How should university be paid for?

This week it's Educational Debate week in the D&CA 5-in-5 project!

Today's discussion topic is a big and contentious one: given that universities cost money to operate, staff need to be paid and buildings built and heated, how should they be paid for?

At the moment we have a system where there are nominally tuition fees, but really these are paid by graduates, not students. There's an income threshold before you have to start paying and they're written off within 30 years. However, there are a number of other possibilities:

– A formal graduate tax, perhaps that all graduates have to pay for a certain time, rather than just until they've repaid 'debt'
– Funding universities from general taxation, so no fees or specific graduate tax would be charged
– Making students pay fees upfront, perhaps with private loans (postgraduate courses tend to work a bit like this)

Which system do you think is best?

Also, how would you respond to somebody who didn't go to university, wasn't academically bright enough for that to really be an option, who doesn't think that they should have to pay for other people to go to uni?

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Reply 1

MindMax2000

Universities Forum Helper

Do you have any of the numbers for the systems above? The financial information is a little difficult to come by, and I think that's what it's really comes down to.

In a formal graduate tax system, I presume the tax will be charged based on how much the graduate earn. The problem with this system is that not all graduates will land a high paying job, and not all graduates will land a graduate job. Should a university that predominantly produce research graduates, nurses, teachers, etc. be sustainable under this form of taxation?

Funding universities from general taxation was the predominant form of funding until it was not sustainable (https://en.wikipedia.org/wiki/Tuition_fees_in_the_United_Kingdom#History). Further increases in tuition fees kept on increasing, partly because of the costs associated with higher education.

I am not confident of using private loans as a means of funding courses. Whilst I can see this being sustainable if the tuition fees were £1k-3k a year, a £30k loan just for tuition alone is not ideal, especially when there is no guarantee graduates will be able to secure a job that will pay enough to pay for the debt incurred the moment they graduate. That's not considering any further financial commitments the graduate may have, or if it will also mean delaying other plans in life even later in life e.g. starting a family, owning a house.

A question I have is which types of graduates should we be encouraging to have, and hence whether they should still be encouraged to attend university? Doctors, nurses, teachers, etc? If their tuition costs are high, should there be some way to alleviate their financial burden, if they will be entering low paying occupations? What about those who wish to attend university but come from a poor background?

Reply 2

Saracen's Fez

Original post by MindMax2000

In a formal graduate tax system, I presume the tax will be charged based on how much the graduate earn. The problem with this system is that not all graduates will land a high paying job, and not all graduates will land a graduate job. Should a university that predominantly produce research graduates, nurses, teachers, etc. be sustainable under this form of taxation?

Just on this, I haven't got full plans for any of these ideas because they're discussion starters, but I would imagine a grad tax would be paid to the government who would fund the universities, so even if some universities were not producing graduates who earnt a high salary, that wouldn't affect their funding. (Though actually maybe you would want a small link, just to see if it encouraged unis to produce better-earning graduates.)

Reply 3

username4521132

grad tax
so penalizing graduates for becoming medical professionals, engineers, scientists, mathematicians, lawyers etc...

Reply 4

Theloniouss

Universities Forum Helper

I would probably propose some combination of all three.
Tuition loans (as they are in the current system) allow fees to be collected from people who have since run off abroad, whereas a grad tax doesn't (and a grad tax presumably would charge overseas graduates who may well have already paid their tuition). They also ensure that nobody pays a significant amount more than the cost of their own degree, as they might with a grad tax.

A graduate tax allows more money to be collected from high earners (presumably raising more money in total), as well as ensuring that people with rich parents are still paying for their own tuition.

General taxation is useful for expensive (but very necessary) degrees like medicine, which cost some obscene amount to run (around £40k/year, I think). It would be unreasonable to expect med students to pay all of this, especially considering they'll mostly be employed by the government that would be a pretty huge own goal.

I'd say the best system would be continuing the current system, except with higher fees and lower interest, then introducing a small graduate tax (perhaps something like a 1% increase in your income tax per tax bracket) once your fees are either paid or cancelled.

Reply 5

username5161072

Funding the universities through a general taxation scheme. That way, the universities start acting less businesses and prevent further commercialisation of the higher education industry.

Reply 6

linedpaper

I think the current system is fine, but we need less unis and a less business orientated approach to the industry... maybe the current system with fees supplemented by taxation. One might complain but it is really taxation at the benefit of society.

Reply 7

Trinculo

Definitiely not general taxation. Cannot have a situation where non-grads are subsidising grads.

