Why should taxpayers pay for ‘free’ higher education?

Posted on April 06, 2014 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

Why indeed? Data published by the CSO and OECD show much better earnings and employment outcomes for third level graduates.  The cost of providing higher education is not small. At approximately €9,000 on average per student per annum the true total cost varies by location, type of course and field of study. Tuition fees and the ‘student charge’ are sizeable but when added together are less than half of the overall cost in the case of undergraduate courses. The rest is financed by the State. Last week a NERI Working Paper ‘We Need to Talk about Higher Education’ explored the evidence in relation to the funding of Higher Education in the Republic of Ireland and how it compares with other countries. It concludes with some proposals for future funding.

One matter on which most, if not all, commentators, analysts and providers of Higher Education agree on is that we need a debate on the future financing of Higher Education because the current arrangement is not sensible and is not sustainable. Only a little over one half of full-time undergraduate students pay the student charge which is currently €2,500 per annum. This is set to rise to €3,000 by the Autumn of 2015. At the same time, part-time and postgraduate students pay very high tuition fees and these are trending upwards year by year in most colleges.

The decision to introduce ‘free fees’ in 1995 for qualifying full-time undergraduate students in 1995 was, in my view, a commendable one. The regrettable outcome was that a rising State contribution under the ‘free fees initiative’ was not matched with an overall improvement in funding on a scale to match rising student numbers as well as re-invest in facilities, equipment and buildings. Generous contributions by private philanthropy did help in the 1990s but these are now limited. A spurt in research funding through PRTLI was a very welcome and important boost. However, the indicators of cost per student are downwards since 2006 and exchequer costs per student are now lower than in second level education – a first since estimates have been calculated in the 1960s.

Where to from here?  One model – the ‘Anglo-American’ model of predominantly private funding with a widespread use of student loans to enable households to meet the upfront cost of going to college is sometimes assumed to be the only option open. However, most European countries continue to operate a publicly-funded system with between 80 and 90% of funding coming from public sources. Some, namely the Nordic countries, maintain a 90% public funding ratio. This is in spite of fiscal contraction during some of the last 20 years.

We have choices.

However, honesty is needed in spelling out:

  • How public authorities will meet the challenge of rising demand in Higher Education…
  • How priorities will be determined by level of education including early childhood education and care as well as health and social protection when populations age and other demands are made on public finances….
  • How formal education can be made more efficient and effective for any given outlay….
  • How we avoid ‘doing harm’ by permitting private costs to escalate and thereby lower participation or reinforce social inequalities….

The NERI Working Paper addresses some of these questions and comes down on the side of a publicly funded model based on the rationale of Higher Education as a public good. Not everyone will agree with this approach and will see a role for even higher private contributions than is currently the case.  Let’s agree that we have an unsustainable situation and we need a debate.

Posted in: InequalityTaxation

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