Student loan | Tuition fees and student loans: system must change, say experts ...

Student loan | Tuition fees and <b>student loans</b>: system must change, say experts <b>...</b>

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Tuition fees and <b>student loans</b>: system must change, say experts <b>...</b> Posted: 17 Nov 2014 11:20 PM PST Ruth Thompson, co-chair of the commission: 'The issue is whether you can place a reliance on the kind of market mechanism you would use in the consumer market. We weren't convinced you could.' Photograph: Graham Turner for the Guardian Loans that no one expects to be repaid. No limit to the number of students institutions can recruit. If radical changes over the past two years to financing UK higher education have sometimes appeared risky, that is because they are, according to a report published this week. The report, compiled by the Higher Education Commission – a cross-party group of MPs and representatives from business and academia – warns that the current system of fees and loans is the worst of all worlds, and is unsustainable for the future: "An experiment is under way, with potential consequences for English HE stretching decades into the future." It points out that the government is investing heavily but getting no credit for it; students feel they are paying substantially more despite having debts written off, and universities are being seen as rolling in tuition-fee money when their grant has been cut and fee income has failed to rise with inflation. "We have created a system where everyone feels they are getting a bad deal and this is not sustainable," the report argues. Its author, Ruth Thompson, a former senior civil servant in charge of higher education, who chaired the commission with Lord Norton, a Conservative peer and professor of government at Hull University, says the level of consensus on this was striking considering what a politically charged area it is. The issues need to be confronted, she says. "If everybody were to ignore the importance of debating what to do next and everyone said nothing needed doing, that everything is as it should be, that would be concerning." Publication of the report comes just two weeks after the government rejected calls for an urgent review of England's student finance system from the Commons business, innovation and skills committee, which argued that the UK was reaching a "tipping point" in terms of its financial viability. The government responded that there was "no imminent pressure on the system", citing the support of the Organisation for Economic Cooperation and Development, which has described the UK as the first European country to establish a sustainable approach to higher education funding. Andreas Schleicher, special adviser on education policy at the OECD, says governments in many European countries end up compromising quality and restricting access because they neither put in enough money to support higher education nor allow universities to charge for tuition. But allowing institutions to charge tuition fees and putting the burden entirely on families, or relying on commercial loans, risks benefitting the wealthiest most. "The UK (and Australia too) have squared that circle with a combination of income-contingent loans and means-tested grants," he says, arguing that worries about shifting the risk to government are flawed because the added tax income of graduates who end up in employment is many times larger than any conceivable bad debt. "That's why everyone wins and it is the most sustainable approach." But the Higher Education Commission report says a new model is needed. It urges the government to reconsider and to follow the committee's recommendation for a review. Thompson says that while the commission supports the idea of both individuals and the state contributing and recognises that the UK's existing higher education funding system is strong enough to withstand some volatility, looking ahead to the next five years caused it concern. "This is a long-term area where if we don't learn and think and deliberate in advance, we can run into trouble," she says. A particular worry is the amount of debt built into the system, under which tuition fees of up to £9,000 a year are charged, financed through loans that students repay once they begin earning more than £21,000, and written off after 30 years. According to the Institute for Fiscal Studies, students will graduate with an average of £44,035 in student debt, compared with £24,754 if the reforms had not been introduced, and 73% of graduates will not repay their debt in full, compared with 25% under the old system. The commission "fundamentally questions any system that charges higher education at a rate where the average graduate will not be able to pay it back" and "where, for example, a teacher is unable to secure a mortgage at age 35 because of the high level of monthly loan repayment". Thompson says she was surprised at the reaction of students to this. "The extent to which students were more passive recipients than actors in what is sometimes presented as a market was of interest to us and of some concern," she says. "When they become graduates they will become people with a substantial debt to repay – or not repay." The idea of the state underwriting these debts – predicted to be £330bn by 2044 – was another worry, particularly because of problems with debt collection. The commission wants universities to help trace graduates who fail to repay, including those overseas, and it wants pilot schemes to explore improvements in debt collection by 2016. It is alarmed that the policy dramatically increases the cost of student loan write-offs for future governments without any easy way of estimating what those write-offs will be. And it firmly rejects financing student loans through sale of the student loan book, having heard hardly any evidence in its favour. The commission identifies problems with alternative sources of funding for universities too. It worries that increasing use of bonds makes it more likely for an institution to default, with potential knock-on effects for the rest of the sector. It says that asking previous graduates to contribute through the tax system or businesses that employed graduates to pay higher national insurance contributions were "both avenues that were not as promising as they appear at first". Rapid expansion of undergraduates, combined with a decline in numbers of postgraduate and part-time students, further worries the commission. While it supports the idea of more graduates, it suggests that the policy of lifting the cap on numbers announced last year puts the financial sustainability of the sector, as well as its quality, at risk and that it should be monitored, and if necessary reversed. Also financially risky, according to the report, is the attempt to introduce market forces to a sector that does not operate as a market. "It isn't a consumer good," says Thompson. "The issue then is whether you can place a reliance on the kind of market mechanism you would use in the consumer market. We weren't convinced you could." The report argues that far from introducing more diverse learning models, the 2012 reforms, which followed the 2011 higher education white paper, "have resulted in zero price variation, little expansion of new offers for students and minimal innovation in teaching and learning". But their most damaging legacy, it concludes, "has been to leave a sector, public, and political parties that are nervy around reform, characterised by differing opinion and mistrust". Hence a reluctance to make the kinds of decisions it argues are needed in the runup to next year's general election. With the higher education policies of the three main parties still unclear, the report discusses possible alternative funding models, including the graduate tax and lower £6,000 fee favoured by many in the Labour party, and the possibility of differential fees or lifting the fee cap. Yet while the report insists that something needs to be done, and suggests various possible actions, it falls short of advocating one solution over another, arguing that the decision requires political judgments about potential winners and losers.

