Roundhouse Student Journal

Perception in HE funding: a few comments

In the run up to the symposium on ‘Sustainable Education’ (30th June at Carriageworks Meeting Room 2, 1-5pm) at the Building Sustainable Societies Conference (June 30th-3rd July), Roundhouse have begun to reflect on some questions and issues that we would like to explore further. The BSS Conference aims to bring together a global network of academics, practitioners, students and policy-makers to explore the concept of social sustainability, with the intention of contributing to the development of a shared understanding of this emergent concept and its potential value for sociology. In speaking to the overall objectives of this conference, ‘Sustainable Education’ will therefore interrogate what the notion of sustainability may mean when applied to, or understood through the lens of, education. Throughout the afternoon we will hear presentations from four invited speakers who will address this issue in their own unique way. More details about this event will follow in the coming weeks. In the mean time, we will be posting a series of thoughts and reflections on the theme of education and sustainability, with the intention that they may inform the kinds of discussions we have throughout the symposium. Below is our first post from Ashley Bullard, a third year undergraduate in the School of Sociology and Social Policy, who has developed his own preliminary thoughts concerning the perception of student loans.

I thought I would give a few passing comments on the role of perception of the student loan books. In particular I wanted to reflect on the idea that the student loans are seen as an investment, and because it is an investment one should only be given a loan if they’ll be able to pay it back. The result would be a nation of doctors and STEMs, and a very small number of people with the skills of the arts or humanities.

When New Labour decided it was going to push for 50% of people gaining degrees, if had to account for the increased costs in HE funding. Grants turn to loans, and fees were introduced. Now, under the basics of loans, one borrows money and subsequently pays it back gradually with an amount of percentage on top. But what happens if people cannot pay it back? Is it worth giving them a loan? This question is skewed. Let me explain.

Let’s say, for the sake of simplicity, that prior to Labour’s 50% target, the government spent £50 (numbers simplified for argument) paying for 1 year of students. This money was spent as an investment by the state in its citizens, on the understanding that over time the state would make more in taxes, and the drawing in of international investment to make that £50/year back in the long run.

But, and once again for simplicity, when it was pushed for 50%, the HE bill increased to £100/year. This number was perceived to be too high, so a trick was performed. Rather than the state make an investment which would be make a long-term return through dispersed taxation, students were to become directly liable for part of the £100/year. By this, I mean that whilst the state would still invest in the population, part of the cost for widening participation would fall on those who gained most and would pay back a little bit extra. This last part was considered the loan.

Now, I’m fascinated by the way words travel; For the student, they receive a loan, but to the state that is a nominated liability which may get paid back. The state still perceive the HE budget as an investment; making a return through taxes on increased wages, but a direct translation back on its investment would occur, paid by people who would earn more (and would be unlikely to earn that amount without a degree). However, somewhere the liability became understood as a loan. The problem with this is that each loan is considered separately and as an investment in of itself.

This transition has caused problems. First off is that HE expenditure is expected to become self-sustaining, a zero-sum game; the amount past students are expected to pay back each year is meant to equal that £100 spent. That would take years to achieve, let’s say (and as always, chosen for simplicity not direct translation of figures) as a net total, students pay back 5% of their loans each year (excluding inflation and interest), it would require the process to have been in place for 20 years! This simply will not work in the current age of short-termist politics.

So the state, having confused itself as to the nature of its HE expenditure, now sells off its student loan book. The companies that buy the loans will expect to make a profit, they will buy loans from students in courses that make returns – the STEMs. Here the loan is an investment in itself. The state isn’t investing in people any more, it’s buying assets in the form of student debt which it sells to greedy companies.

What is worse is that it makes a loss in this situation! Not only does it not have students paying back their liability to their full ability, it sells it undervalued. This means they can’t build up that 20 year catalogue to make HE self-sustaining (if it could actually ever be so), and if they tried to buy the loans back they’d have to pay more than they’re worth. It would be like buying a piece of gold as an investment, then pawning it off for less than you paid for it only to try to buy it back at more than its face value.

So having now moved from an investment, to liability, to loan, the state has to begin considering each loan individually. And what kind of investment is an Arts degree? It is generally one that will only make a small return if one at all. A business mind would not make that risk, as it is a mind that takes each investment individually and on its own parameters.

But let us remember, the state was investing in society as a whole, the population one spends £100/year on would still be paying taxes if not directly paying their potential liability. Whilst those who make lots of money after a degree would pay back their loans quickly, those who do not may never pay back their loan. BUT, that does not stop the investment being worth it. First off, a person with a degree will earn more, whether that is because they’re qualified enough to do a job that they could not do without a degree, or just makes them more likely to get a job, they would still make more than if they had not got their degree. They may not reach the threshold to begin repayment, but if they have more money they spend more, and circulation is the blood of the economy. And the trickle-up of capitalism means those rich kids who are a great investment when considered in isolation, earn more because the economy is doing better.

See, the state should not perceive the HE budget as a massive collection of individual loans to be sold to make a zero-sum spreadsheet. The state should understand the HE budget as an investment in society that places a liability upon those who benefit the most from it to give a little extra back.

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