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Higher education funding is bust. Here’s my alternative
published on : 11-25-2014
Category : Higher Education
The Higher Education Commission on Monday concluded that the current high fee, high debt funding system is “the worst of both worlds”. The taxpayer is picking up a large bill, but so are graduates so “everyone feels like they are getting a bad deal”. This report should break the logjam of complacency that says that there is no alternative to the current system, and that the only way forward is higher fees and higher graduate repayments. Of course, the government recently ruled out reviewing higher education funding: it won’t admit to a catastrophic mistake. Some vice-chancellors think high fees confer status. Some institutions don’t want to change. Yet English universities are boxed in. As the real value of fees erodes, the squeeze threatens teaching quality and research excellence. The public finances cannot bear ever more debt write-offs. Raising fees and graduate payments is politically toxic. There is little room for manoeuvre. The commission outlines several options, but includes two that hold the most promising alternative. We need to switch back to the public funding of teaching, rather than debt write-off. And we need more diverse and appropriate routes through higher education. My own modelling, supported by the House of Commons library, shows that, with the right choices, we can develop a more cost-effective higher education. It is possible to increase investment per student, reduce public borrowing, and cut debt and graduate repayments, while keeping public spending at current levels. It is possible to unlock this change because the current system wastes both public and private money, even while individual institutions face real financial pressure. The choice to subsidise loans rather than teaching has meant all fees are higher than necessary. Those graduates who can repay pay too much as they subsidise others. Others may still repay significant amounts while never covering the cost of their degree. Even so, each year taxpayers foot the bill for billions of pounds of cancelled loans. The “high fee, loan and debt” model has supported the expansion of the most costly form of higher education: the three- or four-year residential degree for young people. Student maintenance support comes nowhere near real living costs, adding further to unavoidable debt. University fixation on a one-size-fits-all student experience has suppressed the diversity that competition might have produced. Two-year degrees and employer co-sponsored degrees have not thrived. Part-time and mature student places have declined sharply, with inevitable damage to social mobility for older students. This might not be so bad if higher education delivered student aspirations. About a third don’t get graduate jobs years after they leave, and employers remain dissatisfied with graduate quality. A new relationship with employers and older students would see 30% of degree courses taught intensively, as two-year degrees or flexible part-time degrees. Half of these would be co-sponsored by employers. We could take the radical step of spending taxpayers’ money teaching students something, not on debt cancellation or grants, bursaries and fee waivers introduced to compensate for high fees. With a huge pot of teaching funds (an increase from £700m to £5.5bn) we can create a “student entitlement” helping each student towards the cost of their courses. The student entitlement would be essentially flat rate – irrespective of course, length, institution or mode of study – but enhanced by a “student premium” for the disadvantaged, who would currently attract student opportunity funding. In my model, the basic student entitlement would be £15,200. The benefits of pursing this model for the wider economy, students and for higher education institutions are clear. The total income of universities is maintained, though the student entitlement and greater diversity gives a clearer choice for students, and universities still have to compete for their applications. Public spending is at current levels and because increased efficiency is reinvested, annual spending per student increases by 13.5%, enabling increased investment in teaching or research. Over 30 years, public sector net debt will be reduced by about £50bn. Fees at a full-cost Russell Group university would fall to about £4,000 a year. A two-year degree would carry a total fee of about £4,500. Students on employer co-sponsored degrees would pay no fee and receive a wage. Employers could co-sponsor a degree for an average contribution of less than £5,000 – less than typical graduate recruitment and retention costs, and leading to much improved HE-employer collaboration. No student should have higher loan and maintenance debts than at present. Loans replace grants, but low-income students are protected. And if higher education needs more money, we could, (though this is not essential in my model) introduce a “free-standing” graduate tax if it was felt that higher-earning graduates should contribute more.
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higher education education our education