Debate: The English Experience Shows That High Fee-Student Loan Model Will Not Work

Until 1998, higher education was free in England; indeed a large proportion of students even received maintenance grants to cover living costs. That year, the newly elected Tony Blair government introduced tuition fees, despite having explicitly promised not to do so. Fees were raised to £3000 in 2003, again in defiance of the party’s 2001 manifesto. In 2010, the upper limit for fees was raised to £9000, a figure which most universities then quickly settled on for almost all their courses.

The Liberal Democrats, who had won their largest ever vote-share in the 2010 election in large part due to the student vote, supported the move. The party never recovered from the resulting political blow despite its attempts, unique amongst British parities, to unite the Remain vote after the 2016 referendum.

In exemplifying the move from free higher education to progressively higher fees financed through student loans, the history of British higher education may hold lessons for India as it contemplates the same path. Indeed, sky-rocketing fees, not just in the private sector but also in pampered institutions such as the IITs, IIMs and Central universities suggests that India is already a long way down that path.

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To enable access to loans for all, the British government backs student loans through the Student Loans Company, which (akin to an Indian PSU) is off the account books of the British state. However, in December 2018, the country’s Office of National Statistics estimated that “much of this student loan debt will never be repaid” and would thus prove a liability to future governments. In keeping with standard international accounting practices, the independent body ruled that student loans must be treated like any other government debt. The resulting 12 billion pound hole in the books increased Britain’s budget deficit by 0.6 percentage points of GDP that year.

Reducing burden on public finances

Reducing the burden on public finances is the most cited justification for moving to a high fee-student loan model. An examination of the British case illustrates that this reasoning just does not hold up. Beyond these issues on the pedestrian question of finance, such a model comes with other problems as well.

Tuition fees are changing the very character of British universities, because when students are treated as consumers, they start behaving like consumers, as documented over many years by Stefan Collini, a professor at the University of Cambridge. Colleges are spending massive sums on amenities that have little to do with improving education, to woo applicants by delivering better “student experience”.

Grade inflation, or the award of progressively higher grades to work that would have received lower grades in the past, a problem long experienced by expensive American Universities, has made it to British shores as fee-paying consumers demand better grades. High fees have also exacerbated the trend of students prioritising disciplines such as management that are financially rewarding on a personal level, to the detriment of socially useful professions like nursing.

Indeed Collini argues, “In many parts of the world English higher education is, to change the metaphor, seen less as a useful pilot experiment and more as the canary in the mine.”

The appalling failings of the model as it operates in the US are so apparent that even proponents, such as professor Gurbachan Singh, writing in The Wire, are forced to acknowledge them. Iniquitous access to higher education is a key barrier to social mobility in that country. Indeed it is telling that in most studies of social mobility, the US and UK compete in ranking last amongst advanced economies.

Alternative models

It falls upon proponents to identify an example of the high-fees-student-loan model working well. Such an example way well not exist. In brainstorming to develop a model most suitable for India, policymakers would do well to keep in mind the many countries where higher education is free or almost free, including Germany that extends that privilege to international students for most courses. Indeed, this is an analysis of England rather than Britain, as Scotland charges no tuition fees to home and EU students, but has found a way to charge English students that is compliant with EU law.

Also Read: Can India Afford the Increasing Privatisation of Public Universities?

Another argument is that markets will drive down costs. But like in the healthcare sector, an examination of the data demolishes this notion. According to the OECD’s Education at a Glance, the US spent $27,000 per student in 2015 ($30,000 if research is included) compared to $26,000 in the UK ($28,000 including research). Germany, by contrast, spent a mere $10,000, increasing to $17,000 even when its substantial higher education research spend is included. Overall, the US spent the highest percentage of its GDP on tertiary education with the figure standing at 2.3% compared to 0.9% in the EU 22; both figures exclude research. As a percentage of total government expenditure, the US spent 3.1% on tertiary education as compared to 1.8% in the EU 22; illustrating (again like healthcare) that marketisation does not even drive down public expenditure as such is the extent to which markets drive up total costs.

Higher education is a merit good, one which produces positive externalities for societies, but produces even higher private gains for the small set of individuals who receive a college degree. It is entirely appropriate to have a conversation about how to fund it. More equitable systems (with their own drawbacks) have been proposed elsewhere in the world, including a graduate income tax with the revenue ring-fenced for spending on higher education. The merits of such a system may be debated in the Indian context. But any conversation on higher education funding must begin with an acknowledgement of the failure of the high-fee-student-loan model across the world.

Kapil Subramanian is a historian of science.