Who Will Bear the Cost?: Funding Higher Education

Author:Ms Barbara Galvin
Profession:Eversheds O'Donnell Sweeney

The Hunt Report states that the annual funding requirement for higher education in Ireland is €1.3 billion. This funding would need to rise to €1.8 billion in 2020 and €2.25 billion by 2030 in order to continue to meet current demands. Given that the Department of Education and Skills projects that the demand for places in higher education is set to continue to rise, where will this money come from?

The Report found that, given the combination of low levels of private investment, high levels of anticipated demand and constraints on the public finances, a new approach to funding was required. A requirement for students or graduates to directly share in the cost of their education, reflecting the considerable private returns that they can expect to enjoy is the only realistic option. Dr. Hunt's Committee makes the case that those who can afford fees should be asked to make a contribution. That contribution should come through an income contingent loan scheme, allied to a combination of means-tested grants and student fees.

The outgoing Minister for Education and Skills has said that the Hunt Report is not a discussion document; it is a government approved strategy. The re-introduction of higher education fees, although widely opposed, seems now to be a foregone conclusion. The question becomes: how will students afford them? As to this question, the Hunt Report suggests an income contingent loan scheme.

It falls short, however, of recommending how the student loan scheme will work. This article examines student loan schemes in the UK and Australia.

The UK Experience

In 2006, income contingent loans were introduced by the UK Government to allow students pay their fees on a deferred basis. Fees were at that time capped at £3,000 per annum, indexed over time. It was reported that by the end of 2009/2010, £1.3 billion of additional annual income was received by higher education institutions as a result of the 2006 reforms.

Student loans and grants were and still are primarily provided through the Student Loans Company (SLC), a non-departmental public body. Under the SLC scheme, the loans are repaid directly out of a graduate's wages, at a rate of 9% for everything earned above £15,000 in that tax year. This threshold will now rise to £21,000 in 2012/2013. Currently repayments continue until either the loan is paid off, the student turns 65 or the payments have been continuing for 25 years-although this will be raised to 30 years. This system of...

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