Evaluating two radical ways to pay for university

Oregon may drop tuition while the U.K. allows $14,000 fees

by Josh Dehaas

A Montreal anti-tuition protest (shahk/Flickr)

In 2012, maximum tuition fees in the United Kingdom nearly tripled to $14,000 per year, about twice the cost of the most expensive undergraduate program in Canada. At the same time, the government made paying back student loans income-contingent, so that those who can’t pay them back don’t have to. Regardless, students demonstrated angrily in the streets.

This week, legislators in Oregon voted to consider another type of income-contingent plan. It’s being pushed by students who are willing to pay for their educations so long as they don’t face big bills up front. It’s being praised—not protested.

Canada does a better job balancing access and quality than many of its peers, but there’s room for improvement. That’s why we should consider the merits of the Oregon plan and the U.K. overhaul.

Following a global recession that hit Britain hard, its highly-indebted government felt it had little choice but to shift the cost of higher education to the students who benefit most directly.

The sticker shock of $14,000 fees caused a widely-predicted dip in applications of about 7.7 per cent and many suggested that access to education had suffered. But, one year later, the number of applicants to U.K. universities is back up. It rose 3.1 per cent to nearly where it was in 2011. It turns out that sticker shock doesn’t scare away many potential students.

That’s probably because students from all financial backgrounds get loans that cover their full tuition bills, plus help with living expenses. (It’s much harder to get loans here.) U.K. students are only required to pay the loans back at a rate of nine per cent of any income they make above $33,000 per year. Those earning a middling salary of $46,000 after graduation are only required to pay back $100 per month, although they might wish to pay more and get rid of their loans quicker.

I borrowed $40,000 to do a B.A. and an M.A. Since graduating in 2010, I’ve paid back about $600 per month, meaning I’m half way there. In the U.K., I would have had to pay back barely anything yet.

Oregon’s Pay it Forward, Pay it Back plan would let students enroll without paying anything upfront. Instead, they’d be required to pay three per cent of their future salaries (assuming they get jobs) back into the state colleges fund annually for 24 years. Students at the University of California Riverside have made a similar proposal, which would collect five per cent of income for 20 years.

Both the U.K. system and the Oregon proposal offer high levels of access to higher education, but the Oregon proposal also does some redistribution post-graduation. It’s more economically progressive, because people who manage a higher income after graduation will end up paying a bigger chunk of the total cost of the education bill. A student whose gross income is $600,000 over a 24-year span would pay $18,000 for a four-year degree, while a student who makes $2.5 million over that same period would end up paying about $75,000. That “take from the rich” aspect may be popular with students.

The U.K. system, brought in by a Conservative-led coalition, is less progressive. The richest need not take out loans or can pay them off quicker. However, it does reward families that save for their children’s educations and encourages graduates to work hard and earn money to pay off their loans.

Both proposals make it clear that everyone is welcome, regardless of ability to pay, while still allowing universities to charge enough to maintain high quality. We ought to take a closer look.




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Evaluating two radical ways to pay for university

  1. It is premature to conclude that the 2012 changes to higher education fees and funding in England have been successful. On the contrary they have had a profound impact on the participation of part-time and mature students. Given that one in three undergraduates in the UK start their university courses when they are over 21 this is a big issue. Applications from older students have not bounced back and there was a 40% decline in part-time student numbers in 2012. The scheme will be more costly in the long-run for the taxpayer and the government has to borrow more (although this is partly hidden because of Treasury accounting rules). As a university think-tank million+ has modelled alternatives. For more analysis and information visit wwww.millionplus.ac.uk

  2. I don’t know where you got the idea that $14000 is twice the highest undergrad tuition rate in Canada. I’m going to be paying more than $10700 dollars next year for 2nd year Engineering at McMaster

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