Student loan scheme would ‘not hinder access’ to college among poorer students

A student loan scheme linked to graduates' income would not hinder access to higher education by poorer students, an Oireachtas committee has heard.

The possibility of such a loan scheme is being examined by the Oireachtas committee on education as part of a series of hearings over the future funding of higher education.

At a meeting on Tuesday evening, Independent senator Lynn Ruane expressed concern at the possibility that large student debt would turn poorer students off higher education.

While low-income students have their tuition fees paid through grants, she said an income-contingent loan system could place a major debt burden on the shoulders of vulnerable students.

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In addition, she said disadvantaged students would be further disadvantaged given that the parents of affluent students would be able to pay their children’s college fees upfront.

In response, Dr Aedín Doris, an economics lecturer at Maynooth University, said research from other jurisdictions where such loan schemes were in place indicted there had been no negative impact on access.

Even in the UK, where the cost of tuition fees and loans had increased significantly in recent years, the proportion of students from poorer backgrounds had not decreased, she said.

“Students understand the investment they are undertaking . . . they understand the payback from higher education, and that these repayments will be made in the future only if they can afford them,” she said.

Dr Doris agreed that while an income-contingent loan scheme was not a solution to access issues, it could potentially free up State money to invest in removing barriers to education from pre-school through to second level.

Financial advantage

While she said children of well-off backgrounds may be in a position to have their loans paid off by their parents, she said affluent parents were always in a position to give a financial advantage to their children whether through private education or housing deposits.

Dr Doris noted that when “free fees” were introduced for higher education in the mid-1990s, expenditure by more affluent parents on private schools and grinds simply increased.

She said a much bigger unfairness was that people who had not benefited from higher education were paying for it through the tax system.

Dr Darragh Flannery of University of Limerick said his joint analysis with Dr Doris of the fiscal implications of such a loan scheme showed they were "entirely feasible" in Ireland.

He said the design of such a scheme should be carefully considered, as the choice of the parameters of the scheme would determine the extent of the public subsidy required.

The scheme would allow a substantial increase in higher education funding without reducing access and at a lower cost to the exchequer compared with other options.

He said resulting savings could then be used to improve funding for earlier education, from pre-school through to secondary school, where bigger barriers to participation in higher education lie.

By contrast, two other academics – Dr Charles Larkin of Trinity College Dublin and Dr Shaen Corbet of Dublin City University – raised concerns over such a system.

In a recent report, their analysis indicated that an income-contingent loan system could not work in Ireland due to the high probability of default.

They have estimated that the proposal would cost the exchequer €10 billion over 12 years before repayments stabilised the system.

A potential alternative they proposed was an “education levy” on earned income that could fund an increase in expenditure in higher education.