Should Irish Students Turn Their 'Free-Fees' Campaign Towards Higher Education Grants?

Yesterday the HEA published the third Eurostudent Survey to be conducted in the Republic of Ireland; the report is available on the HEA website here. There is a short discussion of the report in today's Irish Independent (here), which quotes the report saying that "there are substantial negative effects of working beyond 20 hours per week. Up to this point, the effects of working extra hours do not seem to be important." Other findings are that:

- Some 65pc of students earn at least some income from employment
- Students' spending averages €1,086.64 per month
- The most popular job held by students is shop assistant, followed by working as waiters or waitresses and then bar staff

The third Eurostudent Survey reports on 2007 field-work that was conducted here with colleagues at the Geary Institute. Now we are at the start of 2009 - and with economic recession underway - the concern of working more than 20 hours a week during college is mostly a thing of the past. Despite this, student expenditure costs of approximately €1,000 a month (or €12,000 a year) still have to be financed. So average living costs of a four-year undergraduate degree are circa €50,000, and somehow they must be paid.

According to a report in today's Irish Times, over 20,000 students are expected to take to the streets of Dublin tomorrow to oppose the reintroduction of third-level fees, and to highlight the role they feel education should play in any economic recovery plan. It might be the case that a better use of the protest would be to re-direct the campaign towards a call for improved higher education grants.

The rationale for this stems from the unemployment problem that students now face. Instead of worrying about whether they are working too many hours, or wishing they had a handier number, many students are now lucky to have any job at all. A discussion on this issue is provided by Bridget Fitzsimons in the current edition of the UCD University Observer: "No part-time means full-time trouble...". "Student Advisor, Aisling O’Grady has noted 'a definite marked increase' in those visiting (UCD) Student Advisors for financial advice after being unable to find employment." For any students in severe financial difficulties, some options for advice and support are mentioned in the article. One comment about the new conditions facing students is provided by Juan Houlihan in 1st Arts:

"...I couldn’t go home every weekend for work, and I thought it would be easy to find work in Dublin. I’ve looked in a lot of places, but nowhere will even look at CVs. It’s difficult, and if I didn’t have grants to cover some expenses, I’d be in a lot of trouble. It’s hard to get through college..."

With the uncertain and unlikely prospect of getting a part-time job to cover living costs during higher education, students would gain considerably from an improved higher education grant. This could be a preferable option if there were to be an either/or scenario between 'free frees' or 'improved grants'. The re-introduction of fees in the context of an interest-free student loan system has been tabled by the Minister for Education, Batt O'Keefe. An interest-free lending initiative would mean that students would not have to worry about the cost of their higher education until they have secured post-graduate employment and are earning above a certain level of salary. In a detailed discussion of interest-free student loans on this blog, it was previously noted that the UK student loan system has the following features:

- repayments do not start until April of the year after students have completed their course
- repayments do not start until the student is earning more than 15,000 pounds
- the repayment is 9% of gross salary
- the repayment is transacted as an automatic deducation (through PAYE though this could as easily be a direct debit)
- there is no particular schedule for clearing the debt, but, if it has not been cleared 25 years after repayment began, or if the student turns 65 years old ---- then the remaining debt will be cancelled

In fact, the UK student loan system is a really good offer. Though it does mean that British taxpayers (particularly those that do not get the chance to attend higher education) sacrifice the time-value of their tax-pounds. In other words, they stump up cash so that other people can get a higher education. The money might otherwise be spent on things such as better policing, better healthcare or better primary school services. What's more, the loans on offer are subsidised by taxpayers so that there are some tax-pounds that will never go towards other public services. (What this means is that there really is no such thing as 'free fees' - as somebody else will pay the cost!). All that being said, the recipients of interest-free student loans shouldn't feel so bad, as there is such a thing as non-private returns to education (in other words, externalities - including more tax revenues for govt.).

So, it may be the case that some students would prefer to have 'interest-free student loans' as well as 'improved higher education maintenance grants', rather than just maintaining the status quo of 'free fees'. At present, to get a full maintenance 'grant' of €3,420, the maximum income limit for a family of four children is €38,675 a year. For more than eight children, it is €46,140 a year. Former education minister Niamh Bhreathnach, who abolished tuition fees, admitted she was disappointed at these figures. For more on the 'grant' and its history, see this previous blog post.

What we do know is that the annual maintenance support of €3,420 seems very low, and that it falls very far below the €12,000 that students are estimated to need for their annual expenditure (see Eurostudent 3). Without part-time employment opportunities to cover the difference, will every student comtinue to attend college? Furthermore, what about the students who are not entitled to a grant but can't get a part-time job? That is, those students from a four-kid family with an income above €38,675? A Geary working paper from 2007, "Household Characteristics of Higher Education Participants", suggests that eligibility for maintenance grants is an important factor for encouraging particpation in higher education.

All of this leads to the suggestion that a better use of tomorrow's protest would be to call for interest-free student loans and improved higher education grants (improvements to both the amount of the payment and the level of family-income at which the grant is payable). All that being said, 'interest-free student loans' combined with 'improved higher education grants' is a much more expensive prospect for the government compared to simply introducing interest-free loans, or for that matter, simply re-introducing student fees.

One thing is for certain, if the 'free fees policy' is definitely on the way out (and the govt. deficit is certainly putting this on the agenda), then students would be better served lobbying for an interest-free loan system rather than protesting against the inevitable. What might be needed now is some thought on how to generate short-term finance for interest-free student loans (and perhaps even improvements to grants). One suggestion is to issue ring-fenced special savings bonds. These bonds would bear interest in the same way as any other Irish govt. bond; however, the buyers of these bonds would also know that they are generating cash-flow to support Irish higher education.