Analysis: Report urges changes in third-level funding

Is the status quo sustainable for third-level education? The answer – based on a draft report commissioned by the Government into the future of college funding – is a resounding no.

After seven years of spending cuts, hikes in student fees, tumbling numbers of academic staff and rising student numbers, the sector is under pressure as never before.

High birth rates in Ireland mean the number of students entering higher education is projected to grow by almost 30 per cent by 2028, while annual funding will need to rise by another €1 billion just to meet demand.

If Ireland as a society, a State and an economy aspires to global competitiveness, the report says, it will need to grasp the nettle of third-level funding.

The report makes the case for a “hybrid reform package” including income-contingent loans, combined with greater maintenance support for low-income students and extra funding from the State and employers.

Eye-catching element

The most eye-catching element is a system of deferred student payments, based on future earnings.

Under this system, higher education would be free at the point of access for students. Loan repayments would be triggered only when a graduate starts earning over a minimum income level.

Crucially, those who earn below a certain amount – because they are in low-salary employment or various life stages that limit their access to work and income – would pay back nothing.

The expert group believes this is a fairer and less blunt form of State support than the current fairly arbitrary earnings threshold, below which the State pays a student’s fees.

The income-contingent nature of the student-loan scheme means that while all students take on a loan to pay their fees, the amount, speed and duration of repayment is significantly related to their subsequent earnings.

The report explores the model of a graduate making a repayment of €16,000 in fees, based on a four-year course of study costing €4,000 a year.

Based on a person commencing repayments once they reach the average graduate starting salary of €26,000, it says weekly repayment would be in the region of about €25 a week.

These repayments would vary, depending on interest rates and income, although the report advocates that lending be kept at below commercial rates.

Calculations suggest a person on an average income could pay off this loan in about 15 years, based on an interest rate of 2 per cent.

Net impact

While further analysis is required to determine the net impact on the public finances, a preliminary study of EU fiscal rules suggests a deferred-income system would not breach these criteria.

In addition to student loans, extra funding from the Government and employers is required to ensure our third-level system is able to compete with those of other countries of a similar size, the report says.

These resources need to be combined with actions that support an enhanced focus on the quality of scholarship, programmes and engagement with students across all disciplines.

This, the report says, could lead to a “ virtuous circle” in which investment in higher education enhances quality, learning outcomes and the resources available to fund this critical determinant of national progress.