Fraser Forum

Forget what you learned in the Maple Spring—higher tuition would be fairer tuition

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I’ve been reading a new paper on England’s experience with big hikes in university tuition over the last couple of decades. Here in Quebec in 2012 the Liberal government’s attempt to raise university tuition by just a little bit sparked the “Maple Spring,” our version of the Arab Spring.

Canadian university students comparing their desire to avoid paying the costs of an education (that the data say will payoff very nicely for them) with the struggle of hundreds of millions of ordinary people in the Middle East to free themselves from tyranny, was in very bad taste. On the other hand, the Maple Spring worked, unlike the Arab Spring, which in some countries replaced tyranny with anarchy.

The paper, The end of free college in England: Implications for quality, enrolments, and equality, suggests anyone calling himself a progressive should have been on the side of higher, not lower, university tuition. Despite the price hikes, enrolments are up. Because of them, spending per student is up, while the big subsidy that free tuition gave to middle- and higher-class students has been reduced. Students from all income classes now have greater access to liquidity on entering university, which is what economic theory says you want.

The study’s authors, Richard Murphy of the University of Texas, Judith Scott-Clayton of Columbia and Gillian Wyness at University College London, describe how free tuition had brought England’s universities to a crisis in the 1990s. Enrolments had increased steadily while budgets had not—which is what usually happens when public services are given away for free. Real per student spending had fallen to half its 1973 value, and even so, the government had responded to rising fiscal pressure by capping enrolment.

Who’s more likely to get squeezed in a severely constrained environment?

Lower-income students, which is exactly what was happening.

Starting in 1998, the newly-elected Labour government of Tony Blair took a different and, as I say, more progressive approach. As a first step, it raised tuition from zero to £1,000, though on an income-tested basis, so that low-income students continued not to pay. At the same time student loans were expanded and an income-contingent repayment system brought in. Once students earned more than £10,000 a year they would begin to pay back their loans, interest free, at the rate of nine per cent on any income above that. After 25 years, the debt would be cancelled, whether fully repaid or not. In both 2006 and 2012 tuition was hiked again, first to £3,000 and then all the way up to £9,000, though now with no payment up front, which means no student has to come up with big lump sums at the start of his or her education. At the same time, the loan repayment threshold was raised to £21,000.

The paper runs through the effects in great detail but the bottom line is:

• Enrolments and enrolment rates are higher.

• All students have greater access to liquidity, which is a good thing. Basic theory suggests that if there’s a market failure in higher education it’s that young people, with no collateral to offer except themselves, can’t get the cash they need to make the investments in their own education that—the averages say—will payoff for them with substantial real rates of return over their next three or four decades.

• Universities have been able to spend again. Though there are still some subsidies for students who need access to labs, which are expensive, schools get no payments at all for non-lab students. But they do get the higher tuition and that has enabled them to raise their per student spending.

Probably the best summary of what has happened is the study’s Table 2: “Total Annual Funding Flows.” in 1997-98 taxpayers contributed £3.9 billion to university operations, graduates just £0.2 billion. Twenty years later, in 2017-18, those numbers had been flipped. Taxpayers now paid £6.9 billion, graduates £12.2 billion. As for who got the money, in 1997-98 universities received £3.4 billion, students just £0.7 billion, while in 2017-18 universities got £10.7 billion, students £7.9 billion.

The changes haven’t established a pure market in university education. Far from it. But the system is now more market-like. And if the study’s right, the results have been just about everything progressives could have hoped for in terms of both who’s going to university and how much finance education is getting.  


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