Education

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There are two widely held beliefs about paying for third level. The first is that universities cannot continue to be largely funded from general taxation, as at present. The second is that Irish universities are underfunded, and this is why they have slipped down the league tables. As a result there is a modest panic about paying for universities.

Prof. Michael Murphy, the president of UCC, in an interview with Sean Kelly (Irish Times, Nov 12th), blew on the flames, saying that “Student fees of at least €4,500-€5,000 per year are necessary to maintain the quality of higher education in Ireland” and “as graduates gained a significant income premium from their degree, it was right that those who can afford to pay fees be asked to make a more significant contribution.”

Prof. Murphy is of course right about the income premium. OECD figures for Ireland up to 2004, suggest that graduates, as compared with someone who only completes secondary school, can earn 30% to 70% more. More recent Irish data are not available, but the more recent figures for other OECD states are similar. These figures are for extra earnings across a working lifetime (20 to 64).

How do we pay for third-level education now? It’s hard to get a good picture of the finances of the whole sector, and there are big differences between institutions, especially between the ITs and the universities. The HEA pay the bulk of the costs, apparently 65% to 90%+, depending on the institution. They paid just under €1.35 billion in ordinary grants to all third level institutions in 2009. Of this €769 million went to the university sector. Student ‘registration fees’, now running at €2,000 a year, are said to pay about half the costs of ‘direct student services’, a rather vague term.

Income from research grants, campus companies, patent licensing, conferences, accommodation, catering, rental income, and other university enterprises, makes up the rest. It is not clear whether these other activities even cover their own costs, as there are weak costing and management information systems in the sector. In any event, the bulk of funding comes direct, as a per-capita grant, from HEA, i.e. from general taxation, and so, non-graduates subsidize graduates. This seems unfair, as Prof. Murphy rightly suggests.

The return of fees is touted as a solution. Our neighbours in England have just brought in fees of £9,000 a year, and got a 12 % drop in applications to third level. They do have an efficient scheme of student loans, where repayments are deducted directly from salaries, once the student earns above a modest level, and interest rates are subsidized. The US has an odd system, with very high fees, student loans, and default rates running at 10% overall, and up to 80% in the worst of the private colleges (think mortgage misselling tactics applied to degrees). Most other EU countries have either no fees, or modest fees. We have nothing.

What would bringing in fees do? This would help to fix the funding gap in the sector, although to do this they would need to be closer to €10,000 or €12,000, than the figures of €3,000 to €4,000 being discussed. This would throw much of the burden on current students, and their families. Students entering in the next few years seem likely to be hit for fees. Those whose families can afford it, will graduate with few debts. Those whose families cannot, will either not go, as the recent English experience suggests, or will take on significant debts to do so.

Assuming we develop a system more like England than the US, these students will then repay their loans over 20 to 30 years, by direct deduction from their salaries. Older graduates, like me, would pay nothing for our education. We have already benefited from third level education, which received significant public subsidies, and, in many cases, our parents paid the fees.

Wouldn’t it be better to think of a graduate tax? The effect of this would be similar to a loan repayment deducted from salary, but a lot more people would contribute, so it would spread the costs more fairly. Every graduate earning above a set level would pay, and it would be deducted directly, like PRSI, and the universal social charge. No costly new systems would be required, and the administrative costs of tracking 40,000 graduates a year, across the world, for twenty or thirty years, would be avoided. There would be a once-off cost for registering graduates, but this would not be too hard. The tax would cover all graduates, whether of Irish, or foreign, third level institutions. This would ensure that all graduates would contribute to the costs of third level education.

This might be seen to be unfair to older graduates, as students paid tuition fees up to 1996. However, most graduates under the age of sixty have benefited from significant public subsidies to third level, which have been a feature of the Irish system since the late 1960’s, so it seems fair that we should contribute now.

What rate of tax would be needed to raise €2 billion a year? A rough estimate can be made. In 2010 the top 1% of income earners paid 25% of income tax, the top 8% paid 60% of of the tax, and the top 21% 83% of the tax. In 2010 it was estimated, by the Dept. of Finance, that a 1% rise in the health levy would raise €600m. If we assume the same ratio applies, then 21% of the population paying a 3% levy would raise €1.4 billion.

This suggests that a graduate tax paid at zero for low earning graduates (e.g. under €30,000), 2% for lower earners (e.g under €50,000), and 3% for higher earners would pay for Irish third level into the foreseeable future. These are not trivial sums, but they are not especially onerous either. In the UK new graduates now pay up to 9% of their income for up to 25 years to repay their loans.

There is a major effort to bounce us into bringing back student fees, but it’s not too late to change our minds. There are better, cheaper, and fairer options, and a graduate tax is one.

The perennial issue of funding third level has raised its ugly head, again. For non-locals, the situation is, first we spend rather little on tertiary education overall, by OECD standards (1.2% of GDP, compared with a median of 1.5% of GDP), and most of our universities are in significant financial difficulty. Third level fees were abolished, for Irish citizens, in 1996, with the stated aim of improving access to third level for students from poorer families. Over the las few years universities have raised student registration fees, originally intended to cover student services, from around €300 to around €1500, and it is now proposed to double this fee.

