Wednesday, October 27, 2010

Financing higher education

Government universities cannot afford to continue large subsidies to students. They have to raise fees. This is true not just for India but for other countries as well. How to increase fees without undermining accountability? In today's ET, Arvind Panagriya cites the recommendations of a panel on higher education in the UK.

The panel suggests that students not be asked to pay fees upfront. The government should foot the expenditure of 6000 pounds per student. Students should start repaying the fees to the government once their income crosses a certain threshold- say, 21,000 pounds.

I don't know whether such a scheme is enforceable. It means keeping tabs on every graduating student and the income he or she is earning after graduation. But the underlying principle is interesting. The panel has not asked that students simply finance their education costs through loans. It apparently sees education loans as impeding access. It is one thing to repay fees as and when able. It is another to be committed to huge outflows at the point of graduation.

The panel's approach is in refreshing contrast to the approach in India where education loans are seen as the answer to rising fees especially in the professional courses. The IIMs, for instance, have taken this line to justify huge increases in fee in recent years. As HRD minister, Murli Manohar Joshi had opposed high fees at IIMs and other places during the tenure precisely on the ground that it would impede access.

The problem with the IIMs' increasing their fees is that it has led to an across the board increase in fee in business management course. While IIM graduates may be able to repay their loans, students at other b-schools are finding the going rough. Commercialisation of education comes in the way of inclusion. The answer to universities' or schools' need for higher fees has to be some combination of government subsidy, private endownment and loans or, if feasible, pay-as you- earn schemes.

13 comments:

tejesh kinariwala said...

I liked the idea of 'pay as and when you earn' and i think the practical problem of keeping tab of all graduating students can be solved by looking at it from the other side. Most of the top and middle management is from some management school or the other, so why not recover the money required for subsidies from these leaders who owe a significant part of their fat paychecks to these institutes. A case in point may be million dollar donations to Alma Mater by Mahindra and Tata.
Even being from IIM A, it is tough to imagine parting away with 30 to 50 percent of your salary for the next 4 to 5 years repaying loans.Other college students ,especially those with not so high paying fin jobs are bound to suffer.

blackadder said...

It is good to see that financing on education is being seen for what it is, investment on behalf of both the government and students. As long as students use their education to earn large incomes the government is justified in asking them to repay the cost of educating them. In India, while a carte blanche imposition of this policy is not feasible, it must be implemented in case of students going to work abroad. Such a policy will also be more easily implementable. The government can establish a mechanism by which a trained doctor or engineer needs to get a renewable permit to work abroad. The country has lost out a lot of money in training doctors and engineers only to see them promptly go and join the workforce of other countries. While there is nothing wrong in us being the training factory of the world, we should ensure that we are adequately compensated for that through a gain sharing mechanism.

T T Ram Mohan said...

Blackadder, I am not clear as to how your scheme of a renewable work permit for those going abroad would work. Once the individual gets a work permit from his host country or becomes a citizen there, why would he care?

-TTR

blackadder said...

Once the individual gets a work permit from his host country or becomes a citizen there, why would he care?

We need to put in place an arrangement with nations where anyone who hasn't paid off his training costs is termed illegal. It can be made to reflect in the documentation - work permits or visas can be suitably amended to reflect this. In fact, the sponsors can be made to credit part of the salary directly back to India. It's not a big deal, even today many work permits lapse within a few months of a person losing a job so countries do keep a tab on the status of immigrant workers. Getting an approval from the country of origin can be made one of the conditions of being a legal expat. Citizenship typically takes 5 years at least, more in other nations so the investment can be recovered well before that time. Becoming a citizen means that the cost of providing welfare services shift from India to the host country, which will be to India's benefit.

satyendra... said...

Is it mean only rich people are authorised for higher education?

Tutor Jobs said...

Once the individual gets a work permit from his host country or becomes a citizen there, why would he care?

Sarsij said...

Sir,

I believe this suggestion borrowed from UK, is good in theory and equally useless in Indian context.
Govt till date have not been able to put any satisfactory tab on tax evaders, and we are thinking of paying the education fees of students.....I don't see much practicality of it in the current times.

Probably I would see some value in this suggestion only when the UID scheme turns out to be a success and then talking about such schemes would make any sense.

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