An alternative to high tuition fees or fully free HE

Targeted free tuition is becoming an increasingly popular choice across the world for governments that are deterred from offering blanket free higher education but find the logic of a progressive student loan system hard to sell to potential students from less well-off families – and to the electorate, according to a new report.

“An important consideration in targeted free tuition’s favour is that unlike a high fee or high aid system, it appears to have better political optics to students and taxpayers alike,” the study finds.

The report, Targeted Tuition Fees: Is means-testing the answer?, was published jointly and simultaneously in the United Kingdom and Canada on 19 September by the UK’s Higher Education Policy Institute (HEPI) and Canada’s Higher Education Strategy Associates.

It is written by Alex Usher, president of Higher Education Strategy Associates (HESA) and a leading thinker in Canada on student financial assistance issues, and Robert Burroughs, research associate at HESA and a former executive director of the New Brunswick Student Alliance, the province's largest student organisation.

The HEPI-HESA report considers the spread of means-tested tuition fees across five continents. It compares the different targeted free tuition programmes in place and analyses the policy decisions behind them. The case studies include Canada, Chile, Italy, Japan, South Africa and the United States, as well as the original UK scheme in place from 1998-99 to 2005-06.

The report explains that targeted free tuition offers a third way compared to the two main approaches that have dominated the higher education landscape in recent years.

One of those is to simply subsidise everyone equally in public higher education, which usually means offering free tuition, as occurs in much of continental Europe and Scotland.

The second way, as adopted by most of the UK, Australia and New Zealand is to give students differential subsidies based on their incomes after graduation – which the report dubs ‘post hoc subsidisation’.

In the UK (apart from Scotland), students pay back only when they reach an income threshold; in Australia the size of the debt also varies as fees are grouped into three bands in rough approximation of their expected financial returns, for example with humanities in the lowest band but law and medicine in the highest.

The third approach is ‘pre-hoc subsidisation’, in which differential subsidies are given based on differences in socio-economic status prior to entering studies, as is the norm in North America. In this system all students are charged fees but the net price is reduced for poor students, usually through a system of grants.

The authors say that criticisms of the third approach include that it is cumbersome and not very transparent or intuitive. But targeted free tuition solves these issues by simply declaring all students from families with income below a given level go free.

The report suggests that targeted free tuition could therefore be a solution to the problem that while charging tuition fees supported by a progressive loan system is more cost effective than subsidising rich students to go to university, it involves students running up large amounts of debt in their name.

This creates a potential psychological barrier to taking up a place at university, which is stronger among students from disadvantaged backgrounds and therefore may work against measures to improve equitable access.

It also opens governments to political fallout from the charge that they are sending an entire generation of students out into the world loaded up with debt.

Under targeted free tuition actual total prices are determined in advance of studies, rather than a wait of 30 or more years, as with the UK’s student loan system (excluding Scotland).

Usher, co-author of the report, said: “This is arguably the most important new idea in international higher education finance and it is spreading across the globe.

“Free or lower-cost education for those from poorer backgrounds balances the need for well-funded universities against the fact that some people are more debt averse.”

“Targeted free tuition has some big advantages over both systems with no fees and systems with high fees for all. That is why so many different jurisdictions are independently converging upon it. It is time for a more systematic look at the concept.”

Alternative targeted free tuition schemes

Not all targeted free tuition schemes are the same, however. In the US they are based on providing grants through student aid to offset tuition fees and tend not to have hard benefit cut-offs, so students who just miss out on full benefits still get partial ones, the report says.

In Chile, Italy and South Africa a more direct model operates in which tuition fees are waived at source rather than using off-setting grants and there is hard cut-off, so students whose incomes are slightly above the cut-off miss out altogether.

The authors suggest the latter type may be most likely to spread because it requires less sophisticated administrative methods.

“Some countries which have fees and might be tempted to move in the direction of targeted subsidisation in the future include South Korea, Israel, the Netherlands and Spain,” the report says.

“In parts of Africa, one could imagine similar moves, though the targeting would not necessarily be based on income directly because of difficulties in income verification.”

Instead tuition could be provided free to those who came up through public (state) schools as opposed to private schools or to those who came from rural as opposed to urban schools, the report suggests.

The authors say New Zealand, which has recently shown an interest in free tuition, might find targeted free tuition a “cheaper and more palatable alternative”, despite Prime Minister Jacinda Ardern having announced a three-year phase in of full free tuition.

They say several Canadian provinces, especially Quebec, Newfoundland and Manitoba, and some US states, including Washington and Tennessee, might also be good candidates to move down this path.

They point out that targeted free tuition could be used not only to reduce fee burdens but also to permit the introduction of fees for students from wealthier backgrounds without creating financial barriers for lower-income students. This might appeal to a number of European countries if they ever feel the need to reintroduce fees.

In Eastern Europe it could be an attractive way to “wean people off the current, grossly inequitable dual-track fee systems in which high-achieving students (mainly from wealthier backgrounds) receive their education free while others pay”.

An alternative for England?

The authors ask whether England could return to targeted free tuition, which it employed from the late 1990s up to 2005. The system would remain progressive but the basis on which tuition fees were being discounted would change, as would the beneficiaries.

The director of the Higher Education Policy Institute, Nick Hillman, speaking in a foreword to the report, said the idea is very timely for the UK, particularly England, for three reasons.

“First, the government is currently reviewing the funding of all post-18 education while the opposition wants to row back on the spread of tuition fees.

“Second, everyone wants to see more students from poorer backgrounds.

“Third, the Office for National Statistics may start counting the part of student loans that are never repaid as current public spending – if that happens, we may as well reduce the headline fee for some students and pay cash direct to universities without pretending it is a loan.”

The UK political context certainly suggests there may be an opening for it. The dramatic rise in support for the Labour opposition at the last election is considered to have been significantly aided by young voters’ disaffection with the current expensive tuition fee regime at universities and concern over leaving university with tens of thousands of pounds of debt.

But many of those potential voters are concerned, too, about reversing years of austerity measures, so the cost and timing may not be right to provide full free higher education if Labour wins power in the next election. A more affordable compromise on making higher education free for everyone might be sought.

The same issue seems to have played a major factor in the previous collapse of support for the centrist Liberal Democrats, who in 2012 while junior coalition partners, reneged on a promise not to support a rise in tuition fees, allowing them to triple. They might consider targeted free tuition a face-saving alternative.

Equalising attendance rates

The bigger question, though, is whether targeted free tuition actually works to equalise attendance rates across income groups and on this the study admits that so far the evidence is not particularly strong one way or the other.

As Hillman says, there is a need to assess the whole concept in the round because means-tested tuition fees satisfy some objectives better than others.

“In particular, they fly in the face of the idea – which informs the current arrangement in England that graduates pay back loans only after reaching a certain level of income – that the amount you should contribute towards your own higher education should be based on how rich you are afterwards rather than how poor you were beforehand.

“It is a generation since the concept of means-tested tuition fees was properly debated here. So we are delighted to be bringing the international debate about targeted free tuition back to the UK,” he said.