me in Iain’s piece was this:

I’ve had people tell me in discussions on destinations of leavers from HE (DLHE) or longitudinal education outcomes (LEO) that going to higher education makes absolutely no difference to a person’s future employment prospects or earnings. Really? Do you really want to say that to the department responsible for arguing for your funding from the Treasury?

He is surely right. The quality of the arguments we in the higher education sector make matters, as does the need to offer a constructive alternative to match any destructive criticism. As I said on Twitter, Iain’s argument resonated with me because I have had similar experiences. However, I would have a different, also topical, example based on our student funding system to make the same point.

Opponents of the student funding model we have, which is characterised by high fees and taxpayer-supported income-contingent loans, regularly point out the shift from the old model to the current one may not save money in the long run. Arguably, HEPI was the first organisation to point this out.

It is a clever debating point. It may well be true too, as could soon become much clearer if the way students loans are classified in the national accounts changes, as is widely expected.

The danger for the health of our higher education sector comes in failing to recognise that one logical policy response to believing the current funding system could cost more would be to deliver less funding for each student (known as ‘a lower unit of resource’). Another would be to introduce much tougher repayment conditions so that more money comes back to the Exchequer (known as a lower ‘RAB charge’) – if you doubt the likelihood of this, take a look at the new reduction in the student loan repayment threshold in Australia.

Are such changes really what opponents of the current funding model want? If not, what is the right policy response to the claim that the costs of higher education might have increased even during the austerity years? If we only deliver problems to politicians without mentioning our preferred solutions, we will not be well placed to complain when they deliver something we dislike. (There may be echoes of some of the arguments on Brexit here…).

I said above it may be true that the current system will end up costing more than the old one. It is certainly widely believed and, as pointed out in the previous paragraph, the argument has taken us to a tricky place. Yet, in fact, it is only conceivably true if you intentionally choose to ignore the likely huge extra tax payments from additional graduates. They should provide a boost to the Exchequer that far outweighs any additional long-term costs.

Back in 2015, Andreas Schleicher, in defending England’s high fees model, wrote:

Sure, those loan and grant systems cost money, and have shifted risks to government which will end up paying for any bad debt. Indeed, it is very likely that repayment rates will end up a lot lower than what the government anticipated. But these costs are just a tiny fraction of the added fiscal income due to better educated individuals paying higher taxes. Keep in mind that the added tax income of those graduates who end up in employment, on average over £80,000 in the UK, is many times larger than any conceivable bad debt.

Is it not odd that we generally choose to forget this crucial fact, especially when we are simultaneously so keen to prove the benefits of higher education go far beyond personal financial reward?

If we continue to do so, we may come to look back on the current funding model as a golden era of financial sustainability destined not to be repeated.

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