The logic in loans

February 16, 1996

Apparently, "people think that if you talk about income-contingent loans frequently enough, the problem will go away" ("Loans idea 'irritates' Forth, THES, February 9). Who are these people? As far as I can tell, those of us involved in higher education desperately seek action not talk.

The income-contingent loans proposal has a lot to recommend it. It works elsewhere. It is equitable: it guarantees access to a loan to all prospective students regardless of parental income. To the extent that the loan is subsidised, those who on graduation enter relatively well-paid employment make a relatively large real repayment; those who fail to get highly remunerative jobs pay back less in real terms, or (if they do not pass the income threshold) defer their repayments, possibly indefinitely. The scheme allows the reduction of the subsidy of those of us in the privileged elite by those less fortunate than ourselves.

The proposal is also economically efficient. By reducing the subsidy, it brings nearer into line the net returns that an individual expects to make on her own education and the net returns that society expects to make on it. If the beneficiary of an education deems worthwhile the true cost of the investment which their own education represents, then fine. If they do not, then who on earth should?

This being so, the question of "whether the current rate of 30 per cent is about the right proportion" would, on introduction of a new income contingent loan, become a non issue. The matter would, in effect, be put to the test of the market. That used to be something of which the Government approved.

Mr Forth hints that, with 30 per cent or less of the age cohort in higher education, the taxpayer can continue to meet the full cost of tuition. This is both contentious and irrelevant. If Mr Forth really wants a debate on higher education, let him belatedly enter it by spelling out the reasons for his opposition to the income contingent loans proposal.

GERAINT JOHNES Centre for Research in the Economics of Education Lancaster University

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