Funding Education - Five options for reshaping student funding

Date Uploaded: 09/09/2016

Funding Education - Improving third-level institutions could cost €1 billion. But how should it be spent?

 

Another day, another set of university rankings and yet another drop in Ireland’s position.

 

Academics, students, parents and politicians all agree the State’s third-level institutions are under unsustainable pressure because of years of cutbacks, insufficient public investment and rising student numbers. They also concur that an extra €1 billion in funding is needed just to stay above water.

 

However, that’s where agreement ends. Ask them where the money should come from, and how it should be spent, and you’ll get very different answers.

 

Last year, a report from the Expert Group on Future Funding for Higher Education, chaired by former union leader Peter Cassells, examined international funding models and presented the Fine Gael-Labour government with a number of choices – none of which are without risks or sure to be popular across the board.

 

Cassells set out three options: a higher education system funded by general taxation and no student contribution fee; an increase in State spending and the retention of the existing €3,000 student contribution charge; or an income-contingent loan scheme.

 

Minister for Education Richard Bruton is under pressure to act, and five international models have been cited as potential options for how to move forward.

 

The Nordic model

This involves high levels of state funding, with no student or family contribution and grants and loans provided for student living expenses. This model is close to what the Union of Students in Ireland is calling for. A major strength is that young people from the most disadvantaged backgrounds have few or no barriers to accessing higher education. In Ireland, it would require a massive increase in overall funding and would have to be paid for through general taxation.

 

Politically, it makes tax cuts less possible and, given that industry benefits from highly skilled graduates, would likely mean a greater tax take would be sought from businesses. At a time when corporation tax is such a sensitive issue, it’s hard to see this happening.

 

The Dutch model

In this case high levels of state funding, with moderate student fees of about €2,000 and an income-contingent loan for tuition and living, are involved. Until last year in the Netherlands, most students received a basic grant while those from lower-income households got top-ups. Now, the basic grant has been removed with more targeted support for students from families with incomes below €46,000. Higher education is free at the point of entry and students have access to income-contingent loans with fairly favourable repayment terms linked to income levels over a 35-year period. The savings are being invested in improving higher education.

 

The Australian model

This involves moderate state grant funding, a family contribution of €4,000-7,000, an income- contingent loan for tuition only and maintenance grants for students from low-income families. Australia was the first country to introduce income-contingent loans. Students can borrow up to $10,266 (€7,000) and repayments begin when income reaches $53,345 (€36,000), levied at between 0 and 8 per cent of salary, depending on total earnings. Students pay more for courses such as law, medicine, veterinary medicine and dentistry, and less for humanities and nursing. About 80-85 per cent of loans are not repaid, either because the graduate doesn’t reach the income level or because they emigrate. It’s proven a relatively sustainable funding model for Australia and it’s the closest to the model favoured by the Irish university presidents.

 

The English model

In discussions about funding of higher education, this and the Australian approaches tend to be lumped together. However, there are differences. This model involves very low state grant funding, high student fees (up to €12,000), an income-contingent loan for full-time undergraduates and maintenance loans for students. Cassells says this model has “proven more supportive of access than some expected” and that graduates with low income are unlikely to pay back their loans, with about 73 per cent having some debt written off. The increased income has enhanced quality in higher education institutions but, with so many loans likely to be unpaid, there’s uncertainty about how much the Government will recoup. Politically, this would be the least popular.

 

The US model

This option involves very low state grant funding, a high student contribution, mortgage-type student loans and grants for low-income students. Students leave with debts of about $20,000 (€17,800) and this method could be seen as a disincentive to attending college. In the US, the issue helped to propel Democrat Bernie Sanders to prominence in the presidential race and is highly unpopular. The Cassells report advises that it won’t fly in Ireland.

Source: www.irishtimes.com

Journalist: Peter McGuire

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