Wednesday, 13 April 2011

Tuition fees - nobody understands

Tuition fees is being continually raised as a Lib Dem failure and a huge increase in what students pay - both of these are wrong.

I have modelled the costs of this scheme, compared to the old scheme.

The results are quite scary, and people are completely misunderstanding what the new system means, for students, universities and the country.

The problem is that its actually the exact opposite of how it is being portrayed by the media. The system was engineered by the Lib Dems into a very very progressive system, and in fact they have made it far too progressive in reality.

The key facts are:

- More than half students will pay LESS than under the old system
- It makes it even easier for poorer students to go to University
- It is a shift in tax towards the higher earners
- Studying degrees that will lead to poor earning jobs is more favourable in the new system
- Tuition fees or no fees - the money has to come from somewhere - there is no such thing as a free degree - I have yet to hear a single person say this, but its an obvious truth.
- Average graduate starting salary (including students who fail or do poorly or drop out) is about 17000/yr
- A large proportion (over half most likely) of loans will be partly written off after 30 years.

Some example figures:
Start: 15000, 30yr: 35000, Old cost: 17310, new cost: 13284
Start: 17000, 30yr: 40000, Old cost: 24231, new cost: 21262
Start: 21000, 30yr: 40000, Old cost: 23830, new cost: 25723
Start: 25000, 30yr: 50000, Old cost: 22585, new cost: 44664
As you can see, its cheaper for low earners, more expensive for high earners

The problem for the LibDems is their TOTAL FAILURE to communicate the policy by all concerned (Vince Cable needs the folks who wrote their manifesto to put out some human readable information about it).

The real problem is that the new system is not fit for purpose and open to abuse and will encourage all the wrong things (more photography degrees).

1. Universities are going to realise that they can run a useless belly dancing course, charge 9000/yr for 3 years, and collect 27000, for a course that can be taught for 500/yr. Basically they can use it as a moneymaker for the university.

2. Students are going to realise they can use it as a 3 month holiday. Anyone who is not going to earn a big salary, or who intends to become a full time parent, or knows they are going to only earn say the national average wage, can take 3 years out, do some rubbish course, collect their part of the loan, and have a great time but achieve nothing.

3. The whole point of state funded education is that it is the country investing in its future. That means spending money where it will achieve a return - not providing leisure activities for people with no desire to pay their own way in the world.

4. One assumption of the new system is that higher earners will over-pay, thus funding those that never pay off their loans - basically the higher earners will fund the 30 year writeoffs. BUT The problem is that once this is realised, there will be a market in selling loans to those likely to pay them off - eg Oxbridge candidates, doctors, dentists, accountants etc. A smart financial instutution will basically undercut the government scheme, and take the profits themselves, rather than them being used to fund lower earning graduates. It will be akin to toxic debt - the government will be left holding the bad debt, and the banks will end up with the valuable debt.

We need instead to turn the whole fee system upside down and start again. Key goals should be:

- Availability to all, regardless of financial background
- Focus funding on degrees with value - eg engineering, computing, sciences, medicine, media (we need entertainers), journalism (they all need a statistics course added in...), politics, business, management etc etc
- Reduce the cost of educating (universities are hugely inefficient - why don't they share best teaching instead of guarding it so jealously?)

Its time we had a proper debate about university funding, tuition fees and faced up to the facts, rather than everyone indulging in misleading rhetoric.

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