I'd do a variation of the graduate tax. Have essentially an HE account opened for every person which the fees are debited from. At any time before during or after uni, anyone can pay into that account either as a lump sum or through tax coding. This way, family members can pay into it if they want. Post graduation, the tax element kicks in at whatever level to start paying it off.

Reply 8

Fox Hound

I think there should be a cap in tuition fees, i.e. what it is now, but there should be justification into the prices being charged by unis for their degrees. I don't understand why courses such as business and humanities are charged at the same rate as engineering when engineering requires use of many more resources to complete the degree. This would at least help reduce the cost of uni for a lot of students in those areas and make paying it off easier. For example, a degree in english should cost hypothetically £4000 a year and engineering should be capped at the maximum fee allowable i.e. £9250 if justified correctly. This doesn't directly answer the thread's question but I think it would at least reduce the burden of debt on a lot of students and make paying off debt easier.

Reply 9

Fox Hound

It's good that the American system rewards hard workers with reduced tuition but the biggest flaw is the fact that student loans are remain even though someone can go bankrupt. Real loans are forgiven so why not student loans? It's a blatant cash grab

Reply 10

Trinculo

That's not really relevant, and not even provable. A hairdresser can have a successful business and pay tons more tax than a management consultant with a degree. I just don't want to see a situation where a person is getting their education paid for by non-grads, and then (as is quite common) goes on to hardly work in their life,

Reply 11

A Rolling Stone

Original post by TheStarboy

Funding the universities through a general taxation scheme. That way, the universities start acting less businesses and prevent further commercialisation of the higher education industry.

that's all well and good except society will waste the potential of many students who will be enticed to study for subjects that are of no use to them

Reply 12

jackmarshal757

Original post by Fox Hound

It would give a certain privilege to those doing an English degree over those doing an engineering degree.

Reply 13

jackmarshal757

A reform is needed, reinstate the polytechnics, push for more people to take up vocational courses, would lower the expectations surrounding university and would have the possibility of lowering fees.

Let’s not forget it was Blair, who introduced fees

Reply 14

fallen_acorns

I actually like a half-half model where a proportion of their income comes from the government, and a proportion comes from the students.

The reason is, I'm not a huge fan of entirely state-funded higher education. It gives the government a lot of power over them, and isn't always great for competition-related motivation. Equally having it entirely student funded makes it far to business/transaction like, and removes democratic accountability, which I don't like.

Having a mix, seems appropriate for me.

That being said, this would change if higher education became compulsory, which I believe it will eventually. And it doesn't mean I think that the current situation is right - its a mess. But the principle of putting some cost to the government and some to the student seems fair to me. It also best reflects the benefit, the government benefits from us going to university and so reaps some of the reward for their investment, but students also personally benefit, and so should shoulder some of the cost.

Reply 15

mnot

Universities Forum Helper

So i think most people accept the government should help financial support on day 0.
But I do think the state should be more selective on what they are funding. I think courses should have to offer socioeconomic benefit to be able to qualify for students to access funding, now I think the vast majority of courses offer this but their are certainly some programs that are too often not useful.

I think rather then a big loan a graduate contribution should be made, so if you go into what is deemed useful work you dont pay anything back, if you go contribute to the economy in the private sector via a graduate standard job or work improving services in the public sector you would be deemed to be contributing back, similarly people who are entrepreneurs who employ people or pay a certain threshold of corporate tax would also be seen as contributing back to the system.

But where people move abroad or work in a non-graduate standard job you would have to pay a small tax perhaps on similar terms to the current repayment.

with the idea being you either pay the tax or contribute in a socio-economically beneficial way for 30 years.

This way students arent burdened with a debt, it encourages students to contribute to society but allows for those who got a degree but dont utilise it, and as their is no cost to the degree you remove the customer type feel of higher education.

(edited 3 years ago)

Reply 16

fallen_acorns

Original post by mnot

That's a really interesting perspective. I see where your coming from but I'm pretty sure that were this ever proposed the media would brand it as "gov suggests that poor graduates should pay tax while rich graduates are exempt" etc.

Reply 17

mnot

Universities Forum Helper

Original post by fallen_acorns

Yes, and their are ways of mitigating against this with a bottom threshold so people who earn less than a set value aren't required to pay.

The political lens is often why all too often rational concepts can be distorted unfortunately.

Reply 18

Trinculo

I think there's a difference in that every working person pays toward their own pension and benefits, whereas graduates are the only people to benefit from their education directly, and they are the people who benefit overwhelmingly from it. On average, yes a graduate pays more tax - but they get a benefit that a non-grad does not.