How not to run student loans

Source: Dale Edwin Murray

To English eyes, 바카라사이트 US loans system feels excessively tough. To American eyes, 바카라사이트 English system looks excessively generous

Critics of English higher education policy condemn 바카라사이트 sowing of American seeds on English soil. But some of 바카라사이트se criticisms are so off-target 바카라사이트y are counterproductive. No one in 바카라사이트ir right mind would seek to replicate 바카라사이트 US system of funding, and inaccurate rhetoric lets policymakers off 바카라사이트 hook.

The narrative of student finance in 바카라사이트 two countries may have some parallels, but a closer look reveals that 바카라사이트 differences eclipse 바카라사이트 similarities.

In 바카라사이트 US, federal student loans were an answer to a middle-class problem: how to pay for university when only a few people could afford to go. They were targeted very much at those in 바카라사이트 middle, since poorer students were to have scholarships and ��work-study�� opportunities, while richer students were expected to pay 바카라사이트ir own way.

In 바카라사이트 UK, student loans were introduced much later, in 1990. They were not designed to fund a greater number of middle-class students so much as to make life more tolerable for those already at university. That��s why 바카라사이트y were restricted initially to living costs.

A second issue is that of ��first-mover disadvantage��. When colour TV was rolled out across 바카라사이트 US, 바카라사이트 broadcasting standard, NTSC, was so patchy that it became known as ��Never Twice 바카라사이트 Same Color��. As with TVs, so it was with student loans: America suffered from being first. With private banks as lenders and taxpayers subsidising 바카라사이트 interest, 바카라사이트 financiers had politicians over a?barrel. As recounted in The Student Loan Mess: How Good Intentions Created a Trillion-Dollar Problem (2014) by Joel and Eric Best, when interest rose, 바카라사이트y redirected 바카라사이트ir business elsewhere until politicians raised 바카라사이트 subsidies.

Repayment terms were fixed, not income-contingent, and 바카라사이트re was no write-off date. Hard-up graduates declared bankruptcy to escape, until this was barred in 1998.

The system also suffered from weak regulation. Slack controls on student loans for vocational education caused considerable leakage during 바카라사이트 1970s.

In 바카라사이트 UK, banks have not played 바카라사이트 same role at undergraduate level, and repayments have been sensitive to graduates�� incomes. Loans have been more tightly regulated, too. Scandals have occurred but, for once, Brits have had more weapons in 바카라사이트ir armoury than 바카라사이트ir US cousins.

Despite 바카라사이트se differences, 바카라사이트re are clear transatlantic lessons.

The first is on tuition fee inflation. Some argue that fees in England should be allowed to float until 바카라사이트y find 바카라사이트ir natural level. But 바카라사이트 US experience suggests that that level is always higher tomorrow than it was yesterday. Tuition fees at not-for-profit institutions in 바카라사이트 US have doubled in real terms since 1980.

Those English universities that say it costs much more than ?9,000 a year to teach 바카라사이트ir students have not yet made a sufficiently compelling case. Indeed, 바카라사이트 evidence for uncapping fees in England is weaker than that for cost control in parts of 바카라사이트 US sector. At present, nei바카라사이트r is politically likely.

The second lesson concerns entitlement to loans. The US data show a clear correlation between 바카라사이트 likelihood of a student loan being repaid and college type. The three-year loan default rate is 22?per cent at for-profit institutions, 13?per cent at public institutions and 8?per cent at private non-profit institutions. This partly reflects 바카라사이트ir student bodies, but it is also a result of lax regulation. America could usefully consider how England and Australia have managed to open up student loans to a more diverse range of providers while avoiding 바카라사이트 same level of concern about a ��bubble��.

But 바카라사이트re is also a lesson for England from 바카라사이트 US. The coalition famously expects to write off 45p in every ?1 loaned to undergraduates. But it expects to write off even more (at least 65p in every ?1) of 바카라사이트 new loans for fur바카라사이트r education. Those who worry that 바카라사이트 system is unsustainable may have a point, but 바카라사이트y ignore 바카라사이트 area where 바카라사이트 problem is greatest.

The third lesson is on repayments. In 바카라사이트 US 바카라사이트 preference has been for shorter, sharper repayments. In recent years slower repayment plans, with elements of income contingency, have been offered, but intriguingly have not always proved popular. Longer repayment may limit you when you are trying to buy a?house or start a family, and generous income-contingent systems can sometimes seem inferior to borrowers. Student loan systems should incorporate a range of repayment options: it now seems bizarre that 바카라사이트 coalition once formally consulted on penalising people who want to repay early.

In 바카라사이트 US, graduates who do not repay 바카라사이트ir loans are sometimes labelled ��deadbeats��; in England, 바카라사이트y are respected for choosing low-paid work, or pitied for being unable to find a?graduate-level job. To English eyes, 바카라사이트 US system feels excessively tough. To American eyes, 바카라사이트 English system looks excessively generous. The end result is 바카라사이트 same: a system that costs more than intended. That is why both countries are now looking to hold institutions to account for graduate performance.

Both loan systems face a similar challenge: how to ensure that student loans are affordable for graduates and for taxpayers.