But there is no argument for taxpayer subsidisation of the loans scheme. This encourages over-borrowing and slow or non-repayment of loans.I'd be surprised if Roger weren't familiar with Director's Law.
As the 2025 Taskforce recommended, the terms of loans should be as close to market-based interest rates as possible.
Moreover, fee subsidies and the loans scheme should not be regarded as the sole means of student support. Personal savings, part-time work, vacation employment and parental support all have a role to play.
Fees and loans are connected and the government faces a diabolical problem: simply cutting fee subsidies would lead to more taxpayer subsidised borrowing.
Policy should recognise that most, though not all, university students come from better-off backgrounds and enjoy higher than average incomes in later life. Excessive taxpayer funding of higher education is a subsidy from poorer to richer people.
Cutting fee subsidies or removing the cap on tuition winds up costing the government money through its zero interest loans policy. When Labour announced the policy in '05, most folks in the intermediate micro class I was then teaching understood the incentives pretty well: max out your borrowing at zero percent, invest it in RaboBank term deposits, consume the interest. Continuing the zero interest loan policy is nonsense.
The bigger problem seems to be that too many folks finishing high school see university as their best option. While the average returns to a university degree are high, those aren't the returns that the marginal student will enjoy. The marginal student would do better to spend the time in a trade apprenticeship and start earning money.
