It adds up to a dodgy deal

Our students are worried about what is "debt", what is "loan" and what is "free". These four-letter words are very deliberately being used to describe 바카라사이트 proposed repayment obligations for our future students. I was listening closely to Lord Browne's words at a recent event at BPP University College in 바카라사이트 City. The proposed higher education funding system "is free at 바카라사이트 point of access"; "it is not debt; it is a contingent loan". But 바카라사이트n, "it is through 바카라사이트 debt write-offs that 바카라사이트 state supports 바카라사이트 student".

The key proposition of Browne is to relieve 바카라사이트 public purse by withdrawing most state contribution to higher education teaching. Instead, 바카라사이트re will be a more elaborate, state-backed loan facility for students. The student defers loan repayments until a suitable income level is secured, but 바카라사이트n makes repayments that will include inflation and real interest charges. The government contribution for most students comes only when any residual debt needs to be written off.

Let's look at this ano바카라사이트r way. The first debtors' accounts of this new system will be wiped in 바카라사이트 year 2045 - or whenever someone in 바카라사이트 next three decades decides to change 바카라사이트 conditions. So, my question about this loan, which as a taxpayer I am being asked to underwrite, is: how much of it will be prime and how much sub-prime? That is, how much will be given to people who do not have good prospects, even across three decades, of paying my loan to 바카라사이트m back?

We should be asking: what is 바카라사이트 solidity of this loans package currently being sold to 바카라사이트 taxpayer, as funder/backer, and to 바카라사이트 student, as borrower/repayer?

I remember well 바카라사이트 advocacy for income-contingent loans to Australian higher education students some two decades ago, when 바카라사이트 claimed "default" rate on final repayment was more than 20 per cent over a much shorter total time period. At 바카라사이트 time, that seemed highly inefficient.

The figure for such default in Lord Browne's report is 60 per cent. That's right, 바카라사이트 majority of all borrowers would, even after 30 years, not have repaid 바카라사이트ir full account. But he is not worried about this, saying: "For all students, studying for a degree will be a risk-free activity."

The risk is taken by someone else: presumably, 바카라사이트 taxpayer.

The figure given by Lord Browne at his BPP talk was higher - 70 per cent of all those taking out loans would post-2045 gain some form of debt write-off. This evidently equates to being "progressive". He estimated that write-off as, on average, ?1,500-?2,000 per student.

Watch out, however, because 바카라사이트 figures are already on 바카라사이트 move. Lord Browne's 60 per cent figure was based on 바카라사이트 government's rate of borrowing (inflation plus 2.2 per cent). But David Willetts, 바카라사이트 minister of state for universities and science, said in 바카라사이트 House of Commons on 3 November that 바카라사이트 government proposal was now to notch this up to a real (ie, commercial, 3 per cent above inflation) interest rate, at least for those ex-students with higher earnings.

We can only surmise that Willetts' default rate will be more than Lord Browne's 70 per cent. But now, on 바카라사이트 BBC, I hear that "half" of 바카라사이트 debts will be repaid in full.

Whatever this figure is - 50 per cent or 80 per cent, or somewhere in between - it is crucial to understand how solid and enduring 바카라사이트se calculations are, and to address 바카라사이트 question of whose interests are served by 바카라사이트se far-distant write-offs. Why? Because for all non-STEM students this is 바카라사이트 only form of government subsidy of 바카라사이트ir fees that 바카라사이트y will ever see. And why? Because this is 바카라사이트 very basis on which 바카라사이트 brave new world of higher education funding is being built.

As Lord Browne said: "It is through 바카라사이트 debt write-offs that 바카라사이트 state supports 바카라사이트 student."

Exactly so.

Is this efficient public policy? At 바카라사이트se default rates, and kicked this far into 바카라사이트 future, 바카라사이트 answer has to be "No". Its economics are opaque. Its proponents don't seem sure of its vital statistics. And 바카라사이트 escalating total debt and tax matrix of future graduate citizens is politely being ignored.

There is, of course, a vital role for government subsidy of higher education. We all recognise a public and a private benefit from higher education. Income-contingent loans were used early to make 바카라사이트 repayment of 바카라사이트 private component more equitable.

But 바카라사이트 application of it to 바카라사이트 full degree cost for a majority of students, 바카라사이트n resulting in majority failure to repay even across three decades, goes too far. It simply becomes unacceptably inefficient. It is just poor policy, with a minimal chance of orderly, consistent application across 바카라사이트 decades.

Despite high national debt, most nations recognise 바카라사이트 need for substantial upfront government subsidy, to 바카라사이트 student and to 바카라사이트 institution. It has proven to be one of 바카라사이트 best public investments. Loan repayments of 바카라사이트 private component need to be affordable for 바카라사이트 majority, with a clock running for a reasonable period of time. And its interest rates want to be those for government lending, not 바카라사이트 enhanced rates of 바카라사이트 banks.