Co-Editor of Naked Politics
During Labour’s emergency debate on tuition fees, Angela Raynor made it clear that “Labour have no plans to cancel student debt”. Having banked the votes, their headline campaign bribe was quietly dropped, following the revelation that the actual cost – that didn’t feature in the supposedly “fully costed” manifesto – would be a colossal £100Bn. Despite this, a fellow Naked Politics contributor believes that we need a radical re-think on who pays for tuition fees because students aren’t the only beneficiaries. The implication being that those without a degree owe a debt of gratitude to graduates for their disproportionately positive contribution to the world. Apparently, a greater income-earning potential is insufficient recompense.
The premise begins with an appeal to emotion: Only a heartless monster could fail to appreciate the teachers that educate our children and the doctors and nurses that care for our elders. By extension, “the claim that only graduates themselves benefit from a degree is nonsensical”. And it is – once the word “only” is surreptitiously inserted! It is widely acknowledged that the benefits of higher education are felt by wider society, but what is often forgotten is that so too are the costs. We can safely assume that a qualified doctor will deliver better healthcare outcomes than an unqualified counterpart might, but those same qualifications allow doctors to charge a premium for their labour, and that cost is ultimately borne by taxpayers.
When graduates go on to work in the private sector, the argument changes from “what would we do without them” to one of capitalist exploitation. Apparently, their greedy employers extract the benefit of their studies to commit the crime of all crimes; to make a profit. But Marx’s Labour Theory of Value is bunkum. The value of labour is determined by the laws of supply and demand. If graduates can earn more elsewhere, they are free to do so. Employers must, therefore, pay the going rate for the benefit of their degree-level attributes. So, the proposal that employers should contribute towards student loan repayments overlooks the fact that by paying higher wages, they already do. Making that relationship more explicit, by transferring the responsibility, would merely suppress the value of graduates, leaving their net position unchanged.
The question of who should cover the cost of a student’s tuition rests on the existence of property rights. On completion of their studies, graduates justly claim ownership of their degree. They are necessarily the owners of both the asset and the liability. The decision to enter higher education is, therefore, that of an investor weighing up the potential of future returns. Borrowing to fund an income-producing appreciating asset (earnings tend to increase with experience) is a rational choice. Especially considering that student loans have the most preferential terms of any borrowing anywhere outside of the BBMD (Benevolent Bank of Mum and Dad): Eligibility is not dependent upon credit ratings, repayments are only required once they are affordable, and the balance written off after 30 years. The expected return on this investment is said to be tenfold, with £50,000 of risk-free debt delivering an average of £500,000 in additional earnings over a working life. On those terms and with that risk-profile, there’s only one question for any would-be investor – “where do I sign”?
It is perhaps, for this reason, that more school leavers than ever are asking the same, which suggests that the availability of funding isn’t really a problem. Another Naked Politics writer argues that students may actually want MORE debt – as long as it comes in the form of maintenance loans, which are currently insufficient to meet basic living costs. And there may be something in that, but it raises the same question; who pays? Fortunately, the notion that those from low-income families are discouraged, is not borne out by the evidence. Perhaps the rise of flexible zero-hours contracts and the post-Brexit low-skilled labour shortage are converging to help students to pay their way through university; but either way, student numbers continue to grow exponentially.
An unfortunate consequence is the corresponding increase in graduates that fail to reach the income threshold required to repay their loans in full. When students personally experience neither the financial benefit nor the cost of their studies, taxpayers are left to pick up the tab. Heads, they win; tails, taxpayers lose. Such inequity has led to calls to mitigate the losses, with measures to discourage “Mickey Mouse” degree courses that fail to deliver the requisite earning potential. And, again, there’s a case to be made for that, but if universal access to higher education is to be maintained, it seems that general taxation is a necessary evil.
None of this is to say that the Corbyn-supporting 18-24 age group isn’t right to demand change. Student loan repayments can be an excessive burden when starting out in a fledgeling career. Especially while attempting to enter the ever-more-expensive housing market, furnishing that new home from scratch, and maybe even saving to start a family. A National Insurance exemption for under 24-year olds, on the basis that NHS usage is negligible when compared to older generations, could help. As could reducing the overall cost of living by unilaterally dropping trade tariffs after freeing ourselves from the Customs Union. Plenty of policy options are consistent with property rights. Attempting to magic the problem away with fictitious free money is not one of them!