Financing Your Course: Is Borrowing the Answer?

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Mark Godfrey Looks at the Financial Necessities Of a Full Time College Student and Makes a Suggestion to the Government:

Sweaty palms, eyes down-cast, Simon queued.   Embarrassment, worry, dread… he was meeting the bank manager again.  Those thousands he had promised he would pay off… he thought he could pay off.  But now he was repeating fourth year.  The interest was mounting, he didn’t have time for a part time job.  He’d already borrowed from the college hardship fund…

Simon’s predicament is familiar to many who walk the campus pavings every day.  Many students are in college on the strength of loans they’ve gotten from banks, the size of the debt depending on credit worthiness and the indulgence of the bank manager.   This writer wonders if it would be better to let the Government do the lending, while abolishing the inadequate grant system.  Here follows an examination of Ireland’s financing of college-goers compared to our trans-atlantic neighbour, the US and some of our EU colleagues.

A History of Debt

Pioneers of financing student loans in the 1950s were Denmark, Sweden and the USA.

In the US, the GI Bill set the precedent for direct aid to students.   Aimed at de-mobbed soldiers, the Bill was originally passed towards the end of the Second World War and extended in the National Defence Education Act of 1958.  (Pulitzer prize author Frank McCourt is one of the better -known beneficiaries, having served in the US forces circa the KoreanWar.)   The benefits of a higher education to the individual, and to his or her society, have been well underscored in the US neo-liberal economy; the individual enjoys higher wages and personal standards of living while a well-trained, flexible workforce will always grow the economy, so the argument goes.  Less unemployment, naturally, also means less welfare pay-outs and more tax collected for the exchequer.

The US today gives billions of dollars to its students in loans to be paid back. In America, however, an increasing proportion of the Federal Government’s contribution to student aid is in the form of loans.  American student aid systems have, since the 1970s, swung radically in emphasis from grants to loans.  The costs of loan defaults are dropping too.  With more vigilant oversight of the loan scheme, colleges with high default or fraud rates among its students are barred from accessing loans.

State of the Nation

Third level tuition in Ireland is not even close to being ‘free’ – the costs have been creeping up year-on-year since the early 2000s.  Generally, a student must pay a contribution charge of €3,000 per year (2018/19 academic year), however students may apply to SUSI for a grant towards these contribution fees.

Originally, when the “free fees” system was introduced in the Republic, a charge of £150 was introduced to pay for the non-academic costs of college, without a categorisation of what a non-academic cost was.  In the 1990’s, student enrollment at third level increased by an incredible 89 per cent, according to USI.  In 2019, the number of students in higher education has climbed to a record high with almost a quarter of a million people studying a third-level course last year.

Financing with Student Loans

Higher education benefits society as a whole, but a degree confers private benefits – thus justice and economic efficiency dictates that the student should pay some of the cost.  This is the classic argument of free-market capitalists.  But, they concede, because private lenders like banks won’t normally lend to a student against their future earnings the government should intervene to insure or to provide security for the loan. Loans as opposed to grants, the logic continues, reduce the costs of the education system, thus allowing it to enlarge, include more people and become more efficient.

Instead of the more traditional mortgage-type loan, paid off after a certain number of years, repayments on US government loans to students have become reliant upon income levels after graduation.  So too, the Australian tax debit scheme ensures that loans are repaid in larger annual amounts as income increases.

Swedes must pay off, annually, 4% of the previous year’s income and the interest charged is the same as that for a standard government loan, which is relatively small. Payment can be deferred for up to a year after completion of one’s college programme – which obviously hinders the plans of anyone planning on a few years travelling around the world.   Interestingly, the pay-off rates will see an average wage earner paying off their loan by the time they reach sixty, a long process by all counts.  More prosperous wage earners, meanwhile, such as doctors, will manage the repayment before they’re 50.  German students have a slightly easier task: the German government doesn’t charge interest on its loans but expect them paid back over a graduated number of years.

The Issues with Grants

Irish students have been taking to the streets every Autumn every year, every decade since the 70’s to protest at the paltriness of the maintenance grants provided by the government.  That is, if a student is deemed worthy of a grant in the first place… they’re judged according to their parents actual income bracket, not upon their access to that income.  So maybe it’d be better for everyone if the Government got rid of the measly grant system and lent the students as much money as they need to get through college.  Then students could spend a lot more time concentrating on their study.   What!  Who said “pub”…?  Hey! Who’s whispering “drink”…?


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