Government guarantees of a portion of student loans to secure extensive bank loans?

patslatt

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University registration fees are rumoured to be going so high as to equate to restoration of full fees. So introduction of modestly subsidised student loans programmes through the banks could be timely and help families to finance education.

Third level student loans have a higher than average loan default rate based on US data. Possibly that's because many US students are going to college for the equivalent of a high school education a generation ago.

In Ireland,if for argument's sake student loan losses were 20% of loans including court costs,the government could provide a strong incentive for banks to lend to students by giving a guarantee covering a portion of that 20%,maybe half,or 10%. The banks would have to recover the residual 10% loss on the potentially highest risk loans by increasing their interest rate over low risk loans by a portion roughly of that 10% over the years of repayment. If the government wanted to introduce an element of income redistribution,it could insist that banks participating in the subsidised loss scheme must charge the same interest rates to all students. This would have the effect of lowering interest rates to students from low income families,but the ceiling on interest rates would exclude many from getting loans.

Initially,banks' inexperience with student loans could lead to unnecessarily high administration costs. To prevent that, the government should insist that participating banks must initially satisfy the Department of Finance that they are consulting with foreign banks with experience of student loans programmes,such as those in the US and Canada, to develop efficient loan administration and IT systems. Possibly the efficiency of the loans programme could be maximised if only a few banks were allowed to participate. But that could give large banks an unfair competitive advantage not only in student loans but also-given people's reluctance to change banks- in long term market shares of the Irish banking market .
 


Future

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Don't like the student loan system for tuition fees or registration fees.

I think the Graduate tax system proposed by FG is a lot fairer. The tax only kicks in once the graduate reaches a certain salary.

Also a student loan for fees could hinder a someone from getting a mortgage once they are finished college.
 

Red_93

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If the gov goes ahead with this, I'm going to Scotland.
 

Finbar10

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Graduate tax is pretty fair. Kicks in once income exceeds a given threshold. One problem though is that if it's too high may encourage people to leave Ireland. Has happened to a degree in Australia I think. But won't be introduced because government needs money now and this would only start giving revenue down the road. Government wants to cut education budget by given percentage. 75% is wages which can't be touched under Croke Park. I'd guess remaining 25% is pretty much pared down to the bone by now. So only remaining source of revenue is charging some kind of fees. I guess fee levels will rise in coming years in direct proportion to amount university budgets are cut. Raising reg fee by 1,500 euro I think will only raise about 80 million extra revenue. I think third level consumes about 1.3 or 1.4 billion in funding each year. You can see that if big percentages are cut out of this, we'll likely get rises far in excess of 1,500 over the next few years.

If the government decides to bring in full fees, other European countries are going to start looking a lot more attractive. Had a look around at European fee levels recently. Up to this year typical UK fees were about 3,500 sterling (4000 euros). They may go somewhat higher under the new Tory government. And fees cap has not been removed in Scotland. But those who don't qualify for free fees here at the moment could easily pay 7,500-8,000 euros per year on fees and reg fee. That's probably the level if free fees are done away with. Probably will go towards 10,000 euros in next year or two with increasing reg fees. Cost of living lower in UK. In these days of Ryanair, probably will be a lot cheaper to fund a child's education in the UK compared to sending them to college somewhere up the country. And further afield, France and many Nordic countries have no or practically no fees. And most European countries with fees have levels less than even the current 1,500 euro reg fee. There are probably quite strong constraints on the levels the government could raise fees to. Unless your family qualifies for free fees or you've able to send your child to a nearby college, them going abroad may make a lot of sense at least financially.
 
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patslatt

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Not enough time

Don't like the student loan system for tuition fees or registration fees.

I think the Graduate tax system proposed by FG is a lot fairer. The tax only kicks in once the graduate reaches a certain salary.

Also a student loan for fees could hinder a someone from getting a mortgage once they are finished college.
There isn't enough time to introduce the graduate tax before the next big jump in fees.
 

patslatt

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Language barriers and mediocrity

Graduate tax is pretty fair. Kicks in once income exceeds a given threshold. One problem though is that if it's too high may encourage people to leave Ireland. Has happened to a degree in Australia I think. But won't be introduced because government needs money now and this would only start giving revenue down the road. Government wants to cut education budget by given percentage. 75% is wages which can't be touched under Croke Park. I'd guess remaining 25% is pretty much pared down to the bone by now. So only remaining source of revenue is charging some kind of fees. I guess fee levels will rise in coming years in direct proportion to amount university budgets are cut. Raising reg fee by 1,500 euro I think will only raise about 80 million extra revenue. I think third level consumes about 1.3 or 1.4 billion in funding each year. You can see that if big percentages are cut out of this, we'll likely get rises far in excess of 1,500 over the next few years.

If the government decides to bring in full fees, other European countries are going to start looking a lot more attractive. Had a look around at European fee levels recently. Up to this year typical UK fees were about 3,500 sterling (4000 euros). They may go somewhat higher under the new Tory government. And fees cap has not been removed in Scotland. But those who don't qualify for free fees here at the moment could easily pay 7,500-8,000 euros per year on fees and reg fee. That's probably the level if free fees are done away with. Probably will go towards 10,000 euros in next year or two with increasing reg fees. Cost of living lower in UK. In these days of Ryanair, probably will be a lot cheaper to fund a child's education in the UK compared to sending them to college somewhere up the country. And further afield, France and many Nordic countries have no or practically no fees. And most European countries with fees have levels less than even the current 1,500 euro reg fee. There are probably quite strong constraints on the levels the government could raise fees to. Unless your family qualifies for free fees or you've able to send your child to a nearby college, them going abroad may make a lot of sense at least financially.
There are language barriers to education on the Continent. Also,the quality of universities there is generally mediocre and inferior to the UK and probably Ireland too. Even the famous Grand Ecoles in France that train a tiny government elite rank far down the list in international rankings compared to the best UK and US universities.
 

Finbar10

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There are language barriers to education on the Continent. Also,the quality of universities there is generally mediocre and inferior to the UK and probably Ireland too. Even the famous Grand Ecoles in France that train a tiny government elite rank far down the list in international rankings compared to the best UK and US universities.
Sure, there are language barriers. But if high fees were introduced here you'd likely find some European universities exploiting that fact and designing courses in English. I know that there are several universities offering medical degrees, with quite a few Irish students studying there. Fees run from about 8000 to 12000 euros a year. And I checked out Irish medical course fees. Fees for a medical graduate degree (for mature students who already have a degree in something else, and who wouldn't qualify for free fees I guess) were about 12,000 euros. So presumably the universities here are constrained by the fees of these other offerings in Europe.

It will be interesting to see the kind of levels fees rise to in england, when the 3,250 sterling cap has been removed. The elite universities will be able to raise them up to the new 6,000 and 9,000 sterling caps. But I doubt middle to low ranked universities will have that option. And as you say there will probably be a lot more competition for places in Scotland, if fees remain less than 4000 euros or so.

Wouldn't think European universities are uniformly mediocre compared to the UK. Some pretty decent ones in Germany, Holland and Switzerland.
 


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