Who Benefits Part II: Who Are the beneficiaries of a University Education?

Please read the preceding post about profit and subsidy as it will make this discussion clearer.

Disclaimer: I work in a UK university and the university I work for is subsidized by the government. The current fee regime does not pay the full cost for some degree programmes (medicine, physical sciences, etc.) despite the current burden on the students.  UK Universities are mostly not for profit organisations (with a few exceptions). In keeping with the preceding considerations, I think there should be salary controls in State subsidized businesses, even not for profit ones. 

This and the previous discussion arose from concerns about my students, particularly those from lower income backgrounds. As a group they leave University heavily in debt. In my field entry level jobs can pay under the threshold for repayment. This can mean a long term debt that could triple the cost of the university education or require eventual write off of the loan. It will probably fall heaviest on female graduates who achieve higher results at all levels until entering the workplace where they earn less and areis more likely to take career breaks to raise children.

As mentioned in an earlier post, the cost of fees and the debt service may well exceed the increased earnings expected by obtaining a university education. I am unconvinced that a poor student attending University on the back of loans gains any economic benefit from their degree. For students who can pay upfront, I am convinced there is economic benefit. There are “intangible” benefits of an education, but these may be lost on a person heavily in debt.

Who gets economic benefit from the degree of a student from a poorer background? I don’t think the student does.  Let’s list some beneficiaries:

1)      Universities benefit because they get the money up front and for certain subjects they get an additional payment from the government.

2)      Employers benefit. Although the earning difference between degree holding and non-degree holding workers has declined, UK businesses still hire graduates and pay them better. Presumably they do this because the productivity of University graduates is higher.

3)      University associated industries benefit. These include providers of housing, books, food, etc. Most university associated accommodation stock in the UK is now privately managed.

4)      The government (although this is speculative) probably benefits through higher tax receipts due to higher productivity and more competitive industries. This may be from increased corporation taxes, VAT, and taxes on dividends.

5)      Private buyers of student loan debt (when this is done) will benefit if they can collect the debt. It is likely that the government will lose out on such a sale.

I am sure there are more economic beneficiaries, but the problem here is that the low income student may not benefit at all.

Let’s wind forward in the direction higher education funding has been going and consider a not unlikely scenario. Consider a future in which there is no state support for University Education. In this future, students must pay the full cost of their education. Consider a future in which the fee controls are further relaxed and the cost of attendance increases to what Oxford proposed a few years back (£16K or more).

All of the beneficiaries listed (1-5) should think long and hard about this.

Universities need to speak more truth to power about the unfairness of poorer students not being clear beneficiaries of their own education and think about the amounts being given to senior managers and how they facilitate university associated industries to extract money out of students.

Employers profiting from staff with skills they did not invest in need to think about the world their advocacy is creating. Why should they benefit from increased productivity while hard-working students from poorer backgrounds may not? Why should you get benefit of something you invested nothing in? Why should students and their families subsidise your business? Yes, supply and demand is involved in these considerations, but so is the legal and political framework which determines the way cost, profit and loss are calculated. Like the tobacco industry, do you think you make “profit” when you pay only a small fraction of the total cost of doing business? If you refuse to pay that cost, why shouldn’t your taxes increase or minimum wage requirements change?

If you are a university associated industry, how do you become less parasitic and more efficient to provide better less costly goods and services? How to you become a productive industry that improves the opportunities for your customers rather than banking on someone else’s long term debt which will squeeze off their opportunities and freedom to take risks and innovate?

Is the government creating a world that rewards educational attainment in a fair way? As government support for students is removed, how is a meritocracy created when accident of birth (the wealth of your parents) determines long term benefit? How can the government create a model that allows those educating themselves to benefit from that education rather than a host of others?

Why should buyers of student loan debt get a loan portfolio at a discount? Why can’t this be offered directly to the students? Why should taxpayers be stuck with the bill, while you profit?