The Australian student loan system is over 30 years old, yet it still produces startling surprises. The recent revelation of an unnamed university graduate grappling with a staggering student loan of $737,000 is a stark illustration. The amount of time this student must have spent in higher education is as bewildering as the figure itself. The amount is so astronomical it seems less like a sensible investment in education and more like someone's telephone number.
How did someone accumulate such a colossal debt? One contributing factor was loan availability. In its original incarnation, there were no limits to the amount students could borrow. Students who decide to spend their lives studying could add thousands to their accumulated debt every year. Combined with periodic loan indexation (to account for inflation), some graduates have run up enormous debts. The government has since imposed limits on student loans, which make it impossible for individuals to accumulate such considerable debts in future. However, as the total number of university students keeps increasing, their collective debt continues to explode. The amount owed is now more than $70 billion, almost four times higher than the national credit card debt.
Thanks for reading Wiser Every Day! Subscribe for free to receive new posts and support my work.
Accumulating such mountainous debts may seem crazy, but from students' viewpoint, such borrowing is entirely rational. After all, the government (on behalf of taxpayers) is taking all the risk. If post-university life goes well, graduates get high-paying jobs and steadily whittle down their student debt. Conversely, if graduates' earnings fail to reach the threshold for repayment, the burden shifts to the collective shoulders of taxpayers, including those who have never set foot in a university. In a real-world example of "heads I win, tails you lose," graduates get to keep any gains from studying while the taxpayer absorbs any losses.
And the subsidies do not end there. The government borrows money at market interest rates to fund student loans but does not charge students a real (post-inflation) interest rate. Thus, even wealthy graduates-bankers, surgeons and lawyers-are subsidised by taxpayers.
Imagine offering loans to stock market speculators on terms similar to student loans. If the speculators make a killing, they repay their loans and keep any profits. If their investments collapse, the taxpayer covers their losses. Who wouldn't accept such a deal?
Keeping speculative gains while shifting losses to others encourages a type of risk-taking known to economists as "moral hazard." It not only affects students and graduates, but it also affects universities. Universities pocket tuition fees regardless of whether or not graduates repay their loans, thus presenting educational institutions with a moral conundrum. Even if loan repayment seems unlikely, they may be tempted to admit marginal students and provide them with mediocre teaching because universities keep students' fees even if they drop out or fail to benefit economically from their studies. Instead of steering applicants towards judicious financial choices related to their education, universities are incentivised to encourage everyone, even those who barely struggled through high school, to attend.
To summarise, moral hazard creates perverse incentives for both students and universities. Although many graduates fail to find jobs that correspond to their qualifications and never make enough money to repay their loans, students keep borrowing because the taxpayer picks up the cost of their unpaid loans. Half the population has never had the privilege of higher education, yet they find themselves bearing the brunt of outstanding student loans.
The social costs of these perverse incentives are enormous. Marginal students who wind up in jobs that do not match their credentials become disenchanted, unhappy, and unproductive. Meanwhile, non-graduates, who would be happy in these jobs, are frozen out because employers increasingly require university degrees. Degree requirements for jobs that formerly did not require them and the perverse incentives of the student loan system have combined to blight the life chances of those who never made it to university. Without any change, student debt will continue to mount, large amounts of capital will be misallocated, and social mobility will remain stalled. It is time for a policy reset.
In my recent report, "Degree Inflation: Undermining the Value of Higher Education" (published by the Centre for Independent Studies), I propose several ways to rebalance the risk of non-repayment of student loans. Instead of a burden born mainly by taxpayers, students and universities should share the risk of non-repayment. To see how this can be done, let's start with students.
Under the current student loan regime, the loan charge equals the rate of inflation, which is less than the government pays to borrow the money. The difference between the government's borrowing costs and inflation is a subsidy to graduates paid for by taxpayers. The result is deeply unfair. Those who do not have the opportunity to study at a university subsidise the education of professionals who make more than they do. (Economist Nick Barr described this arrangement as "Taxing beer to pay for champagne.")
Politicians justify this inequity by claiming that these subsidies allow students from low-income backgrounds to access higher education. This argument would make sense if student loans were like mortgages; an interest rate subsidy would lower monthly repayments. Student loans are different. They are like taxes. The repayments of income-contingent loans are calculated as a per cent of income, not the amount borrowed. Charging graduates a real interest rate adds to the amount of time it takes to repay their loans but makes no difference to their monthly payments.
