Students protest the rise in tuition fees. Labour is expected to pledge a reduction from £6k to £9k
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Student politics: The future of tuition fees and higher education debt

Dismissing Labour's tuition fees policy as mere populism is a mistake -  there is a serious debate to be had about tuition fees

There is a serious debate to be had about the sustainability of a student finance system that significantly increases public debts and shunts extensive repayment risks and loan subsidy costs into the future.

Higher education policy has been unusually controversial and contested in the last two decades. The old model of setting up a royal commission and then implementing its recommendations over a generation – the prime example of which was the Robbins report in the 1960s – has given way to the choppier, more fraught politics of recent tuition fee reforms. The Dearing review in the mid-1990s was the last attempt to get establishment agreement to an enduring package of policies, and it was hardly implemented at all in its original form. The expansion of higher education, and its centrality to the life chances of the broad mass of the middle class, has brought university policymaking into the mainstream of politics, with all the messiness that democratic politics entails.

So complaining that Labour has chosen a tuition fee policy that is designed to appeal to young voters is a bit beside the point. Cutting tuition fees may not be a good policy – if I had upwards of £2bn to spend on any policy, I would direct it into early-years education and childcare, not a reduction in tuition fees – but Labour can hardly be blamed for acting politically (though the handling of it is another matter entirely).

Yet simply regarding Labour’s policy as short-term populism would also be a mistake. There is a serious debate to be had about the sustainability of a student finance system that significantly increases public debts and shunts extensive repayment risks and loan subsidy costs into the future. The Coalition’s reforms have been very successful at increasing funding for universities, protecting fair access and upholding student numbers (with the significant exception of part-time students, whose numbers have fallen dramatically), while at the same time cutting public spending. But these goals have been achieved in part because the government treats loans to students as cash transactions that do not appear in departmental spending totals, while the bulk of the write-down in subsidised and unpaid loans (the so-called RAB charge) only starts to make a big dent in future years, when cohorts of graduates enter repayment status.

Therefore, if you want to cut tuition fees in the next few years without reducing universities’ resources, you need to increase public spending on teaching grants, shifting back from a cash loan to departmental spending (and raise taxes or cut spending elsewhere to do it). Yet, simultaneously, if you cut fees then you also reduce government borrowing and its debt liabilities, and increase the loan repayment rate, reducing the RAB charge. As the government’s debts, rather than the deficit, become more politically important in the second half of the next parliament, so too will these policy considerations. In other words, the sustainability of the existing student finance system will become a more pressing concern.

A quick way of reducing the RAB charge would be simply to lower the repayment threshold. But that will appear distributionally regressive, since it will take more repayments from lower-earning graduates, which is why no party can propose it. In fact, as modeling undertaken for IPPR’s Commission on the Future of Higher Education showed a couple of years ago, under the existing system, the bottom four deciles of male graduate earners never repay their full loans, and only the top two deciles of female graduates actually do so. In other words, the current system is deliberately generous to graduates.

The ‘free market redux’ response to these concerns – articulated by Allister Heath and others – is to argue for a fully privatised student loan system, shifting the responsibility for issuing loans onto the universities themselves, so that they have a ‘stake’ in the earnings of their graduates. This at least has the merit of honesty: higher education would be finally reduced to nothing more than a market transaction. But it is a fiscal and political non-starter. Only a handful of universities would be able to start covering loans to their students, and risk-pooling across the whole student cohort would be lost, so borrowing costs would rise most steeply for those least able to finance their studies. The political prospect of swathes of local universities going to the wall would be enough to kill the idea, even if the middle classes hadn’t seen it off already.

It also betrays a parochialism about contemporary higher education policy debates. In the United States – usually considered the best higher university system in the world – the long-term rise in college fees and the steady buildup of student loan debt has sparked major public concern. The average cost of tuition at a public four-year college has increased by more than 250 percent over the past three decades, while incomes for typical families have grown by only 16 per cent, according to College Board and Census data. Declining state funding has required students to shoulder a bigger proportion of college costs: tuition has almost doubled as a share of public college revenues over the past 25 years from 25 per cent to 47 per cent.

