David Mendoza Wolfson argues that the current student fees system is unfair and unfit for purpose. Here he suggests a FAIR alternative.
Two years ago, when the bill was passed to increase fees to a minimum of £6000 a year for state Universities in England, I was the Treasurer of the Conservative Society (I’m now Chairman). I am not proud to tell you that I cheered as I heard the response. I was a supporter of the bill because I saw it as the best way to fund higher education. I knew the debt was bad, but I saw no better system of paying for university, so I believed that the student should have to pay for their education themselves. However, I was wrong to think that, and fortunately over the summer I had the privilege of helping with a scheme that proposes a radical alternative to the conventional methods for funding higher education.
This scheme is called FAIR – “Funding with Affordable Income-based Repayments,” I chose to work on it because I’d read about it and re-considered my previous views. I decided that it is the best way to fund students through university as the scheme is progressive, debt free, and aligns the interests of the university with that of the student which encourages the academics to ensure the education they receive has real value for the long term. Finally, it should reduce the burden on the taxpayer, so the government won’t be able to claim that students are just asking for a hand-out.
This is how it works, when a student decides to offer a place on a degree level course, they have the option either to pay (upfront or by taking out a loan) or they can sign a FAIR “contract.” The terms of the FAIR contract are set by government and are identical regardless of the age of the student or the course or university. These terms stipulate that in exchange for a fully paid for university education, the student will pay back to the university a fixed percentage of their salary for a fixed period of time while they are working.
The university can either hold onto their FAIR contracts, or they can offer them for sale to investors such as pension funds, so that they get immediate payment even though the graduate payments will be well into the future. This means that the better a university is, the more pension funds will pay for its FAIR contracts and so it is rewarded for doing a good job and can expand. This will improve how universities treat their graduates, and they will endeavour far harder to get their alumni top jobs in order to maximise their appeal to more students and ‘investors’ alike.
These pension schemes have billions of pounds to invest in low risk schemes such as FAIR, whilst students would be doing a social good by helping to provide for the elderly. It’s the perfect intergenerational transfer. It would also mean that a large part of university funding would no longer need to go through government, saving taxpayers a lot of money. FAIR would allow universities to be free of red tape (no more ridiculous fines for accepting ‘too many’ people) and they would try to find ways to make themselves even more appealing. As far as I see it, FAIR has the positives of both the debt scheme and the graduate tax without having the negatives of either.
There are two mainstream views for how university should be funded. The first and most widely implemented is the fees system. Realistically this system is a debt based system. It relies on student loans to help students fund their way through university, putting them in considerable debt (the majority of Freshers reading this will leave the university with around £36,000 of debt) without certainty of jobs. The system does not provide students with any more than a service; once the university has collected money it has no incentive to keep spending that on its graduates and will likely only contact them in the future for alumni donations. As well as this, the payments system is not progressive. The current system has payment bands, and whilst low income earners are further subsidised by the government, middle and high taxpayers pay the same amount of money. This means that middle income earners feel the most ‘pain’ as it is they who pay the highest percentage of their earnings back. This system is not fair for these people, and it is not fair for any graduates as it burdens them to tens of thousands of pounds of debt without truly helping them achieve their potential.
The other system is the graduate tax. It is positive in that only graduates pay for their education. However as attractive as the idea of a “free” education seems, somebody must pay, the academics aren’t going to work for nothing. If it’s not just graduates paying, it must mean non-graduates, who are generally poorer, subsidising graduates who are generally richer. This is not easy to justify.
Although a graduate tax like FAIR avoids debt, it leaves graduates at the idea of a government who could increase the tax rate in the future. While a student could sign up when the tax is, for example, 9% for 20 years, a new government could change it a few years later to, say, 20% for 30 years. FAIR contracts, on the other hand, are contracts – and once both sides (student and the university) have signed, the terms are fixed. Obviously government could introduce new terms for a new set of students, but all students would know the terms that could face them when they signed up and once signed the terms could not be changed.
It is my belief that those who want to go to university should be able to, and should not worry about money. The current scheme clearly puts off those from lower-income backgrounds and that is not what education should be about. Nor should the payment for higher education be as uncertain as it would be under a graduate tax. I believe that we should support that idea of FAIR, because it really is a fair deal for future students. It seems appalling to me that at the same time as lecturing everyone on how awful debt is, we are simultaneously straddling future generations with thousands of pounds of it.
Student surveys show that people feel as though they are getting less for their money now. I think that people should pay for what they get from university, and FAIR is a good way to measure that ‘value added’. You pay back a fair amount of what you earned. If we are looking for progressive ways to fund higher education in the future we must not simply oppose the current system but we must also back a viable alternative. That alternative is not lower fees and it is not a graduate tax. If you ask me, that alternative is FAIR.
Find out more about FAIR at www.fairforstudents.org.uk