…a public good

What is the Cassells Report?

The Cassells Report or Investing in National Ambition: A Strategy for Funding Higher Education Report of the Expert Group on Future Funding for Higher Education was released on July 12th, 2016. This report outlines three funding options for consideration which are:

  • Funding Option One: A Predominantly State-Funded System.
  • Funding Option Two: Increased State-Funding with Continuing Student Fees.
  • Funding Option Three: Increased State-Funding with Deferred Payment of Fees Through Income Contingent Loans.

With regards to the USI Constitution in Article 3: Basic Principle of AMLÉ:

3.1 The basic principle on which the students in Ireland build their Union is for the defense, promotion and organisation of the fundamental educational, welfare, economic, political, social, cultural and other interests of all the students in Ireland on a national and international level and 3.2 To realise this basic principle, the Union shall work to foster an education and training system open to all the people on the Island of Ireland, irrespective of any consideration, and which truly serves their interests.

With this in mind, USI know that Funding Option One is key for Irish students and that Funding Option Three will have a negative effect on the lives of current and future Irish students.

How is third-level funded at the moment?

Students currently pay a €3,000 registration fee with the State investing little as 64% into the sector

What does the Cassells’ Report actually recommend for loans?

The report recommends: fees of €4,000 or €5,000 per annum, with a guide graduate debt of €16,000 or €20,000 per student; The option of paying fees upfront or deferring to an income-contingent loan scheme (ICL) administered through general taxation;Repayments due when the graduate is earning in excess of €26,000 per annum; All entrants to higher education will either fund their study privately or through a loan – the state will not cover tuition costs for anyone.

Will fees rise if student loans are introduced?

Yes, they could.

Following the introduction of income-contingent loans in Australia, UK, US and NZ, fee levels have consistently risen in real terms, i.e. at a rate greater than inflation;

In Australia, income-contingent loans were introduced as an option to defer an annual fee payment of $1,800. In 1996 fees were linked to expected graduate earnings rather than the cost of providing the course, and have risen to between $6,000 and $10,000 per annum. The government is proposing to deregulate fees and allow universities to charge whatever they want.

In the UK, income-contingent loans were introduced to defer payment of £1,000 fees. After 1999 the devolved nations all took different approaches, each of which increased the fees significant. In England fees have risen from £1,000 to £3,000 to a cap of £9,000. Universities are currently advertising rates of £9,250 in anticipation of government approval for a rise in the cap in line with inflation.

In New Zealand, fees were deregulated in the early 1990s with the introduction of loans. The government has since intervened to regulate the allowable rise in fees, but the result is nonetheless that fees are between six and nine times the rate when fees were introduced.

Will student income-contingent loans make third-level more accessible?

The only research that suggests that Irish students from lower socio-economic backgrounds may not be averse to student loans is predicated on the assumption that fee grants will still be provided to poorer students. This has not been proposed. Evidence from UK and Australia show income-contingent loans discourage part-time and mature learning and have resulted in a massive drop-off in such enrollments. Student loans have not affected the profile of applicants in terms of socio-economic gradient – neither improved nor affected.

The Cassells recommendations would allow for an upfront payment of fees, which means that poorer students would have no option but to access to loan in order to pay for the cost of college. This means they would be subject to interest and as such pay more for their education.

The demand for education is inelastic (in that a change in price doesn’t significant affect demand) because it is not simply an economic good – rather, it has political, public, cultural and social dimensions. This means that students would likely still take loans if they were the only way to fulfil their aspirations.

Will taking out a student income-contingent loan make my future more secure?

No, it won’t.

Using examples where such loans exist we see that 70% of the UK class of 2015 is expected by the Institute of Fiscal Studies never to fully repay its loan debts. Instead, they will meet payments for 30 years before the loan is cancelled.  47% of the same class have moved back into the family home

Home-ownership in under-40s has fallen by 37 percentage points since the introduction of income-contingent loans in New Zealand in the 1990s. 

Studies in US show that $53,000 of student debt creates a further lifetime loss of wealth of over $200,000; around $70,000 of this relates to reduced home equity, the rest is in savings for retirement.

Will income-contingent loans affect emigration?

Between 2004 and 2013, the percentage of Irish graduates whose first job after graduation was abroad rose from 5% to 12%. This number has risen slightly to 13% for the most recent statistics, despite economic recovery. The largest number of emigrants are aged between 20 and 39.

182,000 people of loan-repaying age (although not all graduates) emigrated between 2008 and 2015. The Cassells Report admits that the potential loss to the exchequer of emigration is unknown, and that measures to collect payments from those working abroad may not be possible or successful. Graduates could feasibly emigrate for 5 years and pay their debt over a reduced term of 25 years before it would be cancelled, resulting in a significant loss.

Based on this, emigration of graduates could increase leaving funding and investment fall deeper into a deficit.

How much will be written off in repayments due to emigration if income-contingent loans are introduced?

At present, the government have no idea how much they will have to write off in repayments due to emigration.

Is a publicly-funded higher education model possible?

Of course it is. The Cassells Report would not have had it as an option if it was not a viable option. Not only is it possible to fund higher education through general taxation alone, but it is the most popular model of funding in the world.

Where does publicly-funded higher education model work?

In Germany, the annual fee of up to €300 covers cafeteria costs, students’ union membership, and travel. There is no excess of demand on higher education due to strong state support for apprenticeships. Germany has 32 public universities considered by Times Higher Education to be among the best in the world. In France, the annual fee of up to €250 to cover, students’ union membership, and travel. Universities in France are internationally recognised culture of excellence in teaching and learning. France has 18  public universities considered by Times Higher Education to be among the best in the world. In Austria, the annual fee of up to €600. 80% progression from second-level into well-resourced, diverse universities. Austria has 2 public universities considered by Times Higher Education to be among the best in the world and 10 considered to be of “emerging excellence” standards.