The case for tuition fees

Someone has to pay for universities - it's right that graduates bear some of it

Nick Clegg is very sorry

I’m a big fan of Nick Clegg. He’s a fantastic political communicator, his performance in the 2010 TV election debates briefly escalated his popularity to the levels of Winston Churchill. He took the Liberal Democrats into power for the first and only time in the party’s history. And his post-politics career has been, unlike many, largely free from accusations of scandal - in fact, it's been pretty impressive.

But I suspect the Nick Clegg Fan Club is a slightly lonely place.

If you ask Nick Clegg about the decision he regrets the most during his time in government, he’ll tell you it was military intervention in Libya. 

If you ask just about anyone else what his biggest mistake was, they’ll say it was his monumental flip-flop on tuition fees. 

On page 33 of the 2010 Liberal Democrat manifesto, the party pledged: “We will scrap unfair university tuition fees”. Clegg himself was also photographed holding a sign: “I pledge to vote against any increase in fees in the next Parliament”.

What he went on to do, of course, was triple tuition fees from £3,000 to £9,000 - and pave the way for future increases. It was, without a doubt, the most memorable thing Nick Clegg did - not helped by his apology video which went viral when it was autotuned into the I’m Sorry song.

Nick Clegg shouldn’t have broken his promise. But, as he says in his apology, he should never have promised it in the first place. Tuition fees are the right way to fund Higher Education.

Who foots the £40 billion bill?

Higher Education is very expensive. Universities cost more than £40 billion a year to run.

Somebody has to foot the bill: and the debate boils down to - who should it be? It can only be the individual, or the taxpayer, or a bit of both. 

If you're asking who is paying the bill, you've got to start by asking who has the most expensive meal. Who is getting the benefit out of universities?

Graduates are certainly getting a lot of benefits. They earn more money: by the age of 31, graduates earn 37% more than their non-graduate peers. They have access to more opportunities: as many as a third of jobs require a degree. And, while there’s not a lot of data on it, most indications suggest that students do have fun at university - and there’s value in that. 

The benefit for the taxpayer is less obvious. Some students will become doctors and lawyers, others will advance research in key fields: there’s public benefit there. But many, many more students will get a degree in Business Studies, or Creative Writing, (or Linguistics); they’ll spend their maintenance loan in local nightclubs; and then they’ll get into a Morgan Stanley grad scheme. It’s hard to argue that they are creating a huge amount of public return on investment. 

When the benefits skew so strongly towards the individual, it'd be wrong for the taxpayer to take on the full burden of paying for Higher Education. We shouldn't split the bill when the graduates got a dessert.

But charging for university brings it's own problems. Tuition fees risk locking out those less well-off.

There is a solution: student loans. The UK’s centralised student loans system is a fantastic one for ensuring parity. You only pay when you’re earning, and even then at a very low rate. The amount you pay is based on what you earn, not how much you borrowed, and the debt is wiped off after 30 years. 

Individual learners pay only when they can, only when they are feeling the benefit from their education.

It's the best debt you'll ever have. In fact, I think it’s extremely irresponsible for commentators to obsess over tuition fee debt. The loans system is set up in such a way to encourage disadvantaged learners into higher education: headlines obsessing about debt discourage them.

To cap it off

If the government were to make higher education free (ie, taxpayer funded), they would have no choice but to cap the number of students who can go to university. 

This is exactly the case in Scotland. Though there are no tuition fees, there is a strict limit on the number of university places. The effect is that the wealthiest families ensure their children get the best education, tutoring and support to secure a place, whilst the poorest miss out. 

If you introduce free education, poorer students are less likely to go to university. It's counterintuitive, but that's how it plays out.

So, you have a binary choice between uncapped entries and tuition fees; or free education but capped places. Either fees for all, or free for a few. My preference will always be the option that opens up the most opportunities the most people.

Raising the fees

Because of the nature of the generous student loans system we have in the UK, the majority of students (somewhere between half and 80%) will never repay their loan in full. When they don’t: the government covers the rest. 

So the taxpayer does contribute pretty substantially to the cost of university.

For the individual, our system means the amount that’s owed is essentially irrelevant. A graduate on a £35k salary will repay £58 a month: whether they owe £10k, £100k or £1 million. 

The only people who ever have a chance of repaying their loans in full are the very highest earners.

So when Labour indicate that they will increase tuition fees, it sounds like they’re making students pay more. But actually, the government will be the ones who pay more. 

Raising tuition fees serves to marginally disadvantage the very highest earners, who have a shot at fully repaying their loan; and the taxpayer, who ends up paying for the unpaid remainder.

Increasing tuition fees is essentially just a bung to universities, as it'll grant them more money per student. The graduates themselves will still have the exact same payment terms, that leave them very unlikely to ever pay off the loan in full. 

Rebranding debt

Tuition fees have a brand problem. Loan repayment in this country looks, feels and acts more like a tax: it’s based on your income, comes straight out of your paycheque, and stops if you stop working. If it looks like a tax, sounds like a tax and acts like a tax - let’s just call it a tax. Let's call it a Graduate Tax.

This rebrand would change almost nothing about the system, but everything about the way it's perceived.

Education would be free, but come with a marginally higher tax rate for graduates in recognition of the benefits they gained from their university education. And under this system, graduates aren’t paying anything back, they’re paying it forwards: their Graduate Tax goes towards the next generation of university students. 

With a Graduate Tax, disadvantaged students are not put off university by the fear of debt, and you level the playing field even further by scrapping the option extremely wealthy individuals have today of paying for university out of pocket.

The current system is the right way to fund an extremely pricey higher education system: the individuals who benefit pay a little more each month in recognition of that. It just needs a rebrand to win back a bit of public love.