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British Government Proposes New Way To Finance University Education To Reduce Deficit

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Submitted by Conrad
Vince Cable has asked Lord Browne to consider a graduate tax to replace tuition fees – Wikipedia

It has been reported in British newspapers over the past few days that the new coalition government is considering a new way of financing university education in order to reduce Government deficits.

The approach comes out of a report commissioned by 23 UK Universities and produced by Nicholas Barr, Professor of Public Finance at the London School of Economics and it draws on model that has worked well in Hungary.

Under this approach students have a choice of paying themselves or receiving payment for their tuition and living costs from a Graduate Contribution Service. They make a contribution for what they have received from the Graduate Contribution Service when they start earning and where the size of repayments are contingent on the level of income. High earners end up paying twice as much for their education as low earners and those earning less than the average wage pay nothing.

The Graduate Contribution Service will pay for tuition and living costs of any accredited higher education institution, be it abroad or at home, be it highly academic or more vocational.

This seems to be a far fairer way of paying for higher education that the current system in Barbados and of course far fairer than an entirely private system.

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5 responses to “British Government Proposes New Way To Finance University Education To Reduce Deficit”

  1. David Avatar
    David

    @Conrad

    Feel free to use the ‘Send Confidential Message Message’ link at the top of the page.

  2. Brutus Avatar
    Brutus

    @Conrad,

    This sounds interesting, but I have many questions, which perhaps you can not answer.

    How in this system does the government ensure that students make the payments they are supposed to once they start working – both in terms of calculating the amount due and enforcing prompt payment? On average what percentage of monthly/annual salaries do the students have to pay once they start working? What of students who study overseas but then do not return home immediately after graduating?

    I had a look at the criticisms of the scheme on the wikipedia link provided – most of them seem a bit petty to me and they do not seem to outweigh the benefits. I think the idea is worth discussing.

    I will see if I can find more details.

  3. smooth chocolate Avatar
    smooth chocolate

    this idea is very interesting but it’s only draw back the ensuring that those who have benefited to make their contribution unless measures were put in place to penalize those who would relegate on their commitment to pay

  4. Brutus Avatar
    Brutus

    From the Nation:
    ___________________________

    Call to save for tertiary studies

    KINGSTON, Jamaica – The Government is encouraging parents to save towards their children’s university fees ahead of a reallocation of state resources to early-childhood education

    http://www.nationnews.com/articles/view/call-to-save-for-tertiary-studies/

    KINGSTON, Jamaica – The Government is encouraging parents to save towards their children’s university fees ahead of a reallocation of state resources to early-childhood education, a policy which will send tertiary fees skyrocketing in coming years.
    Education Minister Andrew Holness told The Gleaner on Sunday that the Government would be rolling out a campaign aimed at preparing parents and applicants to pay a greater percentage of the cost of education at higher-level institutions.
    “Part of the Government’s strategy will be the creation of a social-marketing campaign to encourage parents to plan for tertiary education and to start saving early for tertiary education,” Holness said. (Jamaica Gleaner)

  5. Conrad Avatar
    Conrad

    Dear Brutus,

    Enforcement is a good question. There will be delinquencies I am sure but enforcement does not appear to have been a key issue elsewhere. There are potentially onerous sanctions that could be considered, such as the registration of a bad debt on international registers, the international publication of those names in default, perhaps even some notification by the degree awarding school to those who apply for references or confirmation of degree.

    Like in all loans, a proportion of bad debt would have to be built in to the system, but if we assumed that these are no greater than unsecured personal loans, then it would be less than 5%.

    But remember it is built in to the system that you pay less to nothing when you are unable to pay for it and so I suspect this kind of arrangement would have greater compliance than a traditional loan.

    Given that we spend around $80m a year on funding students through tertiary education, it is a reform that could make a difference. But which politician would be brave enough to open a debate on the issue?

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