Loans liability after death - should dead students' estates pay their debts?

Should students be pursued beyond the grave for outstanding loans? The idea has already been floated unofficially in Australia, in a report for the Grattan Institute by Andrew Norton. Now Nick Hillman, director of Britain's Higher Education Policy Institute, discusses its advantages for England in a new study of the UK and Australian loans systems.

"If the change were made in England, it would lower the RAB [Resource Accounting and Budgeting] charge in the short-term by recovering more money later on," writes Hillman, a former special adviser to Minister for Universities and Science David Willetts.

The RAB charge is the proportion of money loaned to students each year that is expected not to be repaid.

This has always been anticipated to be fairly high because of loan conditions under which students in England do not start repayments until they reach an annual income threshold of GBP21,000 (US$35,000) and have outstanding loans written off after 35 years or on death.

But there is concern in the UK that the RAB, which has fluctuated wildly over the currency of the loans scheme, is now so high that it renders the new student finance scheme more costly than its predecessor and potentially unsustainable.

Hillman's study of the UK - more precisely the English - and Australian student finance systems is aimed at seeking answers to this and other questions, to the mutual benefit of both.

His report, A Comparison of Student Loans in England and Australia is available on the Higher Education Policy Institute, or HEPI, website.

Its publication and that of a parallel report, A Comparison of Higher Education Funding in England and Australia: What can we learn? by Libby Hackett, chief executive of the University Alliance - a group of 22 business-engaged universities with more than 22% of all UK students - coincided with a visit to the UK by Australian Minister for Education Christopher Pyne.

Learning from Australia

Hillman said: "England and Australia have many things in common. That includes dealing with the costs of a mass higher education system via student loans.

"The two countries face many of the same challenges in higher education. But the Australians have often been ahead of us.

"They recently removed student number controls, as George Osborne has promised to do here in 2015. After much debate, they have adopted a more welcoming regime for international students. Australia even has a parallel loan scheme for postgraduates from which we could learn.

"There are some issues that neither country has fully resolved - such as how to recoup loans from graduates who have moved abroad. But people working on higher education policy in Australia typically watch England more closely than we watch them. That needs to change because it is not just on the cricket pitch that we have things to learn."

Hackett said: "There are two big problems with the English system right now: firstly, the growing cost of unpaid student loans (the 45% RAB charge) and secondly, that postgraduate students and even many undergraduate students (those seeking to re-train or up-skill) cannot access a student loan to cover the cost of upfront fees.

"We are looking at intelligent solutions that would address our problems without the need for radical overhaul; Australia is an excellent place to look."

Need for public awareness

"Another thing the Australians have cracked is the visibility of their public investment in higher education, with every student aware of the government's contribution towards their studies.

"The rise in fees in the UK to GBP9,000 brought with it a public perception that government had cut all funding to higher education in most subjects, when in fact it is still investing billions. The lessons here for England are about the balance of investment and transparency.

"Spending so much on loan subsidy and so little on other things is a lose-lose situation. We need to reinstate a social contract between students and government based on a practical demonstration of shared investment."

Her report does not refer to Andrew Norton's suggestion of charging the estate of deceased students for outstanding loans.

COMMENT

That would be insane. Why is no one trying the best approach? Government-funded education. Free education is essential for complete accessibility to higher education, which allows for a smarter populace capable of bringing in more money to their country. Everyone seems to forget that the government's money is the people's money. Higher taxes to pay for education and health is not a problem. Plus by remaining debt free after university, one can take on more risky investment, thus stimulating the economy further.

Christopher Weir on the University World News Facebook page