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Matthew Lynch published in International Education

The case for a fixed 15% fee on all student loans

This article was written by Bruce Chapman

The Grattan Institute has proposed that a 15% surcharge should be added to the Higher Education Loan Program (HELP) debt of undergraduate and college students.

The surcharge is not an up front fee. It is a fee that is added to the existing debt and paid later, depending on a graduate’s future income. Repayments are only made if a graduate’s income exceeds about A$56,000 per annum.

This flat rate means that, while a graduate’s loan would initially increase by 15%, that figure would not get bigger over time.

Currently full-fee undergraduates pay a 25% fee on their loans, vocational education students a 20% fee, while postgraduate and government-supported students pay no loan fee. There is no obvious reason for these disparities and they seem to have evolved through a lack of policy attention by many governments.

So for administrative simplicity and coherence it would seem a good idea that all HELP loans are treated in the same way.

Not a radical idea

The 15% surcharge might seem like a radical reform idea, but the notion of a surcharge actually fits comfortably with the underlying economics of the HELP system, and was part of the original HECS design of 1989.

Benefits to low income earners

While an increase in the size of the loan may raise the ire of prospective students, it is important to remember that this does not leave those who go on to earn a lower income any worse off relative to their wealthier counterparts.

In fact they would be better off under this reform, because there would be no financial advantage to paying off the loan quickly. This is not currently the case.

The lower income earners who take longer to pay off their loans as the system is now are also penalised with having to pay back more interest over time.

In this sense, the change will act as a kind of subsidy on the loans of lower income earners, negating some of the cost and keeping loans from spiralling out of control.

Benefits to the government

A starting point is that the government already passes a considerable discount to students by indexing the loans by the CPI instead of the government’s own cost of borrowing.

While in the past the suggestion of imposing a real, and much higher rate of interest on the loans has been floated, it has been demonstrated that this is not the most equitable solution.

While a 15% spike in underlying cost may understandably attract headlines, this isn’t out of the blue. Having a surcharge on HELP debts for normal undergraduates was part of the original HECS design, but it took the form of a 20% discount for those who chose to pay up front.

This is just the other side of the coin of a surcharge, and was part of the original policy to cover the interest rate issue explained above.

Also, there are already surcharges on other HELP debts, and these are currently (and strangely) different depending on the nature of the tertiary education that people are undertaking.

Why 15% fee?

However, these points in favour of a surcharge should not be conflated with a judgement concerning what is the “correct” level of HELP charges in total.

This means that simply adding a 15% surcharge is an implicit recognition that the debts for graduates are too low at the moment, and should be increased.

The case for a surcharge should be made independently from the issue of what the correct overall level of a charge should be.

The economic case of the Grattan argument for a surcharge stands without reference to any budgetary concerns related to the level of HECS debts, which is a considerably more complicated (and ultimately political) judgement.

The Conversation

Bruce Chapman, Director, Policy Impact, Crawford School of Economics and Government, Australian National University

This article was originally published on The Conversation. Read the original article.

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Matthew Lynch published in International Education

Why the TEF could change the way students think about a university education

This article was written by Chris Husbands

It is one of the remarkable transformations of our time: the world is going to university, and participation in higher education is increasing. On every continent, more young people are going to university than ever before, and increasing numbers are graduating. In the UK, over a third of 18-year-olds go to university – and that figure is higher in the US, Canada and Korea, and rising fast in China and Africa.

As a result, around the world, governments are challenging their university systems to play an ever greater part in generating knowledge, educating highly skilled workforces and building more cohesive societies.

At the same time, they are puzzling about how to afford mass higher education. And that situation opens up a potential gap, between the world of higher education providers and the world of stakeholders – who are demanding more, and demanding it more accessibly.

Teaching excellence

Universities are unique institutions – not just because they undertake research or because they teach – but because, uniquely, they do both. And great teaching matters – it matters to universities as much as it matters to schools and colleges. And for the first time the quality of teaching at English universities will be assessed as part of the introduction of the teaching excellence framework (TEF).

Of course, identifying and recognising high quality teaching is both simple and complex. Excellence in teaching is something we all know when we see it, but specifying what exactly it is turns out to be a more complex exercise.

The TEF addresses this in a sensible way. It does not set out to assess teaching quality directly, but to look for those features which are the consequence of high quality teaching and student engagement, such as strong student responses, high levels of progression and retention.

The TEF begins from a common sense position – that teaching quality, learning environment and student outcomes are the right places to look for evidence of the impact universities have. It then derives “core metrics” from the annual National Student Survey and HESA data on student initial employment – and uses these to develop initial theories about the work universities are doing.

