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Educational News - Student Debt - Facing a higher degree of debt - students could graduate owing 20,000

Date Uploaded: 22/07/2016

The Government is considering plans for a student-loan scheme - with graduates facing debts of up to €20,000. So, who should pay for college?

It is a prospect that sent a shudder of fear through the middle classes and those from less well-off backgrounds who aspire to go to college.

An expert group on third level funding chaired by Peter Cassells this week put forward the idea of a student loan scheme - with graduates leaving college with debts of up to €20,000.

If the scheme is ever implemented, students will be able to take out these loans instead of paying fees up front.

In a climate where the public is increasingly averse to spending money on the public services that it uses, the notion of student loans is likely to be a hard sell politically.

Would ordinary families tolerate five-figure loans when they may already have been battered by recession, and may only be recovering from the effects of heavy indebtedness?

Annie Hoey, President of the Union of Students of Ireland, says: "It will be like tapping them on the shoulder in the Leaving Cert hall and asking them: 'Will you take out a mortgage now as well?' The mind boggles."

Carly Bailey, a mature student at Trinity College and originally from Cavan, speaks for many when she says: "Never in a million years would I have gone to college if I was going to come out with a huge debt."

Any move to introduce the loans will result in protests, but the idea has won substantial support from a growing number of those who work in third level as a way of plugging the huge funding gap that is affecting colleges.

At present, Irish students pay €3,000 per year in college registration fees, unless the low income of their parents qualifies them for a grant.

That charge is already high by European standards. In Germany, students now pay only €50 per term, while in France, the annual fee is only around €190 per year. At the other extreme, in England fees have soared to over €11,000 per year for students - amounting to a staggering €33,000 for a three-year degree.

The problem for the Government is that the €3,000 fee per student falls way short of the average €8,500 that it costs to put a young person through college. The rest is paid for by the taxpayer.

The cost of providing some third-level courses is staggering. According to Ned Costello of the Irish Universities Association, some medical courses cost up to €30,000 per head per year to provide. That means that in some cases, the student is paying one tenth of the cost of the course, and nothing at all if they receive a grant.

In an ideal world, going to college would be free for everyone, regardless of income, but is that necessarily fair and equitable?

Should the bus driver, whose family might not benefit from higher education, pay through his or her taxes for the doctor who will earn a large income in the future?

Dr Kevin Denny, lecturer in economics at UCD, says: "The issue is that there are substantial economic benefits to getting a degree. It works out as one hell of a lot of money. Therefore, the people should make a substantial contribution towards that."

The notion of heavy student debts that can carry over into middle age causes understandable fear, however.

In America, where fees are among the most expensive, student debt has tripled over the past decade to $1.2 trillion. The Wall Street Journal recently reported that student debt has become a "crushing burden" for many Americans, and up to 7 million people have defaulted on loans.

Up to 70pc of US students rely on loans and the average debt is €18,000. With top universities such as Harvard charging up to €55,000 a year, it is easy to see how some students emerge with debts of well over €100,000.

In America, most student loans tend to be like mortgages and do not take into account the income of the debtor after graduation.

The Cassells report published this week appeared to favour a different model - the income contingent loans used in Australia, where the graduate only has to repay the loan if and when they reach a certain income.

Under the system suggested by the expert group, repayments would only kick in once the graduate receives an income of €26,000.

If their income stays below that level, they do not have to pay back the loan. As a result of this system, between 10pc and 20pc of loans in Australia remain unpaid.

Those who argue in favour of this model see it as more progressive, because it bases the contribution on future earnings rather than a person's background.

While there have been inevitable howls of protest, particularly from students unions, some students are in favour of it.

Andy Dunne, who is studying international relations at Dublin City University, says the system could work so long as the contributions are reasonable.

"I would be in favour of it, because I wouldn't want my parents struggling to find money to send me to college.

"While it could load up students with debt, it could open doors to students who might not have been able to go to college."

Dunne, who lives in Wicklow, says it is too easy for students to say that college should be free.

"Of course it should be free, like everything in life, but who are we to decide that hospitals should not get funding and disability services should be cut?"

The introduction of a loans scheme would not necessarily mean that more affluent students would not continue to rely on the bank of mum and dad.

Many parents, even those who are not particularly well off, would probably pay the fees if they possibly could, rather than see their offspring burdened with debt at a young age.

The debt burden would fall on students from poorer backgrounds, if the introduction of loans is accompanied by an abolition of grants. The genuine fear among students is that the introduction of a loans scheme will be accompanied by a massive hike in student fees.

Trinity student Carly Bailey says: "In every other country where they have introduced loans schemes - including the UK, the United States and Australia - they have increased their fees.

