HEAD TO HEAD: Student Loans

Rory O’Sullivan and Elisabeth O’Higgins go head to head on the introduction of student loans


For Student Loans ~ Rory O’Sullivan

“It’s popular in certain circles to say otherwise, but free university fees in a country like Ireland would be a terrible idea, just as they have been in Scotland.”

There is a hole in the budget of every Irish university, and it’s growing; and while quality of service is declining everywhere, the number of CAO applicants is growing as well. Universities desperately need more funding so that they can keep going on current numbers; but in the long-term, they’re going to need an awful lot of money and then some. The argument is over who should pay and Cassells, in his report into the funding of higher education, offers 3 options: students, the state, or both.

All the options have drawbacks, but compromising and paying for higher education with a combination of state money and student fees with a loan scheme makes the most sense. It’s unreasonable to argue that students should have to pay for universities: it’s prohibitive, and fails to acknowledge the public value of both the research and discussion they facilitate as well as the educated people they produce.

It’s equally unreasonable, however, to argue that they should be free. One reason is how expensive they are: the current gap, ever increasing, is around €1 billion; filling it would require increasing the burden on salesmen and store-managers, plumbers and teachers.

Many people forget, but working class people do pay taxes as well. It would pull money away from other areas that matter more to people who aren’t students: healthcare, infrastructure, and the national debt for example. Everything that isn’t higher education and everyone who isn’t a student loses out.


Another is that free fees are regressive: in a system where students don’t pay the electrician pays for everyone, rich or poor. It makes no sense to treat people who can’t afford university and people who can equally in this regard. It means not only rejecting easy money, but also making people with less money pay for people with more to go to college. These reasons are exactly why several Scottish academics, in a book called Higher Education in Scotland and the UK, argued that a free fees system entrenches social inequality.

In Scotland, it forced local councils to cut funding for primary and secondary schools and increased the tax burden on the working and middle classes. It also led to an influx of international students, who come for the free fees and leave once they graduate, contributing nothing to the system.

Free university education doesn’t help the underprivileged, it hurts them: by increasing their tax burden and pulling money away from the services that they rely on to get them to the position of applying to higher education in the first place, and giving it to wealthy and international students.

It’s right that students should pay for some of their education. A college degree isn’t necessary to get a job or start a business, but it does give someone an overwhelming competitive advantage in employment markets versus someone who doesn’t have one. It causes their projected income to rise by orders of magnitude.

It’s what the Cassells report calls a “private benefit”, in that the only person to feel that benefit is the person getting the education. Why should someone who doesn’t have a college education pay for the private benefit of someone who is getting one? Why should a graduate from years ago, who paid full fees, do the same?

Anyone who has worked a summer job can tell you that a college degree isn’t like chemotherapy – no one needs it to get on – college education is a privilege, but even with things that we normally consider rights, like healthcare or a home, we expect people who can pay for them to do so.

It’s popular in certain circles to say otherwise, but free university fees in a country like Ireland would be a terrible idea, just as they have been in Scotland.

Restriction of Independence

It also makes universities more independent when they’re relying less on government revenue and don’t have to pander as much to donors and employers. There are many PhD programmes that aren’t available in Ireland because the government won’t fund them. Even recently, Trinity announced that it would be naming parts of the college after big donors, to the dismay of many. These different sources of funding reduce the university’s independence as it has to change to suit the demands of whomever is funding it: this restricts Trinity’s independence.

The “slippery slope” argument is often levelled against fees: if fees go up now, they’ll only go up by more in the future and the government will cut spending. This idea is flawed, however, because it imagines that the power of students to influence government policy somehow diminishes once fees increase.

Clearly the interests of students have some power; the entire reason that no one in Irish politics wants to touch the issue of higher education funding is that any notable increase either in state funding or student fees would be politically unpalatable.

Kieran McNulty, President of TCDSU, claims in an article in the Irish Times that he was told it would be a “brave” government that confronted the Cassells report. If the voices of students and those close to them are currently preventing the government from raising fees, surely in future that would be no different.

It makes the most sense, rather than demanding several thousand euro a year up-front that many people don’t have, to put in place a student loan system which allows people to pay the money back when they’re earning an income. A study by the Independent Commission on Fees into the fees/student loan system implemented in the UK in 2012 concluded that they’ve had no adverse effect on the number of disadvantaged students applying for college: the number, in real terms and as a percentage of all applicants, has increased.

Some people argue that student loans make college inaccessible for working class people by pulling them into a bureaucracy, but there’s no evidence for this. If the system is properly rolled-out, it’s hard to see how this would be a problem: more likely, working class people behave the same as everyone else and will understand that the debt will be worth it when their degree lands them a well-paid job. The biggest issue with student loans in the UK is ensuring students repay them, but this too can be achieved with a system that properly collects loans from people who can afford them as well as ensuring people can’t avoid repaying them by going abroad.

Loans are the best way of keeping a lot of different balls in the air: quality of education, access to education, and the state’s ability to juggle everything else it must do: this is why they’re the solution that the Cassells report recommends as the remedy for the funding crisis in higher education.

Ideological notions of free education or universities that are completely student-funded simply aren’t workable, but neither is the current situation in which universities are in massive debt and cutting back so many services just to keep going. The only way we can fix the problems they’re facing is if we recognise that loans are the most sensible solution.