All of this will be overseen by a panel drawn from across and beyond the sector, applying its judgement and expertise – and I am the chair of the panel.

High stakes

The TEF brings the opportunity to create a structure to celebrate excellence, provide clearer market signals and enhance quality across the sector. And if we get it right, to give yet stronger signals to international students about the sheer quality to be found across UK higher education.

The UK government is clear that it wants to create a link between funding and teaching quality, which will provide opportunities to reinforce and celebrate quality. And this is an opportunity to enhance understanding of higher education and of the way teaching is developing in a responsive and fast-changing sector.

Of course there are potential risks, both for individual institutions and also to UK higher education as a global brand. That means that the panel has to get the process right, and navigate a route through a complicated mass of data on a diverse sector.

Much of the initial work has been focused on understanding and responding to sector concerns, and these matter a lot. But there are other interests, too, which is why there is student representation on the TEF panel – because we need to be alert to student concerns about the overall quality of provision. So although it is important to reflect sector concerns, it is also necessary for the sector to recognise that universities matter to others, too.

There is no denying that the stakes in the TEF are high – high for government, high for universities and high for UK higher education. But if it is designed properly, and managed effectively, the TEF can give us the opportunity to celebrate excellence and provide a common way to think about how it develops.

And with more and more young people going to university, it becomes all the more important to develop a framework we can use to communicate clearly what is going on in university teaching.

The Conversation

Chris Husbands, Vice Chancellor, Sheffield Hallam University

This article was originally published on The Conversation. Read the original article.

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Matthew Lynch published in Education News, International Education

New partnerships are needed to arrest economic malaise in South Africa

This article was written by Steve Koch

South Africa’s Finance Minister Pravin Gordhan presented his 2016 mid-term budget on the back of a crisis in higher education funding characterised by widespread national student protests. The Conversation Africa’s business and economy editor Sibonelo Radebe asked Steve Koch to weigh the minister’s speech.

What is your reaction to the minister’s statements on funding higher education? Could he have done better?

The minister’s statements were well calculated, measured, and responsible in the current climate. The additional increase in National Student Aid Financial Scheme funds should go quite some way towards improving access to post-school education.

Assuming “better” means finding money to fund “free education for all, immediately”, the answer is no. Despite what student activists would like to believe, free education for all is pro-rich. This is because, disproportionately, students who qualify for post-school education come from richer households.

The answer is a more nuanced “maybe” if “better” means finding more money to help poor students fund their tertiary education. There are options, not necessarily palatable to all, such as privatisation of state-owned enterprises, which might raise revenue and reduce pressure on the fiscus. But changes of that nature would not be made in a medium-term budget. They would more likely feature in the State of the Union Address.

What should be done to address the higher education crisis in the long term?

There appear to be two components to this crisis. The one that appears to have driven the initial #FeesMustFall movement is that post-school education is relatively expensive and, even though funding for post-school education is one of the fastest rising budget items, student numbers have risen faster.

The bigger problem is that the economy has not grown fast enough to absorb workers for far too long. Students or their parents are left with potentially crippling debt and yet limited prospects to repay. Dealing with this will require some creativity, and a willingness to experiment to engender positive change in the economy. In my view, positive change requires opening up space and creating funding opportunities for entrepreneurs and businesspeople, while working to limit “rent-seeking”. Corruption, bribery and collusion are common forms of rent-seeking, which is the use of a position of power (political, economic or otherwise) to further your one’s own interests.

But one of the undercurrents of the current crisis is political, not economic. There is a desire for change, period. Thus, we see the rejection of democratically elected student council representatives, the rejection of current curricula and the rejection of socially accepted rules of engagement, among other things. Dealing with this will have to go far beyond the structures of a medium term budget.

What do you think credit rating agencies are taking out of this budget?

The medium term budget did not signal any big changes in policy associated with either large increases in budget deficits or long-term debt. And the minister was adamant that South Africa was able to control its own destiny.

These were important pronouncements because they underscored a commitment to budget sustainability.

The credit rating agencies are likely to take solace from this. But the minister is not capable of changing the economy overnight. And there are international risks, as well as local economic and political risks, beyond his control that remain important factors in credit rating decisions. Politically, uncertainty surrounding the minister’s continued appointment, as well as any potential replacement’s commitment to sound fiscal management, remains. Similarly, uncertainty surrounding the US Presidential elections, and the US’s continuing commitment to either free trade or Africa cannot be discounted. Economically, Brexit and the resultant relationship between Europe, the UK and Africa create further uncertainties about South Africa’s growth potential.

