Student loans tied to graduates' future earnings might only be partially repaid, a potential funding disaster for third level

patslatt

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Student loans tied to graduates' future earnings might only be partially repaid, a potential funding disaster for third level

One option in the Cassels Report on higher education funding suggested abolition of upfront third level fees and their replacement by student loans, with repayments of delayed fees based on graduate earnings. This option would prove highly damaging and possibly disastrous for third level education for several reasons.

The initial impact of delayed repayment of fees would cause great funding gaps when those student loans become widespread. To avoid this, whatever system of student loans is adopted, third level institutions should insist on keeping upfront fees.

Future Irish governments would likely seize the opportunity to slash third level funding as many US states did as US federal student loans expanded to cover fees. This would force Irish third level institutions to make massive fee increases.

Eventually, student loans repayments would become burdensome, especially if top marginal Irish tax rates stay around 50 percent and given the low financial returns and even losses on third level education costs for many. Predictably, there would be populist demands for loan forgiveness, with a strong possibility that loans would only be partially repaid. So third level institutions could end up begging for restoration of former levels of government funding.

Evidence from the huge federal US government student loans programme shows that almost 40 percent of total loans will qualify for forgiveness as graduate earnings fall short of the earnings needed to fully repay loans. See US To Provide Debt Forgiveness For Student Loans | PYMNTS.com
 
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One option in the Cassels Report on higher education funding suggested abolition of upfront third level fees and their replacement by student loans, with repayments of delayed fees based on graduate earnings. This option would prove highly damaging and possibly disastrous for third level education for several reasons.

The initial impact of delayed repayment of fees would cause great funding gaps when those student loans become widespread. To avoid this, whatever system of student loans is adopted, third level institutions should insist on keeping upfront fees.

Future Irish governments likely seize the opportunity to slash third level funding as many US states did as US federal student loans expanded to cover fees. This would force Irish third level institutions to make massive fee increases.

Eventually, student loans repayments would become burdensome, especially if top marginal Irish tax rates stay around 50 percent and given the low financial returns on third level education for many. Predictably, there would be populist demands for loan forgiveness, with a strong possibility that loans would only be partially repaid. So third level institutions could end up begging for restoration of former levels of government funding.

Evidence from the huge federal US government student loans programme shows that almost 40 percent of total loans will qualify for forgiveness as graduate earnings fall short of the earnings needed to fully repay loans. See US To Provide Debt Forgiveness For Student Loans | PYMNTS.com
Why should a student loan scheme involve any deferral of payment of fees to the colleges? Money is just about the cheapest commodity on the planet right now. Student loans make third level education an investment, and that is how students should see it, not as something to pass a few years at the taxpayers' expense, pursuing a course of very dubious value.
 

Kommunist

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Education is a right, not a commodity.

I support the full abolition of tuition fees.
 

Congalltee

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A degree leads to higher pay and therefore higher taxes paid. That should be sufficient.

That said the State should only pay for the courses which the State needs. Computer science, engineering, ag, medicine etc but not non-language based arts. Does the State need 100s of law graduates?
 

patslatt

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Why should a student loan scheme involve any deferral of payment of fees to the colleges? Money is just about the cheapest commodity on the planet right now. Student loans make third level education an investment, and that is how students should see it, not as something to pass a few years at the taxpayers' expense, pursuing a course of very dubious value.
A high percentage of UK graduates lose out financially on third level education, unable to earn enough to cover the costs. A renewed emphasis on apprenticeships and work related education is overdue.
 
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A high percentage of UK graduates lose out financially on third level education, unable to earn enough to cover the costs. A renewed emphasis on apprenticeships and work related education is overdue.
Repayments are based on earnings, with no repayments below a certain threshold. I agree with your second point, not just because we need more people to pursue apprenticeships but because it represents a career path more suited to many.
 

patslatt

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Education is a right, not a commodity.

I support the full abolition of tuition fees.
POLITICAL REALITY
Third level education needs to be funded by high fees because the political reality is that third level education is a low priority. Pay increase for gardai, nurses and teachers whose unions are politically powerful, increases in the old age pension because pensioners vote heavily,hospital budgets and constituency projects are the major priorities.
 
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silverharp

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in the US loans just increase the cost of education and supply of cr@ppy degrees. The one advantage if a mix of fees and gov funding is that some kind of cost control is in place. loans will just do to education what it did to the property market.
 
