Debt, income and student loans


A chara, – The letter (May 5th) by student union leaders, and others, objecting to an income-contingent loan system for higher education, misses many important facts. The prospect of paying tuition costs of €16,000 or €20,000 for a degree may indeed seem high. However, the student would pay nothing up-front, unlike the present system, since it is financed by a loan. They would pay only if subsequently they could afford it. A recent study for the OECD countries measured the lifetime returns to earning a degree using 2010 as a starting point. Remarkably, Ireland topped the league table; our degrees are worth the most, on average, increasing lifetime earnings by about €320,000, adjusting for differences in prices across countries. Can anyone think of an investment that generates a return like that? Of course, some will earn more and some will earn less. The logic of an income-contingent loan system is that the student is insured against downside risk: can’t pay, don’t pay.

The issue of the effect of an income-contingent loan system on access is a red herring. Australia has had such a system for over 25 years and the system has not significantly worsened or improved the access of people from worse-off backgrounds. It is not designed to do this, and you need other policies that tackle the underlying problems, such as low attainment at second level and the cumulative effects of disadvantage from early childhood. It is worth considering the experience of the UK. A study published a week ago by the Brookings Institute showed that the abolition of free college in 1998 did not stand in the way of rising enrolment and, by at least one measure, the equality of the education has risen substantially. Moreover after years of widening inequality, socio-economic gaps seemed to stabilise or even decline slightly. On a similar note, my own analysis of the abolition of university fees in Ireland in the 1990s showed that it did nothing to reduce socio-economic gaps in progression to university. Those who advocate solving the current funding crisis by greater public funding appear to be unaware of (or indifferent to) the regressivity of such a policy since it will necessarily involve a transfer to the relatively well-off from taxpayers in general.

A large part of what government does for its citizens can be thought of as forms of insurance. Social protection – the health service, the Garda, the Defence Forces (for example) – exists to protect us against possible risks that may happen individually or collectively. An income-contingent loan system extends that logic to higher education: graduates make a contribution to the cost of their degree, given the generous returns it typically provides. But if doesn’t, they are insured against the cost. What’s so unreasonable about that? – Is mise,


Associate Professor,

School of Economics,

University College Dublin,

Belfield, Dublin 4.

Sir, – The proposal to introduce a student loan scheme in Ireland misses the whole point of education. Education is an investment by a society in its members, to increase social capital, catalyse development and ensure continuing social, economic and technological progress. Education is not just an individual enterprise to increase one’s earning capacity, although it can be that as well.

The returns to society from educational investment far exceed the cost of providing affordable education to everyone. The social contract in a democracy means that resources such as education are distributed fairly among the population, allowing everyone to benefit. The subsequent contribution of each person’s knowledge, talents and skills to society is essential for the ongoing socio-economic advancement that supports all its members.

Resources are also recycled from one generation to the next, raising the bar for progress for everyone. Students are not financially indebted to society or the economy for their education. The increased capacity and expertise gained through their studies are the foundation for future cultural and economic progress.

Article 26 of the Universal Declaration of Human Rights states that “Everyone has the right to education”. By recognising the inherent dividend that accrues to society from an accessible and affordable education system, we should be doing all we can to ensure that everyone can avail of this fundamental right. – Yours, etc,



Dublin 6.