Maximum price for education ( discuss benefits and drawback)

Extract A

Rethinking tuition fees

The value of a degree is significant. The latest data shows that the median university graduate income was £10000 more than the average non-graduate income in 2018. This ‘graduate premium’ means graduates will contribute significantly to the economy. In addition, the government will benefit greatly from additional tax revenues. However, funding higher education continues to be a major issue. English universities charge some of the world’s highest fees. Interest rates on student loans are now 6.3%. There are a large number of courses where graduates are likely to earn less than non-graduates, despite an average of £50000 of debt. The Department for Education estimates that 45% of the value of loans will not be repaid. Outstanding student loans in England totalled more than £100 billion in 2018. By 2023 total outstanding student loans are forecast to rise to £120 billion. One option for revising student fees could be to charge higher fees for courses that are more expensive to teach or that have a better chance of higher earnings. That would make Science or Mathematics degrees more expensive to study than English or Philosophy.

At most universities the level of fees is likely to be the same flat rate of £9250 per year. However, science-based courses need more expensive equipment and courses such as medicine require more teaching time and personal instruction. Tuition fees were introduced in 1998 at £1000 per year. They are currently £9250. Economists estimate that the price elasticity of demand for higher education is about –0.5. Charging £9250 a year for an undergraduate degree makes England very expensive by international standards. Scotland has no fees for Scottish students, and fees in Wales and Northern Ireland are significantly lower. Much of Europe has low or no fees and Germany, which used to charge fees, has abolished them, replacing them with a graduate tax. The only country with comparable fees is the United States. Top private colleges can charge more than the equivalent of £30000 per year while state colleges can charge local students less than fees in England.

Despite this, student numbers at English universities have continued to increase from 450000 in 1998 to over 700000 in 2018. Students from all backgrounds are more likely to go to university than ever before. However, applicants from low-income areas are much less likely to go to university than applicants from high-income areas. The Universities and Colleges Admissions Service (UCAS) found that in the most deprived 10% of postal areas about 20% of young people went to university in 2018, compared with 50% in the highest income areas. Research by University College London revealed that even when candidates from low-income areas had the same exam results, they were much less likely to apply to university than candidates from high-income areas.

Extract B

Low-income university students twice as likely to drop out than high-income ones The number of students from low-income areas who drop out of university before finishing their degree is at its highest in five years, indicating a considerable waste of scarce educational resources. This news comes at the same time as a drive to recruit students from poorer backgrounds, with universities spending a total of £725 million on access initiatives in the past academic year alone. A number of top universities have started to lower their A level grade offers to students from low-income areas, in an attempt to encourage them to apply. However, there is a danger with ‘enticing’ disadvantaged students through lower grade offers, if universities are not going to provide ongoing support for them once they begin their courses.

The latest figures show that 9% of disadvantaged undergraduates do not continue in higher education beyond their first year. In comparison, the average drop-out rate among students from the high-income backgrounds was less than 5%. The gap continues to widen. A report, published by the Office for Fair Access, concluded that: ‘The significance of this for students is huge. Higher education can be a transformational experience that opens doors to rewarding careers and social mobility, but this is only the case if students achieve successful outcomes.

EITHER

(1) advantages of a free market approach Evaluate the possible to providing services such as education. (20 Marks)

OR

(2) Evaluate whether government intervention is able to correct market failure in education. (20 Marks)