Let’s face it, being a graduate puts you at a significant advantage in a job market – or at least it should be. A lack of graduates in the working world could potentially spell disaster – all of a sudden the best and the brightest come at an even bigger premium.
At the moment, tuition fees represent what happens when demand increases for places and the government decides not to prioritise higher education. The result is students footing the rather expensive bill – one that they often find themselves paying back for much of their working lives.
The system for repayments is flawed, especially the regime installed in 2012. Not only do graduates have to repay £27,000 worth of tuition fees, but they also are subjected to a brutal interest rate – the rate of inflation (using the RPI measure) plus 3%. This presently stands at 5.5% and yes, it accrues whilst you study. Right from the word go, you’re stacking up more and more debt. This interest also stacks up if you’re earning less than the threshold for paying back debts – £21,000 in England at present.
The repayments are nice and structured yes, you get 30 years to pay them off. However, the rates of repayment, combined with the interest rate, means that many graduates earning a perfectly reasonable living might well never fully pay these debts off.
Now, all of this seems rather troubling, and to be honest I think we could safely say the education cuts experienced across the board are taking their toll on everyone.
However, is there possibly a solution on the horizon?
The Institute of Economic Affairs (IEA) has suggested an alternative system which could be used by universities to help fund degree programmes.
How about… rather than taking out a taxpayer-funded loan (one which is hardly the most popular of things among older generations) graduates pay a proportion of their future earnings to the university they attended?
Now that’s a radical idea. The theory is that, after you graduate and get on the job ladder, you have some form of agreement to give over a proportion of your earnings to your university for a period of time. That way, the university gets their money and you got your education. There’s no fuss with loans and making sure that the Student Loans Company have paid on time. It sounds a pretty interesting idea.
I’ve taken a look at all of this considered some of the good and the bad of this idea. It makes for an interesting debate.
OK, so it seems a great idea!
- If you’ve ever felt that your university represented poor value for money, I guess we might have found a solution. Obviously, you only get out of your degree what you put into it – you have to work hard from the outset. I can’t really deny that – students really do need to work to succeed.
That said, some universities carry better reputations than others – many are judged on the standard of teaching and quality of support. If you’ve obtained the best-possible degree you can at your university but you’re still struggling in the job market… Well, some people put that down to the reputation of an institution. Whether or not that’s fair is a different issue, but it’s something to play on the minds of university chancellors and executive boards. If all their graduates are struggling in the job market, isn’t that not only going to reflect badly on them but it also means that they’re going to financially lose out.
In theory, this is going to raise standards, right? Highly successful graduates with an improving name behind them are more appealing to prospective employers. The result, surely, is more money from highly-paid graduates going back to universities?
Yes, universities will be motivated by money. The trouble is though, what else would they have to fall back on?
- A change in the system of course removes a fair amount of the burden from the taxpayer-funded Student Loans Company. Besides from the obvious complaints about reliability and delivery of loans, a smaller burden on a weakened system makes great sense. I’m sure resentment from the rest of the population might ease a bit as everyone cuts back on the stereotype of students being lazy or enjoying themselves at the taxpayer’s expense.
- Universities now have a vested interested in you now – they’re not getting their money until you’ve graduated. By logic, therefore, they’re going to want you to not only succeed with the best possible grades and also to succeed in the job market. Does that mean that careers services are going to greatly improve, along with graduate fairs and advice services? It could be the start of more practical information being made available to students.
I have concerns…
No idea is completely fool-proof, that said.
- First thing that immediately sprung to mind is that the system is flawed if the fees are going to remain the same for courses. It’s basically the same as before, only universities aren’t going to see their money for at least a year after you graduate. Somehow I get the impression that they’re not immediately going to get behind it without some change in policy.
Yes, it could mean that universities could charge what they like in order to justify not seeing their money for several years. Seems fair to them, but now we’re talking a completely free market where anyone can charge anything. As we know from the American style of higher education, that can be prohibitive and rather dangerous.
There has been speculation that universities will be able to tier their courses and let the price reflect that. However, I think that’s very dangerous should institutions go for that option, as now you’ve got a two-tier approach and suddenly we get into those good-old arguments about accessibility to higher education.
- If one year we suddenly flip the switch to a new system, it’s going to leave universities out of pocket for several years until they start seeing some money from their graduates. Services are going to be cut in the meantime whilst the students study in order to save costs – either that or in preparation for the change existing students who are paying their fees up-front will lose out. Something has to give. A changeover would have to be managed carefully.
- With universities potentially setting their own fees and making their own agreements with students, you are effectively privatising the system of fees to universities. Obviously how universities can operate their agreements would have to be regulated to make sure that graduates aren’t fleeced out of money in the future, but tying yourself to a university rather than a system does feel like signing your life away a bit.
All in all, it seems to be a promising idea. It surely would raise standards and encourage student success – not to mention a massive drive into the job market afterwards. That said, we’d really have to be careful over fees and regulating how students pay it back to make sure that students actually get a better deal.
In theory though, why not? It seems like an option to relieve of us of the mess we currently have.
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