Mfumo wa mikopo ya wanafunzi wa Australia umekuwa ukitumika kwa zaidi ya miaka 30 lakini bado unaendelea kusababisha mshangao. Utafiti wa hivi karibuni wa mwanafunzi wa chuo kikuu ambaye hajulikani jina lake, ambaye amepambana na mkopo wa wanafunzi wa $ 737,500, unaonyesha waziwazi kwamba hali hiyo ni mbaya. Ni jambo la kushangaza kuona kwamba mwanafunzi huyo alitumia muda mwingi sana katika elimu ya juu. Kiasi hicho ni kikubwa sana hivi kwamba kinaonekana kuwa ni kiasi kidogo cha pesa kinachotumiwa katika elimu na kinafanana zaidi na nambari ya simu ya mtu fulani. Mtu angewezaje kukusanya deni kubwa kama hilo? Sababu moja iliyochangia ilikuwa upatikanaji wa mkopo. Katika hali yake ya awali, hakukuwa na mipaka kwa kiasi ambacho wanafunzi wangeweza kukopa. Wanafunzi ambao huamua kutumia maisha yao kujifunza wanaweza kuongeza maelfu ya deni lao lililokusanywa kila mwaka. Pamoja na urekebishaji wa mara kwa mara wa mikopo (ili kuzingatia mfumuko wa bei), wahitimu fulani wamekuwa na madeni makubwa sana. Tangu wakati huo, serikali imeweka mipaka kwa mikopo ya wanafunzi, ambayo inafanya iwe vigumu kwa watu binafsi kukusanya madeni makubwa kama hayo katika siku zijazo. Hata hivyo, kadiri idadi ya wanafunzi wa chuo kikuu inavyoendelea kuongezeka, deni lao la pamoja linaendelea kuongezeka sana. Kwa sasa, madeni ya nchi hiyo yanazidi dola bilioni 70, karibu mara nne zaidi ya madeni ya taifa ya kadi za mkopo. Asanteni kwa kusoma Kitabu Wiser Every Day! Jisajili kwa bure kupokea machapisho mapya na kuunga mkono kazi yangu. Kujiwekea madeni makubwa kama hayo yaweza kuonekana kuwa jambo la kipumbavu, lakini kwa maoni ya wanafunzi, kukopa kwa njia hiyo ni jambo la busara kabisa. Baada ya yote, serikali (kwa niaba ya walipa kodi) inachukua hatari yote. Ikiwa maisha ya baada ya chuo kikuu yanaendelea vizuri, wahitimu hupata kazi zenye mshahara mkubwa na kupunguza deni lao la masomo. Kwa upande mwingine, ikiwa mapato ya wahitimu hayatoshi kufikia kiwango cha kulipa, mzigo unabadilika kwenye mabega ya walipa kodi, ikiwa ni pamoja na wale ambao hawajawahi kuweka mguu katika chuo kikuu. "Kama mfano wa ulimwengu halisi wa ""mwisho mimi kushinda, mkia wewe kupoteza,"" wahitimu kupata kuweka faida yoyote kutoka kusoma wakati mtoa kodi absorbs hasara yoyote." Na misaada haikomi hapo. Serikali hukopa pesa kwa viwango vya riba vya soko ili kufadhili mikopo ya wanafunzi lakini haitoi wanafunzi kiwango cha riba halisi (baada ya mfumuko wa bei). Hivyo, hata wahitimu matajiri - mabenki, madaktari wa upasuaji na wanasheria - wanasaidiwa na walipa kodi. Hebu wazia kutoa mikopo kwa wawekezaji wa soko la hisa kwa masharti sawa na mikopo ya wanafunzi. Ikiwa wawekezaji hufanya mauaji, wao hulipa mikopo yao na kuweka faida yoyote. Ikiwa uwekezaji wao unaharibika, mlipa kodi hufunika hasara zao. Ni nani ambaye hangekubali mapatano kama hayo? Kuhifadhi faida za ubashiri huku ukibadilisha hasara kwa wengine huchochea aina ya kuchukua hatari inayojulikana kwa wachumi kuwa "hatari ya kiadili". Hii haimaanishi tu wanafunzi na wahitimu, lakini pia inahusu vyuo vikuu. Vyuo vikuu huchukua ada za masomo bila kujali kama wahitimu wanalipa mikopo yao au la, hivyo kuwasilisha taasisi za