The consequence is that student debts, and loan default rates, have exploded. According to a recent paper by the Federal Reserve Bank of New York: ‘Until 2009, student loans had been the smallest form of household debt. During the Great Recession, Americans reduced their other debts but continued to borrow for education, making student debt the largest category of household debt outside of mortgages since 2010. Since 2004, student loan balances have more than tripled, at an average annualized growth rate of about 13 percent per year, to nearly $1.2tn, in 2014.’

Default rates are now rising, and the federal government is being urged to step in to protect students who have been stranded with debts from for-profit college providers who have gone bust. One of these – Corinthian Colleges – was once one of the world’s largest profit-making college providers. It has now all but disappeared and a group of its former students has gone on debt strike. Meanwhile, the New York Fed study showed that the rise in student debts has started to reduce household formation rates and home ownership among the young and early middle-aged.

(All this looks remarkably like what Wolfgang Streeck, the German political economist, calls the shift from welfare capitalism to the debt state. The failure of liberal market economies to generate sustained increases in living standards, coupled with constraints on public finances and the financialisation of the economy, leads to governments and families ‘buying time’, as the title of his recent book calls it.)

This has prompted President Obama to come forward with new public subsidies for college costs, and extra help for graduates at risk of loan default. (Student loans cannot be wiped out by bankruptcy in the US, and default can have major implications for access to credit.) He has also proposed much wider dissemination of lower-cost MOOC and other digitally enabled courses, to begin to drive down college costs. This agenda is almost entirely absent from UK public discourse.

Unless you are a dyed-in-the-wool Hayekian, these developments in the US should give pause for thought. We need to find ways of making the existing student loan system more sustainable, not privatising it, and of protecting flows of resources into universities, while simultaneously finding ways of opening up lower-cost provision to expand access. The needs of part-time students – passed over in most of the commentary – should be a priority. And we shouldn’t expect politics to take a back seat while we figure it all out.

Nick Pearce is head of the IPPR, where this piece originally appeared.

Nick Pearce is Professor of Public Policy & Director of the Institute for Policy Research, University of Bath.

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The problems with ending encryption to fight terrorism

Forcing tech firms to create a "backdoor" to access messages would be a gift to cyber-hackers.

The UK has endured its worst terrorist atrocity since 7 July 2005 and the threat level has been raised to "critical" for the first time in a decade. Though election campaigning has been suspended, the debate over potential new powers has already begun.

Today's Sun reports that the Conservatives will seek to force technology companies to hand over encrypted messages to the police and security services. The new Technical Capability Notices were proposed by Amber Rudd following the Westminster terrorist attack and a month-long consultation closed last week. A Tory minister told the Sun: "We will do this as soon as we can after the election, as long as we get back in. The level of threat clearly proves there is no more time to waste now. The social media companies have been laughing in our faces for too long."

Put that way, the plan sounds reasonable (orders would be approved by the home secretary and a senior judge). But there are irrefutable problems. Encryption means tech firms such as WhatsApp and Apple can't simply "hand over" suspect messages - they can't access them at all. The technology is designed precisely so that conversations are genuinely private (unless a suspect's device is obtained or hacked into). Were companies to create an encryption "backdoor", as the government proposes, they would also create new opportunities for criminals and cyberhackers (as in the case of the recent NHS attack).

Ian Levy, the technical director of the National Cyber Security, told the New Statesman's Will Dunn earlier this year: "Nobody in this organisation or our parent organisation will ever ask for a 'back door' in a large-scale encryption system, because it's dumb."

But there is a more profound problem: once created, a technology cannot be uninvented. Should large tech firms end encryption, terrorists will merely turn to other, lesser-known platforms. The only means of barring UK citizens from using the service would be a Chinese-style "great firewall", cutting Britain off from the rest of the internet. In 2015, before entering the cabinet, Brexit Secretary David Davis warned of ending encryption: "Such a move would have had devastating consequences for all financial transactions and online commerce, not to mention the security of all personal data. Its consequences for the City do not bear thinking about."

Labour's manifesto pledged to "provide our security agencies with the resources and the powers they need to protect our country and keep us all safe." But added: "We will also ensure that such powers do not weaken our individual rights or civil liberties". The Liberal Democrats have vowed to "oppose Conservative attempts to undermine encryption."

But with a large Conservative majority inevitable, according to polls, ministers will be confident of winning parliamentary support for the plan. Only a rebellion led by Davis-esque liberals is likely to stop them.

George Eaton is political editor of the New Statesman.

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