Rebranding Student Debt

Posted on November 24, 2010

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Recently a number of MPs, including the Universities Minister David Willetts, have tried to argue that increased tuition fees shouldn’t affect the proportion of lower-income students going to university as the fees are not paid up front. I cannot remember who said it but one person interviewed even stated that student loans shouldn’t be considered debts.

Ignoring the correctness of this statement (personally, I fail to see how a loan is anything other than a debt) I would have thought this argument would have been better supported by more drastic changes to the system. I will now propose such a system and hopefully encourage some debate from it.

Rather than talking of yearly fees of x amount per year, this new system would be similar to the graduate tax idea. In this system, as I understand it, graduates would pay an extra amount of tax (as a percentage) of their wages so that if a graduate benefits from their degree then they pay more towards the cost. The counterargument here is that, clearly, the majority of graduates would end up paying considerably more than they do under the current system and they would pay this for as long as they worked.

My proposal is simply to put a cap on this graduate tax so that after paying a certain amount of this tax the tax stops. The amount would be around the total cost of tuition fees currently (approximately £9,000 for a 3 year course or upto £27,000 under the proposed increases).

Under this system I see a number of apparent benefits:

  • No concept of ‘debt’ as the money is never loaned
  • Same amount of money is paid as in the current/proposed system

Now, I’m not saying I think this system would be good if it was simply to cover up an increase in the overall amount of money paid. However, if politicians really believe that many people will be put off university by misunderstanding the payment of tuition fees or the stigma of debt then by removing the fee and loan aspects, without increasing the amount paid back, would avoid these problems.

You will, no doubt, notice that I have refrained from commenting on the amount that should be collected. That’s a separate argument and I don’t claim to know enough about government or university funds. At least with this scheme a reduction in the number of people applying to university from lower income backgrounds could not be placed on the condescending idea that they don’t understand that tuition fees aren’t paid up front.

Ideas? Comments? Think I’m talking rubbish? Let me know in the comments.

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