D

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in the US loans just increase the cost of education and supply of cr@ppy degrees. The one advantage if a mix of fees and gov funding is that some kind of cost control is in place. loans will just do to education what it did to the property market.
I agree about the US, but in this part of the world can fees not be controlled by a regulator?
 

patslatt

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A degree leads to higher pay and therefore higher taxes paid. That should be sufficient.

That said the State should only pay for the courses which the State needs. Computer science, engineering, ag, medicine etc but not non-language based arts. Does the State need 100s of law graduates?
Arts graduates in good programmes produce liberally educated people who contribute to society in many ways, culturally, politically etc. THeir fees should be subsidised for that reason but in any case are low compared to technical courses.
 

ShoutingIsLeadership

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In the 1960s, free secondary education was introduced. A brilliant move.

In 2016, when it is vital that our citizens receive some form of third level training or education, so that we can compete internationally for jobs, we are talking about effectively reversing that 1960s decision which has served us so well.

The right wing 'know the cost of everything/the value of nothing' agenda mindset has normalised this idiocy.

Just like everybody is referred to as a taxpayer, rather than as a citizen.
 

patslatt

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In the 1960s, free secondary education was introduced. A brilliant move.

In 2016, when it is vital that our citizens receive some form of third level training or education, so that we can compete internationally for jobs, we are talking about effectively reversing that 1960s decision which has served us so well.

The right wing 'know the cost of everything/the value of nothing' agenda mindset has normalised this idiocy.

Just like everybody is referred to as a taxpayer, rather than as a citizen.
POLITICAL REALITY

Free third level isn't properly funded as can be seen in continental Europe's mediocre factory universities.

From Post 8 above which you ignored:

Third level education needs to be funded by high fees because the political reality is that third level education is a low priority. Pay increase for gardai, nurses and teachers whose unions are politically powerful, increases in the old age pension because pensioners vote heavily,hospital budgets and constituency projects are the major priorities.
 

Patslatt1

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in the US loans just increase the cost of education and supply of cr@ppy degrees. The one advantage if a mix of fees and gov funding is that some kind of cost control is in place. loans will just do to education what it did to the property market.
FINTECH STARTUP FOR STUDENT LOANS

See The Economist article on this startup http://www.economist.com/news/finance-and-economics/21715672-taking-risk-return-ratio-education-seriously-fintech-startup-tries

To qualify for student loans, conditions are rigorous:

-Courses must achieve high earnings as indicated by data gathered on subject, teachers, institutions,job offers and salaries
-Students must be permitted to drop out within a certain period without incurring a loan obligation
-When students default, the teaching institution is responsible for 20% of the unpaid debt

These rigorous conditions would appeal to banks and governments who might be persuaded to finance student loans. Teaching institutions would select students carefully and train them well to avoid financial penalties.

With regard to university courses, given lengthy courses only the big money professions would likely qualify for commercial student loans under the above conditions eg medicine,law, B.Com, actuarial science, computer science and certain science and engineering degrees.
 

toughbutfair

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Given how low paid arts grads are (see today's survey on RTÉ.ie , ) why loan them money to do a course. There's far too many people studying this course. It's a luxury that the state cannot afford. They can read about art, history, Shakespeare etc in their spare time.
 

toughbutfair

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In the 1960s, free secondary education was introduced. A brilliant move.

In 2016, when it is vital that our citizens receive some form of third level training or education, so that we can compete internationally for jobs, we are talking about effectively reversing that 1960s decision which has served us so well.

The right wing 'know the cost of everything/the value of nothing' agenda mindset has normalised this idiocy.

Just like everybody is referred to as a taxpayer, rather than as a citizen.
I think many people aren't capable of learning complex professions. We need factories doing line work. There used to be thousands from the "not so good areas " of Limerick doing an honest days work in Dell and the pay was decent too.
 

Therightroad

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Large dairy farmers who have 'good' accountants getting grants is the biggest joke of the present system ...
 

Clanrickard

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In the 1960s, free secondary education was introduced. A brilliant move.

In 2016, when it is vital that our citizens receive some form of third level training or education, so that we can compete internationally for jobs, we are talking about effectively reversing that 1960s decision which has served us so well.

The right wing 'know the cost of everything/the value of nothing' agenda mindset has normalised this idiocy.

Just like everybody is referred to as a taxpayer, rather than as a citizen.
In Scotland when fees were hiked participation from working class areas rose. When they were abolished the participation rates fell. Free education is not free , someone has to pay for it. There is a material advantage to getting a third level degree and those who receive that advantage have a duty to chip for the cost of that advantage.
 


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