Free University Education - Research Paper

Can Free University Education Ever Happen?

Introduction

As tourists depart London each September, they are rapidly replaced by a tidal wave of some half-million students, two-thirds of which are full-time and a fifth of them foreign. This nomadic, pub-congesting, mostly proletariat mass is electrified, enthusiastic, vulnerable and bewildered. The collective, silent message among the city's residents could easily be summed up as: Brace yourselves, Londoners...back they come...

Having migrated to the city for an education, some get the finest. Many receive little or no tuition and end up procuring a degree and enjoy a good time or struggle through a miserable one, according to happenstance. What benefits does this horde bring to London? Consider that higher education is big London business. London has long been a place of intellectual and emotional asylum. In addition, the city's hospitality to thousands of migrant scholars ensures that it remains the most popular student city in the world, albeit being big, anonymous and superficially expensive. Pubs, cafes and bed-and-breakfasts in student quarters depend heavily on this inflow. Notably, young people unable to find housing in halls of residence now underpin the private rental market.

So the quintessential question debated for nearly the past five decades has become: Who should pay for these students' educations?

Tuition-Free Initiatives History

1960's

The Soviet's launch of the first Earth satellite, Sputnik 1, astonished the world and ushered in an entirely new age of escalating technological advancement. It can be argued that it also motivated additional educational spending on both sides of the Atlantic. In Britain there were also concerns about poor economic performance and both factors were foundational in the appointment of the Robbins Committee in February, 1961, that ultimately introduced a system of a mandatory, tax-funded maintenance grants, means-tested on parental income. (Robbins, 1963) The Robbins Committee's conclusions rested on a number of principles, the most important of which may have been the assumption that courses of higher education should be available for all those qualified by ability and attainment and who wish to pursue them. (Barr, 2003)

Clearly, access to higher education was a prime objective of the report. In pursuit of that objective, among others, the Committee recommended a population target for higher education, from about one in twelve of 18-year olds to about one in six, by the year1980. (Robbins, 1963)

That goal was reinforced in the Report, which noted several advantages of loans, particularly that tax-funded grants tend to be regressive, since higher education was then disproportionately used by students from higher-income backgrounds. (Barr, 2003)

The major worry about loans was their incentive effects, in particular the deleterious effects on access. The report not recommend immediate recourse to a system of financing students through loans, stating in light of the fact that many parents were only just beginning to contemplate higher education for their children, that the prospect of acquiring education loans would have produced undesirable incentive effects. (Robbins, 1963)

Loans issues had arisen within in the broader debate about the proper role of government. In a general defense of the market mechanism, Friedman (1962) considered the government's role in vocational and professional training. He accepted the capital market imperfections, specifically the riskiness of student loans (the absence of any security). He suggested that to counter the risk for lenders offering education loans, they would secure a share in an individual's earning prospects; to advance him the funds needed to finance his/her education on condition that he/she agree to pay the lender a specified fraction of his future earnings. His proposed terms involved a contract in which the prospective student would agree to pay to the government in each year of his/her employment, a specified percentage of his earnings in excess of a specified sum for each $1,000 that he received, easily combined with payment of income tax in order to minimize additional administrative expense. (Friedman & Friedman, 1962)

These early student-loan proposals derived from the benefit principle (he who benefits should pay) and that a graduate tax would enable the community to recover the value of the resources devoted to higher education from those who have themselves derived such substantial benefit from it.

1970's

The early 1970s saw various proposals, among them, an income-contingent scheme for postgraduate students. Perhaps this was the obvious way to begin: the numbers involved were less; mass access would have become more efficient; and there should have been less political opposition. The 1974 election of a Labour government effectively ended any immediate likelihood of loans. The emphasis of higher education policy remained on pursuing expansion and improved access through the existing system of tax-funded maintenance grants. Unfortunately, public spending cuts after the 1976 economic crisis ruled out any chance of success.

With the 1979 election of a Conservative government, income-related loans reappeared on to the political agenda. Keith Joseph, then Secretary of State for Education, was committed to the policy and any explanation of why no such policy was implemented would only be speculative. However, three possible reasons were certainly in play during that era: the high up-front-taxpayer cost of the loan policy throughout its early years (paired with government's commitment to public spending cuts); the administrative difficulties cited by the Inland Revenue whenever the policy was revisited; and the political precariousness of suggesting a reduction of a middle-class perk.

