Higher Education Fees Debate - Graduate Tax

Graduate Tax is a model of higher education funding that shockingly involves students paying a tax in line with their income after graduation. Some models of graduate tax involve graduates paying a rate of tax until retirement, or for a certain number of years after graduation or until the cost of the degree is paid. For the sake of distinguishing this from a simple rebrand of our current model, I’ll argue for a rate of taxation until retirement to be sporting.

Although it seems counter-intuitive to want to pay back student loans for the rest of your working life when the current system offers the faintest glimmer of hope of paying off your student debt before retirement, doing so addresses a current inequality in the system. As a loan, it accrues interest over time which means students who pay their fees up front or soon after graduation essentially buy their way out of paying interest. Assuming that some students do work long enough to pay off their loans, plus interest, in their entirety, it means that students from higher incomes pay less for their education than other students.

One of the major benefits to a graduate tax is that education remains free at the point of delivery and removes the stigma around debt and loans. ‘Tax’ is not perceived the same way as ‘debt’ which is a concern for current applicants and their parents - hearing you will be 40k in debt after leaving university is not the same as hearing you will be required to pay an additional tax on your income.

A graduate tax also removes the market economy of higher education. Raising the cap on fees to £9,000 led to many universities raising their tuition fees in line with the cap to preserve the perceived value of their degrees i.e. charging less than £9,000 would make their degrees seem cheap compared to other institutions. To put this in perspective, although universities may vary widely across the league tables, the average tuition fee for 2013-14 was £8,507 suggesting many institutions have fallen into this trap. Although it can be argued that raising the cap meant universities had to improve their offer to make it worth £9,000 a year, this is arguably not true as our job market values ‘having a degree’ often from a ‘good university’, which will be true regardless of the quality of teaching. Equally, it creates a system where students aren’t just deciding their course based on the institution’s merit but also on their perceived debt after graduation. Arguably, removing the economic component of degrees would force universities to compete on merit, rather than rely on undercutting the tuition fee market to attract students.

I’ll now talk briefly about my esteemed opponents. Free education sounds grand and seems like the obvious choice for a student body. Still, there are two ways of achieving this system - either you massively increase general taxation or you massively decrease university places. These very different approaches reflect the diverse nature of free education supporters, namely the NUS, UKIP and the Green Party - three groups you don’t normally put in the same sentence.

The option of increasing general taxation means that the model leans heavily on people who haven’t gone to university (72.8% of the population) paying for students to have a privilege they themselves haven’t enjoyed. Although you can argue the net benefit of some degrees to society (STEM, Medicine, Nursing, etc) and therefore that the general population will confer some benefit from free education, this isn’t as great as the benefit to the individuals who attend i.e. vast impact on income, social mobility, etc. This is why I’d be reluctant to support a scheme which relied on general taxation.

The option of restricting places may sound appealing to all of those who scoff at so-called ‘Mickey Mouse’ degrees, but I wonder about the effect it would have on access arrangements for students from poorer backgrounds. A degree is so much more than a piece of paper, it is access to completely different employment prospects, it is one of the few methods of social mobility we have in this country. Restricting places would ultimately deny students these opportunities.

That leaves us with the current system and the argument that if it isn’t broken that we shouldn’t try to fix it. Well, I’d argue the system is broken. People much more qualified than me have argued that we are approaching a point where repayment of loans is so low that £9,000 fees are unsustainable. The number of applications to university have dropped. Personally, I attended the big fees protest which led to me being hit around the head with a placard when things got violent. For my welfare alone, this historic wrong must be redressed.

Okay, you can ignore the last part.

I’m not saying a graduate tax will solve the sector’s problems - higher education funding is incredibly complex and frankly a bit of a mess. Still, I hope this article has convinced you it’s the best hope we have.