Postgraduate funding is an inequitable mess and we urgently need to fix it

The current system of financing means that many people who are not from wealthy families are simply priced out.

Any undergraduate student scanning the various university website pages listing postgraduate courses or giving advice on further study will probably notice one consistent statement running through each, namely that it is "hard", "challenging" or "difficult" to finance a Masters or PhD. As a young person used to grim headlines about the financial difficulties faced by their generation, it’s not hard to just shrug your shoulders and accept that this is the way things are in such a tough economic climate. But of course postgraduate study is something that shouldn’t be hard to finance. It shouldn’t be difficult for people to find the resources to further their academic passion or get the qualification necessary to enter their career of choice. But sadly this is the case for thousands of people in Britain who want to get a better education. It is a state of affairs that requires action and the UK and its students are worse off for it.

In many respects, the state of postgraduate study in Britain symbolises a lot of what is wrong with the country as a whole. Postgraduate teaching and research here is world-class, but the way it is funded and provided is ultimately an inequitable mess. The benefits of attending great institutions is all-too close to being the preserve of wealthy students from Britain and abroad. This is largely due to the lack of any sort of comprehensive government financing. Unlike undergraduate degrees, which of course often have high tuition costs but are supported by government-backed low interest loans, there is little support for postgraduate study. The result is that students are often expected by universities to pay the incredibly high cost of attendance up-front. With fees sometimes in excess of ten thousand pounds and the cost of living high, many people who are not from wealthy families are simply priced out. The only chance to pay for tuition and living costs comes from a frankly insubstantial number of scholarships offered by university departments and Career Development Loans offered by banks which are declining in number and are often just offered for courses that can make up the money quickly. The rest is expected to come from students.

Not only is this situation bad, it is getting worse. Fees for taught masters courses, which are often the basis for entry into certain professions, have risen 11 per cent as a result of cuts to teaching grants. Support for such programmes is also being scaled back to nothing by the research councils. The number of PhD students being supported by these bodies is also seeing a 20 per cent cut. If a potential student cannot find support from this shrinking pool, then they can be turned down for not being able to cover the costs of further study, even on the basis of sometimes arbitrary living cost estimates being made by universities. The most high-profile example of this is that of Damien Shannon, who has taken St Hugh’s College Oxford to court for rescinding his offer on the basis that he could not pay the £12,900 in estimated living costs, even though he had access to a £9,000 loan.

The result of this deteriorating situation is that postgraduate study is becoming more and more restricted to the few who can afford to pay thousands of pounds to attend. The postgraduates of Britain are already a less socially representative group than their undergraduate peers: according to research by the Sutton Trust in 2010, 17 per cent of postgraduates went to independent schools compared to 14 per cent of undergraduates. The effects of this are twofold: the lack of access to further study means more and more people lose out on improving their earnings in the long run (the Sutton Trust estimates that students with a masters degree earn on average £1.75m over their lifetimes). If those that do have access are increasingly just those that already have money, the privilege of those at the top will become reinforced. It also makes certain professions more closed off. Fields such as law and academia often require a postgraduate qualification in order to gain entry. Politics is another area which is arguably harder to access in the current system for many: a lot of the think tanks, charities and MPs offices that constitute the political establishment are packed with people possessing masters and PhDs.

It’s a sad state of affairs but one with something of a silver lining, namely that the issue is now rising up the political agenda. Universities and policy makers are increasingly aware of the social and economic costs that come about under the status quo. A variety of bodies are now calling for comprehensive government support for postgraduate study. Many of these proposals are very moderate and practical, mostly calling for the extension of subsidies and loans into further degrees. The NUS has proposed a funding model based on income-contingent loans of at least £6,000 a year, HEFCE is reviewing the way it funds postgraduate courses. Even the centrist Conservative pressure group, Bright Blue, had a call for a system of loans in its recent pamphlet "Modernisation 2.0". High-profile public thinkers such as David Attenborough are also joining the campaign to act on postgraduate funding. Hopefully with persistent and informative pressure some kind of comprehensive support will be implemented at some point. Even if it might require sacrifices elsewhere, it is a critical investment that needs to be made in the nation’s people. Until that day comes, thousands of bright young Brits will continue to have their aspirations dashed by this deeply unfair part of our precious university sector.           