The effects of the earlier abolition of fees have recently been analysed, and the author (Kevin Denny from UCD) concluded that the abolition of fees had no effect on access for poorer students because :-

  1. There was (& still is) excess demand for places: there is a shortage of places not students.
  2. The fee reduction benefitted well-off students, low income ones would have been exempt.
  3. Most importantly: the paper shows that it’s how students do in the Leaving that matters. The fact that the low income kids do worse in the Leaving is why they are less likely to progress. Changing fees didn’t change that.
  4. Kevin Denny Behavioural economics blog May 2010

In the light of this, and our rolling financial crisis, its being suggested that we double ‘registration fees’ to €3000 for everyone (FF), bring in a graduate contribution, based closely on the Australian HECS, for new graduates earning above a certain level (FG), and do nothing much (Labour). I have reservations about all of these.

The FF proposal is to further increase the already stratospheric ‘registration fees’ which pay for ‘student services’, like library books. This will hit families just above the income threshold for grants very hard, and is not likely to raise much money. It currently brings in €60 million (this is my guess, 80,000 students, half of whom pay, €1,500 each), so doubling it would get you €120 million, while the HEA, which largely funds the third level sector, spent €1.5 billion in 2007.

The Labour proposal neither addresses the real funding crisis in third level, nor does it do anything to f ix the holes in our budget deficit, so I’ll leave it at that.

The FG proposal is more interesting. Its based closely on the Australian HECS system. In brief, they propose that new graduates should pay back one third of the cost of their education in stages, through the PRSI system, once they reach certain earning thresholds. Existing graduates would make no contribution. This is intended to raise about a quarter of the costs of third level education (€500m out of €1.8 billion).

I can see some problems with this. First, it’s not enough.The amount they propose to raise will not fix the problems of the third level sector. Second it will take a long time, up to ten years, before any substantial sums of money are raised, as the graduates have to get jobs, and move up their pay scales. Third, it’s not fair, the burden of funding third level falls on current and future undergraduates, and those who had free education, from 1996 to 2010, pay nothing. Fourth, the system will be very complex to administer, as an individual will have to have an individual account, which is paid down over time. Both the UK and the Australian experience suggest that this will be very expensive, and cause a range of social problems. Both countries fare poorly in the recent report on Global Higher Education Rankings 2010 – Affordability and Accessibility in Comparative Perspective.

Is there another way? Let us adopt the basic idea that those who benefit from higher education should pay for it, and those who do not, should not. The economic return to higher education accrues both to the individual graduate and to the society as a whole, so there is a case for subsidy to higher education. However, the salary gap between graduates and non-graduates is significant, so graduates ought to pay more for higher education than non-graduates. One way to achieve this is to levy graduates. It’s not too hard to identify graduates. Many jobs are entirely graduate. Also, graduates do not become non-graduates, so it is only necessary to record the graduate status once. A flat levy, of 1% or less, on all graduates, from Irish universities, or elsewhere, whose total income is above a modest level, could pay for third level education. Such a levy could easily be collected through the tax system, and would bring in the money quickly.

Worth considering?

I’m at the UserR! 2010 conference at NIST in Gaithersburg, Maryland. This is the main annual event for R users. there have been whole series of presentations on using R in education. The full program lists the Pedagogic talks (3 sessions, and 9 talks, on the first day).
What I’ve seen so far is great work on training people in data analysis, in statistics and (to some extent) in probability, The work is really good, and I have lots of new ideas. What’s been lacking, and what I need to think about more, is the other part. There are at least three other elements,

  1. asking intelligent questions, that is questions that are well enough specified to be answered, and well enough considered to actually matter.
  2. using research information, and clinical information, to support good clinical decisions
  3. data cleaning, data exploration,

Any thoughts?

Abolishing Fas?

Deputy Ruairi Quinn has called for Fas to be abolished and its budget diverted to the IT sector. While I share his frustration with the running of Fas, it is, I believe, a serious mistake to think that it can easily be replaced.

Just as the IT’s and the universities have different and complementary roles, so Fas fills a vital slot in the educational landscape. No-one else has the same combination of guidance, staged training, and
technical options. We need it, we need it to work well, accountably and efficiently, and we need it more than ever now as the economy crumbles. The only chance for many people to get the skills they need is Fas, or something very like it.

TD’s need to hold Fas, and the rest of the Education sector, accountable for delivery, and efficiency. Soundbite policies got us into the present mess, but will not suffice to get us out of it.
(Irish Times Saturday Sept 4th)

Prof. John Nelder, one of the more remarkable British statisticians, has died, at the age of 85.

I never had the good fortune to meet him, but his work had a great influence on me. McCullagh and Nelder, Generalized Linear Models, was my first technical statistics book, as an epidemiology PhD student, and I used Genstat, which he originated, throughout my PhD. His clear explanations have stayed with me, and I am proud to recycle them to my own students (with attribution!). Genstat also showed me a way past the more ‘black box’ approach of SPSS and SAS, to the interactive data analysis, exemplified by R. I’d like to thank him, and offer my condolences to his family.