Is the <b>Student Loan</b> Debt Crisis Beginning to Ease? - NBC News.com Posted: 13 Nov 2014 06:12 AM PST For the first time, the average student loan debt has topped $30,000 per graduate in several states. But there are also signs the $1 trillion crisis is easing, according to two reports released Thursday. The Oakland, California-based Institute for College Access and Success (TICAS) says the average for the class of 2013 topped $30,000 in six states, with others not far behind. The average debt nationwide in 2013 was $28,400, TICAS said, up 3 percent from the year before. The nonprofit organization's ninth annual report, "Student Debt and the Class of 2013" finds 69 percent of graduates left school with at least some debt. "It's getting harder and harder to graduate from college without debt," Lauren Asher, president of TICAS, told CNBC. The report also notes that debt varies widely from state to state. The six states breaching the $30,000 mark for the first time are New Hampshire, Delaware, Pennsylvania, Rhode Island, Minnesota and Connecticut. Maine, Michigan, Iowa and South Carolina are close behind, with average debt topping $29,000. "It's getting harder and harder to graduate from college without debt." Not only does New Hampshire lead the nation in average debt at $32,795, but 76 percent of its graduates have some student loan debt, the highest level in the country, the report says. At the same time, some states are keeping student debt relatively under control. New Mexico boasts the lowest indebtedness in the country, averaging just $18,656. The TICAS report, and a separate report from the College Board, say there is some reason for hope among college grads, as the job market starts to improve and tuition increases slow—and in some cases actually reverse. Schools holding line on tuition And although college tuition is still increasing more than overall inflation, the College Board's "Trends in College Pricing 2014" says schools are starting to hold the line on tuition. "These price increases are lower than the average annual increases in the past five years, the past 10 years, and the past 30 years," the report says. For example, in-state tuition at four-year public schools increased just $254 for the current academic year. The 2.9 percent increase marks the first time since 1974-75 that tuition has risen less than 3 percent, the report found. According to the report, for-profit colleges, which have come under heavy criticism for their role in the student debt crisis, raised tuition just 1.3 percent on average this year. Out-of-state tuition at public universities is up 3.3 percent this year, and private four-year institutions have raised prices 3.7 percent, nearly twice the overall rate of inflation. The College Board says the picture is even brighter when you consider government rants and aid, which is further tamping down tuition increases. In some cases, the report says, tuition is actually going down. The report says based on "net" pricing—after grants, tax credits, and deductions, tuition has risen 32 percent in the past 10 years, compared with 42 percent the decade before. At four-year private schools, net prices have actually declined 13 percent over the past decade. Borrowing declining As a result, the College Board says borrowing by students still in school is declining—down 14 percent since 2011. If the trend holds, the average debt per graduate should begin to drop as soon as this year. Rising tuition has been a major bone of contention in the ongoing student debt crisis. Critics have blamed everything from overbuilding and added student perks at colleges and universities, to the relative ease of obtaining student loans and grants. Others have pointed to declining government support for education, forcing schools to rely more heavily on tuition. Asher said the few glimmers of hope in the latest data do not mean the crisis is over. "Lower rates of increase in tuition and debt at graduation are good, but they're still increases," she said. Asher adds that a major reason for the improvements has little to do with reforms, and more to do with the fact that an improving job market means fewer people are going to college. TICAS also found that for the class of 2013, unemployment for recent college graduates was 7.8 percent, or less than half the rate for young people without a college degree. "A college education is still one of the best investments out there," Asher said. First published November 13 2014, 6:12 AM

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