Photograph: Getty Images
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The Asian Financial Crisis 20 years on

In the four years between 1993 and 1996 the tiger economies of Asia led the world in terms of gross domestic product (GDP) growth and stock market returns as foreign and local investors piled in and embraced the opportunity.

In the four years between 1993 and 1996 the tiger economies of Asia led the world in terms of gross domestic product (GDP) growth and stock market returns as foreign and local investors piled in and embraced the opportunity. But trouble was brewing and Thailand was the canary in the coal mine. Strong growth was being funded by ever increasing levels of debt and with offshore interest rates far more attractive than those available at home, US dollars became the funding currency of choice.

While currencies remained pegged to the US dollar risks were minimal but as a growing trade and current account deficit and rising inflation led to increasing overvaluation of the Thai Baht, speculation grew and short-term money started to move out of the Thai currency.

In July 1997, after a futile attempt to stem the outflow, the Thai central bank removed the peg triggering an immediate 25% fall in the currency - by the end of the year it had lost half of its value. The impact on the economy was devastating. Interest rates initially spiked making dollar debt significantly more expensive. Loans started defaulting, peaking at almost 50% of total loans in 1999. The figures reflect the severity of the downturn: GDP took five years to return to pre-crisis levels, consumption – the use of good and services by households - was four years, and private sector loan growth only returned to positive territory in 2002.

Although Thailand was the trigger, the ticking time bomb of unhedged foreign currency debt and a  prolonged period of over-exuberance prevailed across all of South East Asia.  The Philippines and Malaysia were also significantly impacted but the most significant downturn occurred in Indonesia, which, although running a current account deficit only half the size of Thailand, saw its currency go from 2000 rupiah to the US dollar to 16000, and bank loan books fill up with defaulting loans.

Contagion and a severe lack of confidence dented the whole region and although Hong Kong managed to hold on to its peg to the US dollar, a prolonged period of high interest rates and slower growth resulted in a 40% fall in residential property prices and a deflationary period that took many years to recover from. Even South Korea, which was the 11th largest global economy at the time, had to call in the International Monetary Fund (IMF) as interest rates ballooned and the currency weakened.

The recovery, which on average took more than 5 years, was supervised by stringent IMF requirements and has put Asian economies on a much firmer footing. With a few exceptions Asian currencies are free floating, meaning their value is determined by the foreign exchange (forex) markets through supply and demand, and as a result they have much more flexibility to reflect domestic economic cycles ensuring that pressures don’t build. Current and trade accounts, with the exception of India and Indonesia, are now in surplus, with the practice of unhedged foreign borrowing all but ended. Short term foreign debt in ASEAN (the Association of South East Asian Nations) nations has dramatically dropped from 160% to now less than 30%.

The Global Financial Crisis (GFC) in 2008 was borne out of exuberance in the West but not in the East and although Asian economies were impacted by the slowdown in global growth, Asian economic credibility was never called into question.

The only economy that is showing a worrying trend is China. A credit boom following the GFC has seen debt-to-GDP balloon from 160% in 2008 to 260% in 2017. The nature of this debt however is different from that accrued by South East Asian Countries in the late 1990’s. Firstly, most of the debt lies with state owned enterprises (SOEs) and is hence backed by the >$3tn worth of foreign exchange reserves, and most of it is denominated in renminbi. Secondly, although China operates a managed exchange rate regime against a basket of trading currencies, the capital account is closed which restricts the amount of speculative flows. Finally, a lot of the debt is owned by domestic institutions and is long term in nature which reduces the likelihood of enforced withdrawal leading to a liquidity crisis.

The impact of the Asian crisis lives long in the memory of Asian corporates. The days of rapid expansion and growth for the sake of growth have gone and been replaced by conservatism and a focus on cash flow and profitability. Corporate debt levels are at all-time lows while cashflow compares favourably to any other region of the world. Interestingly it is developed economies that are now showing the stresses Asia encountered and recovered from 20 years ago; Asia in comparison looks favourable.

1 Debt can be issued in a various currencies and because the value of these can shift around, hedging is process of protecting yourself against adverse movements, usually through the use of derivatives.

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