The proper case for free university tuition

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May 31, 2017 by Paul Goldsmith

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The debate over university tuition fees rumbles on. Abolishing them would cost over £11bn a year. Labour has committed to do this, but without properly making the case for doing so.

Its manifesto says ‘education should be free’ and ‘no-one should be put off education themselves for lack of money or through fear of debt’. They point out that ‘there has been the steepest fall in university applications for 30 years’ in 2016. £9,000 tuition fees and the replacement of maintenance grants with loans has meant the average student graduates from university and starts their working life with debts of £44,000. University tuition is free in many Northern European countries, so it should be free in the UK too.

All well and good, but not an explanation of why it should happen. The case against is that tuition fees provide incentives for universities to improve themselves and provide a better service. Those who benefit most from a university education are asked to pay for it, with 9% of their income over £21,000 (£30 a month for those earning £25,000), meaning they are no longer poor when they do so, and it is slightly mendacious to call it ‘debt’ as ‘debts’ have to be paid regardless of income.  Between 2010 and 2015, universities received 20% more applications from poorer students than ever before (note that in Scotland, with free tuition, this has gone the other way). New Labour’s ‘widening participation’ agenda encouraged everyone to go to university regardless of whether it was the right choice for them, undervaluing the vocational pathways that could lead to rewarding trades. Much research has been done on the amount of “graduate-level” jobs needed in a developed economy and it is about 33%. In Germany, where the education system, training and qualifications required gives vocational and trade pathways proper prestige, the result is a country with a higher GDP per capita yet far more equal income.

So there is the case against free tuition fees. For the case for, I want to reference the work of Christopher Newfield, who has written a book about why changing university education from a ‘public’ good (funded by the state) to a ‘private’ good (funded by the user). Ultimately, Newfield argues that education is the greatest gift we can give to the next generation.

Newfield identifies four problems with what has happened in the UK, where universities are half-way out of the public good sphere into the private good sphere:

  1. University benefits are not just private benefits – a higher income. They include the overall benefits to society in terms of better personal health for its users (regardless of what they study) and better ability to solve society’s complex political, economic and social problems. The economist Walter MacMahon has calculated this ‘dark matter’ as being two-thirds of the benefits from university education. Yet, individual university students are currently funding the public’s gain.
  2. Tuition fees reduce public support for universities. People pay partly for universities by their taxes, then their children take on debt to pay for it again. This increasing debt burden destablises university revenue, as opposed to the more sustainable public revenues they could have, which explains some of the redundancies British universities have recently been making, which can’t help quality of service.
  3. There is now a growing inequality of quality of provision, dampening benefits for students at poorer universities and thus benefits for society. In the US, students attending purely privately-funded universities receive on average twice as many resources and have far better graduation rates. At the extreme, Stanford spends 10-20 times as much per student per year than the 2-year community college down the road. No surprise that the latter has far lower learning benefits and graduation rates.
  4. A private-funded university system includes nonelite universities to spread commodity skills. When universities are funded according to ability to pay they ration quality of service. This reduces the high-quality instruction that the business world (who the privately-funded universities are supposed to serve) need to justify their own investment into high productivity growth. A political system that likes high-skills, but refuses to fund immersive learning at scale encourages the importing of those skills from abroad – helping to generate the Brexit backlash.

Fully publicly-funded universities solve these problems, by putting higher income as one of many gains among more non-market, indirect and social gains for society. They give the public a direct stake in the quality and effectiveness of the universities. A rough equality of service can be enabled by directing funds towards universities that serve disadvantaged students with greater needs. Finally a mass quality system can help to address the productivity gap that is growing between the UK and other countries, at a point (Brexit) when we will really need that.

I’ll leave the conclusion to this to Christopher Newfield himself:

“The country needs deep personal ingenuity on a vast scale and can draw on the institutions, its universities, along with further education providers and other levels of schooling, that make creativity exciting and meaningful. The public-good frame puts the university at the heart of personal and social development, enables universities to work across society, shows universities to be a means by which we help each other understand the world better, address impossible technical issues, solve the hardest social problems across all cultural divides, and involve the non-university parts of the population that have been left out.”

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