Friday, October 5, 2007

How Should Higher Education be Funded?

University Education has been a hot topic as governments increasingly struggle to find the funds for universities. In the UK, the government is increasingly shifting the burden on to students and their parents. With the expansion in student numbers the problem is likely to become more pressing. What is the best way to fund University Education?

Firstly, should University Education be free at the point of use?

- Arguments for free education
- Arguments against free education

Personally, I feel that the external benefits of university education are relatively low. Most of the benefit from university education accrues to the individual. There is an opportunity cost of spending on university education which is reduced spending on other areas. Arguably, the government would be better off investing in primary and secondary education, rather than trying to make university education free for everybody. Furthermore, with the rapid expansion in university numbers, the idea of free education for all becomes more difficult to make a reality.

Methods of Paying for University Education

Higher Tax

The government could increase tax to fund university education, but, I feel with demographic changes placing greater demands on government spending. It would be better to use tax increase to spend on public transport or health care. To increase tax rates for free university education would be to place an undesirable burden on the taxpayer. Also, the government may gain a better return from spending any extra cash on vocational training on primary and secondary education.

Student Loans

At the moment, student loans play an important role in financing university education. One benefit is that students don't have to pay back until they are earning a certain amount. However,
  • Going into debt may discourage students going to university
  • Debt can create stress
  • There is a high % of defaults on student loans.
Graduate Tax

This raises revenue by charging extra income tax on those who benefited from universities. This would be equitable in the sense that income tax is progressive, taking a higher % from high earners. Students may argue it is unfair. But, if a university degree increases their earning potential there is some justification in making them pay part of that extra earning potential. I prefer a graduate tax to student loans.

Sponsorship Deals

In the US, there is greater use of encouraging students to gain sponsorship from big companies. This involvement of the private sector encourages university degrees to be more relevant to the needs of the workforce.

Reduce Number of Students going to university.


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