Higher education shouldn’t be a market. No wonder tuition fees are failing

By Hugh Muir Today, as the phrase goes, will be a good day to bury bad news. What to do about Vladimir Putin? What happened to flight MH370? And what kind of hash has George Osborne made of people’s pensions? But for all that, there is subterranean scandal that should not pass unnoticed. The highly contentious student loans system is unravelling. Many predicted that it would. The surprise, given its high profile and political toxicity, is that it is falling apart so fast, but perhaps that can’t be helped. Hopelessly flawed, it seems to be falling under its own weight. Questioning of ministers by Labour’s Liam Byrne reveals that the write-off costs have reached 45% of the £10bn in student loans made each year, all but nullifying any savings to the public purse made by the new fee system. They started out with a £3,000 loan ceiling – which in fact became the norm. Then they hiked it up to £9,000, the better to lift the burden from the Treasury and to give us – in the jargon beloved by ministers – world-class universities enabling us to compete in the global race. What is actually happening seems very different, as the parliamentary admissions concede that the resource accounting and budgeting (RAB) charge – indicating the level of likely default – is fast approaching the 48.6% mark. At that point, experts say, the government will lose more money than it would have saved by keeping the old £3,000 cap. But the situation may be worse than that. Internal estimates within Vince Cable’s business department put the default threshold at 47%, rather than the 48.6% figure calculated by experts outside Whitehall. Which brings armageddon even closer. All that pain, all that argument, all that political damage – particularly for the Liberal Democrats who cast away popularity to help the government hike its fees – and for what? There is simple economics here; too many graduates chasing too few jobs in a labour market slimmed down by government austerity measures. Many who have taken out the loans can’t find jobs, so they don’t pay; but those who do find employment are paid so little in an over-supplied market that they don’t reach the threshold at which they have to pay. And of course, those who can will arrange their affairs so that whether or not they become eligible to pay never becomes apparent. The market is a harsh place. Consumers soon tell you if the pricing policy is wrong. Read the entire article here: http://www.theguardian.com/commentisfree/2014/mar/21/higher-education-market-tuition-fees-failing-9000-pounds

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