Tuesday, October 12, 2010

The Browne Report: Should students pay more for their education? (Part 2)

Yesterday, I posted several comments on whether students should pay more for their education. I argued that they should not.

As expected, Lord Browne of Madingley (and former BP boss) has published his long awaited report. This report can be found here. The report makes several recommendations which include removing a cap on tuition fees (with fees possibly rising to at least £7,000 or more from the current ca.£3,200 fees level). His recommendations also include the position that students should only pay their fees if (a) they have graduated and (b) earning more than £21,000.

Several observations:

1. What to do about students who don't graduate?
One real concern is with drop-out rates. If students need not pick up the tab for the higher costs of their education should they fail to graduate, then who should pay this on their behalf? In most cases, it would appear that the Government would do so.

This could be a real concern with further expansion of higher education (and potential costs for consumers) where they may be risks associated with completion targets. Lower completion rates may entail higher costs for the taxpayer.

Perhaps a solution would be to say that students who do require funding help to pay the costs of their education should also be required to pay this back. This would not mean that those already disadvantaged should become more disadvantaged per se. Instead, it might be subjected to the same requirement for graduates: non-completing students might only be required to pay back what they had borrowed if earning £21,000 or more.

The benefits might include a greater incentive for students to complete courses, as failure to complete would not get them off the hook in terms of repaying what money was borrowed. Of course, the negatives would include the possibility of turning potential students off of further study given the greater likelihood of taking on higher debts.

2. Flourishing of degrees in subjects earning lower pay?
Students need not pay back money borrowed if earning below £21,000. One potential possibility is that this will attract more students to subjects where earnings in lower paying jobs. The cost would be stifling ambition amongst future students, but the benefits to these students is the possibility of studying for free.

3. The squeezed middle becomes the pulped middle
There has been much talk about a "squeezed middle" in the UK. I fear that the squeeze may be too much: we might soon speak of a "pulped" middle class. Many future students from these backgrounds will be picking up the tab and their debts will substantially increase.

Some may think that this is pehaps overdue. Afterall, many US universities charge much higher fees. One major difference is that these US universities often have far, far greater endowments with which to offer financial support.

A second major difference is that, in the US, people are already used to such a system. Parents already save for their children's education from an early age. This is not the case in the UK.

Therefore, it would have been far better if the Browne Report had recommended a gradual lifting of the fees cap (if it were to be lifted at all---recall that I oppose the lifting of the fees cap!). If spread over time, then the public would have some time in order to begin saving and prepare themselves for meaningful entry into a market in higher education.

The problem is that these changes are recommended to be implemented rather swiftly, possibly as early as 2012. This gives students potentially affected and their parents virtually no substantive opportunities in order to save and invest ahead of further study. In my view, this is a particular flaw.

Conclusion: a bad deal at the wrong time
While the British Government is cutting departments across the board, it is a mistake to target higher education in this way at this time. During a recession, university places should not be scrapped, but grown. One reason is to at least bring down unemployment: it is cheaper to support university students than those on benefits after being denied a place.

Furthermore, when we view these policy recommendation in light of possible changes in unemployment benefits, it makes better sense to expand support of further study in order to better develop the skills of those who might soon be forced from incapacity benefit or jobseekers allowance to partial or full employment. To push such persons into the workforce without additional support to gain new competitive skills, such as those on offer in higher education, is akin to asking inexperienced swimmers to cross a river of racing water with their limbs bound.

Finally, this report looks likely to be explosive for the Liberal Democrats who have benefitted for their position against raising tuition fees. Now the coalition government they are a part of is set to benefit perhaps doubling or more these fees. Expect their support to plummet.

UPDATE: I will comment further on this report once I have had a chance to study it more closely.

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