elimu na tatizo la maadili. Hata kama malipo ya mkopo yanaonekana kuwa ya kawaida, wanaweza kujaribiwa kukubali wanafunzi wa chini na kuwapa elimu ya wastani kwa sababu vyuo vikuu huhifadhi ada za wanafunzi hata kama wao huacha au kushindwa kufaidika kiuchumi kutoka kwa masomo yao. Badala ya kuongoza waombaji kuelekea chaguzi za kifedha za busara zinazohusiana na elimu yao, vyuo vikuu vinahimizwa kuhamasisha kila mtu, hata wale ambao walijitahidi sana kupitia shule ya sekondari, kuhudhuria. Kwa muhtasari, hatari ya kimaadili huunda motisha mbaya kwa wanafunzi na vyuo vikuu. Ingawa wahitimu wengi wanashindwa kupata kazi zinazolingana na sifa zao na hawapati pesa za kutosha kulipa mikopo yao, wanafunzi wanaendelea kukopa kwa sababu walipa kodi huchukua gharama ya mikopo yao isiyo na malipo. Nusu ya watu hawajawahi kuwa na upendeleo wa elimu ya juu, lakini wanajikuta wakibeba mzigo mkubwa wa mikopo ya wanafunzi. Gharama za kijamii za vichocheo hivi visivyofaa ni kubwa sana. Wanafunzi wa hali ya chini ambao huishia katika kazi zisizo sawa na sifa zao huwa na tamaa, hawafurahii, na hawafanyi kazi. Wakati huo huo, wasio na digrii, ambao wangekuwa na furaha katika kazi hizi, huondolewa kwa sababu waajiri wanahitaji zaidi na zaidi digrii za chuo kikuu. Mahitaji ya digrii kwa kazi ambazo hapo awali hazikuhitaji na motisha mbaya ya mfumo wa mkopo wa mwanafunzi wameunganishwa kuharibu nafasi za maisha za wale ambao hawajawahi kufanya hivyo kwa chuo kikuu. """Ukosefu wa mabadiliko yoyote, deni la wanafunzi litaendelea kuongezeka, kiasi kikubwa cha mtaji kitatumiwa vibaya, na uhamaji wa kijamii utaendelea kusimamishwa." Ni wakati wa kuweka upya sera. Katika ripoti yangu ya hivi karibuni, "Degree Inflation: Undermining the Value of Higher Education," (iliyochapishwa na Kituo cha Mafunzo ya Uhuru), napendekeza njia kadhaa za kusawazisha hatari ya kutolipa mikopo ya mwanafunzi. Badala ya mzigo uliozaliwa hasa na walipa kodi, wanafunzi na vyuo vikuu vinapaswa kushiriki hatari ya kutorudishwa. Ili kuona jinsi hii inaweza kufanywa, hebu kuanza na wanafunzi. Kwa mujibu wa sheria ya sasa ya mkopo wa mwanafunzi, malipo ya mkopo ni sawa na kiwango cha mfumuko wa bei, ambayo ni chini ya serikali hulipa kukopa fedha. Tofauti kati ya gharama za kukopa za serikali na mfumuko wa bei ni ruzuku kwa wahitimu inayolipwa na walipa kodi. Matokeo yake ni yasiyo ya haki kabisa. Wale ambao hawana fursa ya kusoma katika chuo kikuu kutoa ruzuku elimu ya wataalamu ambao kupata zaidi kuliko wao kufanya. (Mtaalamu wa uchumi Nick Barr alifafanua mpango huo kuwa "Kutoingiza kodi kwenye bia ili kulipia champagne".) Wanasiasa wanahakikishia ukosefu huu wa usawa kwa kudai kwamba ruzuku hizi huruhusu wanafunzi kutoka asili ya mapato ya chini kupata elimu ya juu. Hoja hii ingekuwa na maana kama mikopo ya wanafunzi walikuwa kama mikopo ya nyumba; ruzuku ya kiwango cha riba ingepunguza malipo ya kila mwezi. Mikopo ya wanafunzi ni tofauti. Ni kama kodi. Malipo ya mikopo ya mapato-mwisho ni mahesabu kama asilimia ya mapato, si kiasi kukopa. Kuwajibisha wahitimu kwa kiwango cha riba halisi huongeza muda unaohitajika kulipa mikopo yao lakini hautoi tofauti yoyote kwa malipo yao ya kila mwezi.