Evaluating two radical ways to pay for university

Oregon may drop upfront tuition payments while the U.K. allows $14,000 fees

An anti-tuition protest in London in December, 2010 (AP Photo/Gareth Fuller/PA)

In 2012, maximum tuition fees in the United Kingdom nearly tripled to $14,000 per year, about twice the cost of the most expensive undergraduate programs in Canada. At the same time, the government extended student loans to nearly everyone and made paying them back income-contingent, so that those who can’t afford to pay don’t have to. Regardless, students demonstrated wildly in the streets.

This week, legislators in Oregon voted to consider another type of income-contingent plan, this one pushed by students—yes, students—who are willing to pay so long as they don’t face big bills up front.

Canada does a better job balancing access and quality than many of its peers, but there’s room for improvement. That’s why we should consider the merits of the Oregon plan and the U.K. overhaul.

Following a global recession that hit Britain hard, its highly-indebted government felt it had little choice but to shift the cost of higher education to the students who benefit most directly. The sticker shock of $14,000 fees caused a widely-predicted dip in applications of about 7.7 per cent and many said access to education had suffered. But, one year later, the number of applicants to U.K. universities is back up. It rose 3.1 per cent to near where it was in 2011. It turns out that sticker shock doesn’t scare too many away.

That’s probably because students from all financial backgrounds get loans that cover their full tuition bills, plus help with living expenses. It’s much harder to get loans here. U.K. students are only required to pay the loans back at a rate of nine per cent of any income they make above $33,000 per year. Those earning a middling salary of $46,000 after graduation are only required to pay back $100 per month, although they might wish to pay more and get rid of their loans quicker. Either way, it’s not a heavy burden.

Oregon’s Pay it Forward, Pay it Back plan would let students enroll without paying anything upfront. Instead, they’d be required to annually pay three per cent of their future salaries (assuming they get jobs) back into the state colleges fund for 24 years. Students at the University of California Riverside have made a similar proposal, which would collect five per cent of income for 20 years.

Both the U.K. system and the Oregon proposal offer high levels of access to higher education, but the Oregon proposal also does some redistribution post-graduation. It’s more economically progressive, because people who manage a higher income after graduation will end up paying a bigger chunk of the total cost of the education bill. A graduate whose gross income is $600,000 over a 24-year span would pay $18,000 for a four-year degree, while a graduate who makes $2.5 million over that same period would end up paying about $75,000. That “take from the rich” aspect may be popular with idealistic students.

The U.K. system, brought in by a Conservative-led coalition, is less progressive. The richest need not take out loans or can pay them off quicker. However, it does reward families that save for their children’s educations and encourages graduates to work hard and earn more money to pay off their loans quicker.

Both proposals make it clear that all are welcome in university regardless of ability to pay, while still allowing universities to charge enough to maintain high quality. We ought to take a closer look.