A Market Based Solution to the Fees Problem

By Harry Tanner

The Labour party’s promise to abandon tuition fees and “ambition” to annul graduate debt is ill-disguised hucksterism. In the – not actually secure – knowledge that young people voted in swathes to Remain and are utterly disenfranchised with the Tory party, Corbyn and his merry band of Bolsheviks sought to galvanize this would-be support base. And the greatest problem of our day for young people? Look no further than tuition fees.

When the proposal comes from the party that gave us tuition fees, this irony is hard to lose. I attack the hypocrisy and not the principle; the principle and idea of tuition fees is a groundbreaking one. Paying for your education is by far the best way of securing a good university experience: the university treats you as a customer, and you treat the degree more seriously. In theory that is a win-win.

Most students do not need this article to expand the reasons why, in practice, it is not a win-win. How arts courses claim the fees for a full-time course, giving 6 hours a week (with minimal reading) in return; dissertation tutors meeting you twice in the year; a streamlined and – often – dumbed down education; very little flexibility to switch out what you do and do not want to do. While government has reassessed how to fund these courses, there has been no such reappraisal of what they comprise. However, £27,000+ is still not an unreasonable price to pay if you go to an excellent university and get a 2:1 or a 1st class degree. It is more than worth the salary bump-up, as Theresa May continually reminds us.

Young people are, understandably, up-in-arms. Most particularly if they have been educated at a non-Russell Group University, or on a course that does pay itself back in a superior salary. The Labour party appeared to be on their side, until Angela Rayner was caught in flagrante delicto denying her party’s much-publicised pledge. The Tories have mumbled quite a lot about it being an injustice, but not done a very great deal. Even the Telegraph columnist, Allison Pearson, has been enraged, yet nothing has happened. While the political congregation holds its breath for this messianic policy’s apparition, there is an altogether less interventionist option that presents itself. All it requires is the right will and enough capital, no state, no party.

The real gripe is not actually with universities, but with Student Finance England. It is SFE who have imposed the 6% APR (if you just gasped, you might want to check the piece of paper you signed months ago to get your loan!). It is SFE who are disincentivizing high earnings: under the imposition of draconian payback rates on the shoulders of those earning high salaries. It is SFE who has reduced all this to a small, innocent looking form, with the focus neatly inverted in those passive-aggressive text messages we all get “sorry, we cannot arrange your payment yet. You need to sign the declaration form!”. This is, of course, SFE for “we cannot issue your loan until you have signed the contract”, but it just seems so harmless. It is easy to confuse our bumbling academics with the master hucksters at SFE; universities and our teachers are not our enemy, it is a government-backed loans system that has become lazy in the absence of true competition.

If a company were to come on the scene, backed by venture capitalists, that interviewed and assessed potential undergraduates, offered them highly competitive loan interest rates, and connected them up to potential employers (when the time came) – most likely for an agency fee – then excellent students could get onto courses for significantly lower interest rates. Student Finance England would be undercut, students would get a direct route into industry, and they would be contractually obliged (extenuating circumstances permitting, underwritten by insurance) to complete their degree to a certain standard. It would not be so hard to raise this capital, using a simple system of loan arbitrage. It would not be hard to arrange for a flexible payback system, which did not interfere with tax rates and did not get in the way of those who aspire to earn high and do well for themselves.

The truth is – universities are not going to start charging less money. The likelihood of government paying for university tuition is infinitesimally small. But, there is room for a competitive environment at the high end of the university system to undercut SFE and secure a genuine future for students. It is in the nature of socialists to seek a state solution to this; the right solution lies with the market.