A new deal for the young: funding higher education fairly

Funding higher education is a matter of fairness. Everyone can agree on that. The disagreement comes when we ask, to whom should it be fair? Is it to the students who, in many countries, must pay more compared to previous generations for a service that seems no better? Or is it fair to those who do not go to university and miss out both on the salaries and a state-subsidised education that can be, as much as hard work, an extension of adolescence?

Any answer also needs to make more resources available for an expanding sector. Given growing student numbers, maintaining the cost of a high quality of education will take up an ever greater portion of government spending. The choice is either cutting back on other spending or raising taxes. The need for salaries in academia to match, at least somewhat, those available in the private sector means the cost of providing a degree has risen along with incomes; digital technology has yet to provide many cost-cutting improvements, if it ever does. 

Resources can be claimed back from graduates either through student loan schemes, general taxation or specific levies on those who attended university. The shift from grants to loans in many countries has left younger generations paying more but older generations unaffected: in Britain, an outlier, some recent graduates pay what is effectively a 9 per cent higher rate of tax than their older colleagues in the exact same job. Those who have had their education interrupted by the coronavirus will feel even harder done by. The UK’s system — even if fees are too high — is an improvement over the US where not all loan repayments are based on income or forgiven after several decades.

FT series: A New Deal for the Young

Join us for a series of live debates this week, every day at 2pm BST, on the following FT View editorials and share your own ideas and questions. Register for free

Monday Housing affordability is a problem in many countries. How can we fix the crisis?

Tuesday How to secure a decent pension for today’s younger generation. A third way is needed.

Wednesday Building better jobs: like every generation before them, young people desire decent, secure employment with prospects.

Thursday A rethink on education: who should pay for university education, and what about those who don’t go?

Friday Young people face a future of environmental destruction. What can be done to fix it?

Saturday Taxing fairly: today’s young face the burden of supporting older generations but benefit much less at the start and end of their working lives.

Making more resources available for higher education does not mean only for graduates but for those taking different vocational paths. Even if they do not take up the offer immediately after leaving school, those who do not find academic life a good fit should not be ignored. In most countries, more than half of young people do not go to university; a new deal must work for this majority. Many who do not attend university feel as if they are permanently locked out of opportunities while those who do often feel as if they have paid for a necessary ticket to a middle-class lifestyle rather than an optional luxury.

There is a common set of principles. First, costs should be shared and not rest solely on graduates. This would recognise that the benefits of a well-educated population accrue to everyone, but also that redistribution is used partly to smooth incomes over the periods when we cannot work. That includes the pensions and healthcare used more by the old as well as the education that goes to the young. In the words of the conservative political philosopher Edmund Burke, society is a partnership between generations.

Second, opportunities should not be limited solely to the academically minded. In the UK this means funding the commitment to broaden access to the student loan system, making it available for a wider range of courses. France’s Compte Personnel de Formation, in which workers accrue a fund that they can use for training over their working life, is another interesting approach; Germany’s successful vocational education system similarly stands out.

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Elsewhere, where governments fund higher education through block grants to universities, it will mean funding other institutions on more similar terms. That would be the best way of answering the question: it should be fair to everyone.

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Other editorials and pieces in this series can be found at ft.com/newdeal