US Elections: messing with the small print won’t address the issue of student debt
Higher education finance might be the last thing on America’s minds when they cast their votes on Tuesday. However, the fact that both candidates have set out plans to reform the US’ student loan repayment schemes is perhaps indicative of the importance of this issue in the US. The problem is, both candidates are just messing with the small print, and their plans which will do very little to help graduates struggling with student debt.
Trump intends to push for an income-driven repayment plan that would increase the level of the payments students have to make (by increasing the cap on payments from 10 to 12.5 percent of income) but reduce the repayment period to 15 years from its current period of 20-25 years (depending on the scheme). Meanwhile Clinton has endorsed the current plans, with the caveat that she aims to simplify the number of plans.
But will these proposals help students who are struggling with their loan repayment? The short answer is no.
The idea of a single ‘tipping point’ for the RAB charge is misleading
by Claire Crawford, (Institute for Fiscal Studies and University of Warwick), Rowena Crawford (Institute of Fiscal Studies) and Wenchao Jin (Institute of Fiscal Studies)
The raising of the cap on tuition fees charged by English universities to £9,000 per year in 2012 (and the accompanying increase in student loans) means that students are now leaving university with considerably more debt than they did under the previous system. Most mid-to-higher earning graduates are also repaying substantially more. A recent report published by the Institute for Fiscal Studies (IFS) estimates that students will leave university with around £20,000 more debt under the new system compared to the old system, with graduates in the top half of the earnings distribution paying back between £8,000 and £22,000 more in today’s money than they did before.
But despite these huge increases in private contributions, it does not currently look like the government will save much money as a result of the reforms. Continue reading →
Why the Australian system is not the holy grail of HE
A recent report by the much respected Higher Education Policy Institute (HEPI) recommends that UK policymakers pay much closer attention to Australia’s ‘advanced’ university funding system, which shares many of the features of the UK system, but at considerably lower taxpayer expense.
It is easy to see why HE finance policymakers should be tempted to look at Australia for inspiration. The recent finding that the RAB charge – or the proportion of unpaid student loan debt, that is covered by the taxpayer – may reach 45% shocked many. An IFS report out on Thursday put the figure at 43.3%. This means for every £1 lent to students 45p is not recovered. By contrast, the Australian equivalent – at 25% for standard tuition fee loans – is a much healthier figure.
On the surface, this would seem reason enough to adopt the features of the Australian tuition fee system. But this could result in unintended consequences if not thought through thoroughly. Continue reading →
Economics of HE 