Against Student Loans ~ Elisabeth O Higgins

“The Union of Students in Ireland estimate that if the loan scheme is implemented, students will be faced with a debt likely greater than €20,000 after they complete their studies.”

On Wednesday the 19th of September it was estimated that well over 10,000 students took to the streets to protest increases in third-level fees and the introduction of student loans. However, for such an important issue, the future funding of higher education has been given little coverage in the mainstream media. So what exactly are student loans and why are they a problem?

The Cassells Report

The Cassells report published in March of this year is the guiding force the government will be using when deciding the future of higher education funding. The report puts forward three funding options.The first option is a predominantly state-funded approach involving the complete abolition of fees for students; this means that the government would contribute significantly more to higher education. The government currently contribute 64% to each student’s fees, and it is estimated to jump up to 80% if this option were to be chosen.

The second option is the retention of the current system of funding consisting of a student contribution of €3000 per annum as well as a slight increase in the government contribution. The report acknowledges that this current system of funding is likely to be unrealistic and unsustainable in the long-run.

The third option, the introduction of an income contingent loan scheme (ICLs) has garnered much attention within government over the last few months. These loans would replace upfront fees with a system of deferred payment.

This means that once students have left third level and begin earning over a certain threshold of income (currently set at €26,000 per annum) they will begin to pay off their loans, at a rate of interest less than the commercial rate. The loan can last for up to thirty years and the duration of repayment, the amount of time it takes to pay off the loan, will be dependent on income. This system of funding can be seen in New Zealand, the United Kingdom and Australia.

Equity involves more than just money

Proponents of higher education loan systems suggest that it grants every potential student equity at point of entry. They argue that all students, regardless of their socio-economic background, can gain access to education with ICLs. However, this assumes that equity at point of access boils down to a purely economic factor: this is untrue.

Equity in access to third level education is a complex socio-economic issue that begins at primary school, or even before. Structural and institutional problems of equity cannot be solved through the introduction of an ICL scheme; in fact, such loan schemes could work to discourage students from lower income backgrounds. These students are more risk averse and less open to the idea of loans, due to being more uncertain of their ability to repay their loans than groups of students coming from higher income backgrounds.

It is likely that under such a scheme, the current SUSI grant system would have to be abolished, as the government under European fiscal rules would not be able to fund both the implementation of a loan system and borrow for SUSI. While SUSI is far from perfect, completely abolishing it is likely to hinder access to third level rather than improve it.

Evidence from the UK has shown that while there has been no decrease in the amount of students, there is also no increase in the number of students attending third level institutions since the introduction of ICLs. If we want to make positive progress in equity in access to education ICLs are simply not the answer.

Repayment of Loans

Critics of the ICL system worry about the repayment of loans. Emigration has proven to be a major issue in the collection of payments in countries where loan systems have been implemented. In 2013, The Guardian reported that The National Audit Office in the UK found that the Department for Business, Innovation and Skills did not have employment records for around 368,000 graduates who took out student loans. The main reason for this was emigration or lack of employment after graduation.

In the UK, this has lead to the continuous downgrading of estimates on the return on loans. In 2015/2016, it is estimated that the Department for Business, Innovation and Skills will have to fund an extra £600m for these unpaid loans. With our history of emigration, it seems likely that we will see similar issues if a loan system is introduced.

With thousands of graduates leaving our shores every year — 35,300 graduates left Ireland from April 2014 to April 2015 — ICLs will not be the answer to any long-term economic objectives as the government will likely be left continuously downgrading estimated return on loans.


Another issue with such a funding system is that it will lead to graduates leaving third level institutions in large amounts of debt. The Union of Students in Ireland estimate that if the loan scheme is implemented, students will be faced with a debt likely greater than €20,000 after they complete their studies.

While this debt is nowhere near the levels we see in the United States it is still significantly higher than the majority of our European counterparts have to pay.

Given that our income tax rates are more on par with the latter, it makes sense that the price of higher education in Ireland should closer to that of students this side of the Atlantic. Debt levels of €20,000 will also likely prove unsustainable for some students, especially students who are not fortunate enough to get jobs straight out of college or students who want to continue onto masters and PhD programmes.

Along with this, such debt has the potential to postpone graduates taking out necessary loans in the future such as mortgages can even push back savings for pensions. It will also likely decrease graduates consumption in the general economy which could hurt the economy particularly in times of economic slow downs.

While the government may think of the loan system as a long-term solution to financing higher education, it is much more likely to be a long-term economic problem if you take into account reduced savings and reduced consumption in the overall economy.

Universities Fee Increases

In places where ICL systems have been introduced universities have consistently increased fees. After the introduction of a loan scheme in New Zealand, university fees increased for ten years until the government introduced legislation that allowed for increases of only 5 percent per annum. The same can be seen in the UK, where many universities increase fees to the maximum amount loans will allow for.

If such a scheme is introduced in Ireland, there will be temptation for Irish third level institutions to do the same. ICL not only place a burden on graduates to pay back university fees, but also these fees will increase to levels that will prove unsustainable for many.

The Cassells report has brought the funding of third-level education to the fore in the last few months, and the government are under great pressure to make a decision on the issue sooner rather than later. The government continues to view loans as a viable option to fund third level institutions into the future.

The disadvantages of an ICL system far outweigh the advantages. There are arguably better methods of funding that should be considered, including a publicly funded system that continues to be the sustainable norm across the majority of Europe. All funding options need to be fully debated and addressed before the government runs with what appears on the surface to be an easy option.