1980's

The result of the 1970'government inaction on education funding reform was that by the early 1980s, though there was yet to be political consensus, agreement beyond the ranks of politicians was widespread and virtually every advocate of student loans in Britain favoured an income-related loans scheme. (Blaug,1984)

The virtual death dirge for free university education was sounded by the 1988 passage of the Education Reform Act, which radically changed schools. Loans would be a means for the government to continue to attempt to meet a target of half of all school-leavers attending to university while offsetting the cost by mandating that banks and ultimately students themselves pay for it.

Incredulous as it may seem today, when asked at a press-conference, what he would say to mothers and fathers worried about their children getting into debt, Conservative education secretary, Kenneth Baker, took a long pause, then replied, "Do you know, I hadn't thought of that ... still, everyone's in debt these days, aren't they?" In context, this was the time proximal to a huge credit boom and a time when the popular mantra that greed is good was generally accepted. (Bates, 2010)

During those halcyon days, local authorities had been obliged by the Conservatives' 1962 Education Act not only to pay full-time students' tuitions, but also to contribute towards maintenance fees, as well: a benefit that generation came to take for granted. Baker's loan plan called for £1,200 over three years, repayable over 10 years at zero interest. The loan topped up living expenses, not tuition fees. Expansion moved forward and polytechnics rapidly converted en masse into universities.

What appears to have been notably absent from the national debate was the consideration that a sudden glut of degreed workers might not enhance the career prospects of the individual university graduate, now deeply in debt. Additionally, the introduction of student loans was universally criticised by the National Union of Students and by universities as being likely to be unsustainable for students from poorer backgrounds.

Inevitably, the government's plans soon started to falter. The banks and building industries were disinterested in running a lending scheme, offering money to young people at less advantageous terms than they were already employing. As a result government was forced to scramble for other ways to finance the scheme and set up a separate company to administer it.

Conclusion

Into the New Millennium

In 2004, recognizing that the heady, happier days of the initial education funding initiative were long past, Labour changed the principle further: introducing loans for tuition fees. In September 2009, The Confederation of British Industry proposed a 70 per cent increase in fees to a maximum of [pounds sterling] 5,000, reduced the number of maintenance grants and further proposed an end to subsidised student loans. It warned the Government that it must abandon its unattained target of putting half the youth population through higher education and to concentrate instead on those who really desire it.

That proposed cut in the student loan subsidy is expected end the unfairness whereby non-graduate taxpayers are cross-subsidising graduate ones, despite the latter earning, on average, higher wages. As for dismantling maintenance grants other than for genuinely low-income families, it would lead to more students working in pubs, restaurants and social services and to more living at home, and would thus replenish the labour market.

In answer to the question posed in the introduction to this essay, the evidence gleaned since the 1960's indicates strongly that beneficiaries of any service that not does rank as a vital welfare benefit should pay for it, to the extent that they can. That especially applies when the returns from such payment is as specific to the user as is a university education and with fees paid directly from students to the universities that they are attending, the return students should demand is better service. (Jenkins, 2009)

Bibliography

Barr, Nicholas, 'Financing Higher Education in the UK: The 2003 White Paper', House of Commons Education and Skills Committee, The Future of Higher Education, Fifth Report of Session 2002-03, Volume II, Oral and Written Evidence, pp. 292-309.

Barr, N & Crawford, I, Financing Higher Education: Answers from the UK, Routledge, London.

Bates, S, Tuition fees: From 'free' university education to students owing thousands, guardian home.

Blaug, M 1984, Where are we now in the economics of education? Netherlands Institute for Advanced Study and University of London Institute of Education, London.

Friedman, M & Friedman, R 1962, Capitalism and freedom, Chicago, University of Chicago Press, Chicago, IL.

Jenkins, S, 'You get what you pay for -- and that includes university; Students may cry foul at calls for higher fees but higher education and London's economy will be better for it'., The Evening Standard.

The Robbins Report: Memorandum by the Chief Secretary to the Treasury and Paymaster General 1963.