Given the prevailing political environment do you think the finance minister will achieve what he has set out to do?

One way to define the minister’s job description is that he has the responsibility to pay – sustainably – for activities that government would like to fund. He spoke about the realities of the local and international economic situation. He also restated the importance of creating a South Africa that was different (and far better) than the one inherited in 1994.

The reality is that government’s ability to directly fund new activities has decreased. But if business and civil society become more involved, government’s need to directly fund new activities will decrease.

For me one of the key takeaways was the message that the country’s full potential requires not just the government, but also the efforts of the private sector and civil society. If I’m reading this correctly it could herald the beginning of positive change in the economy and society.

It remains to be seen whether this theme permeates future government policy actions, or whether business and civil society begin to work with government and each other to achieve positive change. But the minister’s efforts are likely to open fiscal space, and, therefore, could help achieve what is required.

The Conversation

Steve Koch, Professor of Economics, University of Pretoria

This article was originally published on The Conversation. Read the original article.

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Matthew Lynch published in Diversity, HBCU's, list, Matthew Lynch

3 Reasons to Embrace Diversity on College Campuses

It’s easy to think of college campuses as islands – academic havens with little interaction with the greater world beyond. In reality, the work done on the grounds of colleges and universities has a big impact on society, from medical breakthroughs to mass adoption of social change. It’s important then that U.S. institutions of higher learning are representative of society as a whole in their student bodies and staff. That’s easier said than done, of course, but multicultural representation on college campuses should be a top priority.

Beyond the boost a multicultural campus brings to the immediate student and faculty body, there are some things they can bring to the “real” after-college world too. Here are three of them.

1. It can help us eliminate the wage gap. There is a gender wage gap and there is a minority wage gap. Unless you are a white male, you are probably making less than white males who do the same job as you. Some argue that the wage gap doesn’t exist but statistics show otherwise. The latest numbers from the Bureau of Labor Statistics finds that women make 78 cents for every dollar earned by a man in the U.S. The racial pay gap varies but in industries like technology, minority workers make $3,000 to $8,000+ less than white counterparts.

Even if these numbers are not 100 percent accurate, they are telling of an overarching problem with the American workforce: people are not paid equally. By having more diversity in the amount of highly educated workers, Americans have a better shot at getting rid of the nasty wage gap for good. Not only will these educated workers be more apt to ask for what they are worth, but it stands to reason that more diversity will emerge in positions of leadership (i.e. – those that make salary decisions). Feeding diversity into the professional workforce goes a long way toward pay equality and ups the standard of living for minorities and women.

2. It can help us get rid of discrimination. Racial tensions have spiked in the past year or so around the country, accented by the deaths of Michael Brown in Ferguson, Missouri, and Eric Garner in New York City. Though a lot of people like to believe that discrimination is no longer an issue in the U.S., these incidents and reactions to them highlight just how much more work needs to be done to eliminate prejudices, injustice and discrimination between races.

In my experience, it is easier to judge and alienate hypothetical people that you have never actually met. Once you’ve spent some time with the very people you once judged, it becomes more difficult not to view them as equals. Unfortunately when it comes to our nation’s public schools, diversity is difficult to achieve in districted areas. Kids go to school alongside their neighbors – people who often look like them, have a similar socioeconomic background, and who have the same basic life experience. Colleges and universities are able to break out of this mold and can be the first pass at diversity students experience. It’s important to maximize that opportunity by making sure not just campuses, but individual programs, are well represented with students from a variety of racial and socioeconomic backgrounds. It is harder to discriminate against a friend and colleague than a nameless ideal of a person.

3. It can help us become more competitive on the world stage. The more ideas brought to a discussion, the better the chance of a good one. When a variety of perspectives are pooled, innovation and creativity emerge. Nations like Japan have always had an academic edge but Americans often win out because of the one thing that just can’t be taught: visionary thinking. When everyone brings the same experience to a problem, there will be less ways to solve it. A diverse college body means a more diverse workforce after graduation. This helps EVERYONE. When the U.S. succeeds on the world stage, Americans all benefit.

Diversity matters on college campuses and not just for the benefit of those institutions. Could the next generation of college grads be the one to help the U.S. surge ahead of world competitors through collective creativity? To eliminate the wage gap? To put an end to discrimination? All of these accomplishments are on the horizon in the U.S. – and colleges and universities can give them all a boost by fostering multiculturalism and diversity on campuses.

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