The major beneficiaries of a degree are the people who hold that degree in the higher lifetime earnings they gain from having that degree. So it should be they that pay the costs of gaining that degree.And it seems pretty fine to me as well. As Tim notes getting a loan against human capital isn't easy as you cannot really sell the asset if things go pear-shaped. Thus government involvement in making loans may be a good idea. But they should be serious loans, that is, they should have the market rate of interest charged on them. Otherwise you are just subsiding a few years of beer consumption for many students. (Yes I know interest free loans are a great idea of you want the student vote. But getting a few votes isn't really a great basis for public policy. No matter what politicians tell you!) This would hopefully have the effect of making students actually think about whether or not going to university is a worthwhile idea, rather than it being just the default option.
There’s no real way to have private funding of the loans though: yer average 18 year old isn’t the greatest credit risk for £50k now, are they? So government provision of the loans seems fine.
The greater societal benefit of having lots of graduates: I’m entirely unconvinced about that. Yes, I’d say there is a public good to having a largely numerate and literate society, thus meaning tax subsidy to that part of the education system that provides that (and if only we did have a part of the education system that does provide that) but having 40, 50% of the age cohort with degrees?
Given that the vast majority of them go on into careers which were not traditionally thought of as requiring a degree I don’t really see it I’m afraid.
In fact, I rather hope that the unwrapping of the current subsidy, the making plain what are the true costs, will mean fewer taking a degree in the first place.
But the basic concept being proposed seems just fine to me. Here’s what a degree costs, we’ll help finance it but you’ll have to pay for it: just fine by me.
Asymmetric Market Power, Competition and Ethics
16 hours ago