"I know the Cassells report suggested that it would be a moderate increase, but that is not set in stone."

Senator Ivana Bacik, professor of law at Trinity College, can see major disadvantages to a system of deferred loans.

She says it would incentivise emigration, encouraging students to move away to avoid repayments.

"It would restrict access to disadvantaged students, who are traditionally more debt-averse."

UCD's Dr Denny says the introduction of student loans with deferred payments could be combined with student grants.

Dr Denny says the increase in fees in England and the introduction of student loans did not have a dramatic effect on the number of students from disadvantaged students going to college.

However, the number of part-time and mature students dropped. Older students may be reluctant to take on extra debts, particularly if they have a mortgage already.

While those involved in third level differ in their approaches to how it should be funded, there is common agreement that the present system is unsustainable.

Senator Bacik says between 2008 and 2013, Ireland had an 18pc increase in student numbers but a 29pc cut in public funding.

The colleges are creaking. There are higher lecturer-to-student ratios, buildings and equipment are less well maintained, and some have slipped down international league tables.

The increase in student numbers and the cuts in funding have led to a dramatic change in the staff to student ratio from 16 students per staff member to 20 students per staff member.

As the Cassells report put it: "This ultimately means that teachers have less time to dedicate to each student and focus on the types of activities that are proved to have a positive impact on students' learning outcomes."

The report confirms the concerns of staff and students that lecture halls, libraries and labs are overcrowded, and some of the facilities are sub-standard.

"Things are breaking down and not being replaced. The idea that you can just keep cutting back and not affect quality is naïve," Dr Denny says.

If the lecturers and students are worried about colleges creaking at the seams, the situation is about to get a lot worse unless the funding to third level is increased dramatically.

Malcolm Byrne of the Higher Education Authority says there is a demographic tsunami working its way through the primary and secondary school systems.

This will lead to rise in demand for places of up to 50,000 in the next decade.

"The population surge is going to hit very soon at third level and this will lead to a surge in demand for places. How do we fund all those extra students?"

Given the political pressures, the present government is unlikely to take the radical step of introducing a loans scheme, and it will be reluctant to increase taxes in order to fund the system in other ways.

For some time, the approach has been to muddle along with a cut-price system - and hope for the best. But if we continue to follow that path, we should not be surprised if the standards continue to fall and results are mediocre.

The numbers


Extra annual funding required to fund third-level educati​on​


Average cost per year of educating a student

Up to €30k

Cost per annum of educating a medical student


Ratio of Students to academic staff in Irish colleges


Irish students now going on to third-level after Leaving Cert


Students going on to third-level in 1980

Up to €55k

Annual fees at Harvard University in America


Projected rise in student numbers — next decade


Students who receive a student grant

How students pay around the world


Fees are banded

Band 1: Arts, social studies, education, nursing €4,000

Band 2: Computing, engineering, maths, science €6,000

Band 3: Law, dentistry, medicine, veterinary €7,000

Students pay for college through income-contingent loans provided by the State. There are no loans for living costs, but some maintenance grants are available for those on low incomes. Repayment is through the tax system and only begins when income reaches A$55,000 (€38,000).

The charge is then at a rate of 4 to 8pc, depending on income. There are no interest rates but the outstanding debt is indexed for inflation.

Up to 20pc of loans are unpaid, as a result of the low earnings of some graduates and emigration. Reduced repayment rates are available for some of those employed in priority areas such as education, nursing, maths and science.


Fees €11,000

Since 2012, students in English universities have been charged the highest fees in Europe. Virtually all colleges charged the maximum fee of £9,000 (€11,000). Maintenance grants have been phased out. Repayments are only made on earnings over £21,000 (€25,000) at a rate of 9pc of income. Interest rates are linked to inflation. College application rates among 18-year-olds have continued to increase, but college entry by mature and part-time students has fallen sharply.


Fees: variable with average of €9,000 and to €55,000

US colleges have an enormous variation in fees and rely heavily on charitable donations. Top universities may charge fees of over €50,000 but also offer concessions based on circumstances. Most loans are similar to mortgages and have to paid back, regardless of income.

Nearly 70pc of degree recipients leave college with debts and this affects the overall economy. A report by said the 40 million graduates in debt affected house and car sales, retirement savings and the ability of students to leave their parents' home. Even students who fail to graduate may leave college with substantial loans.


No Fees

The government pays the entire cost of third-level education and also provides loans and grants for living expenses. Nordic countries have some of the highest levels of investment per student in the world.


Fees €2,000

There are universal fees, supported by loans which are paid back when students reach a certain income. The Dutch also have comprehensive grants for living expenses for families with an income under €46,000. Loans are repaid over 35 years.


Journalist: Kim Bielenberg