Students in Britain have gone to strike over tuition fees. But who should pay for higher education because there simply is no free education. 

The Nordic countries in Europe pay for universities through the public purse and some even generously subsidize the living costs of university students. It makes sense for them because participation is almost universal and they have a steeply progressive tax system so that they can recuperate the funds from graduates who typically end up as the better earners. 

European countries like France or Germany, too, say higher education is important, but their governments are neither willing to put in the required funds nor allow most of their universities to charge tuition. They end up compromising quality and with limited provision, with the effect that all workers end up paying for the university education of the rich parents’ children. That's because wherever access is limited, it tends to be the wealthiest and not the smartest students who get the best places, whatever the source of funds.

A third alternative is to allow universities to charge tuition, and interestingly, Organization for Economic Cooperation and Development (OECD) data show absolutely no cross-country relationship between the level of tuition fees countries charge and the participation of disadvantaged youth in tertiary education. In fact, social mobility is worse in Germany which pays for almost all university education through the public purse than it is in the UK. That is because to mobilize those public funds for higher education, Germany ends up charging tuition for children in kindergarten, leading to an uneven playing field to start with. 

But getting tuition right is not simple either. If countries put the burden for tuition entirely on the shoulders of families, they risk not attracting the brightest but the wealthiest children to attend, which means not making the most of the country’s talent. 

If countries rely mainly on commercial loans which students have to repay once they finish their studies, they still leave students and families with the risk, because the promise of greater lifetime earnings of graduates is a statistical one, and there is actually very wide dispersion in earnings. The UK, and some other countries too, have tried to square that circle with a combination of income-contingent loans and means-tested grants. That basically means risk-free access to financing for prospective students with governments leveraging, but not paying, for the costs.

But even the best loan system is often not sufficient. There is ample evidence that youth from low-income families or from families with poorly educated parents, but also youth who just don't have good information on the benefits of tertiary education, underestimate the net benefits of tertiary education. That’s why it has paid off for the UK to complement the loan scheme with means-tested grants or tuition waivers for vulnerable groups. It will be worth continuing to do so, simply because people with better education will pay much more in taxes than what their education costs. 

Still, there is a lot the UK can do to further improve its approach to financing universities. For a start, it can do better with aligning course offerings with societal demand. That may also mean to think more carefully about fee structures, ensuring that these better reflect the cost of provision and the value to students. Indeed, it is crucial to ensure that fees reflect the educational value of the programmes for students, rather than the amounts that universities can extract from students simply because graduates can expect higher lifetime earnings that also reflect their prior attainment. Consider that England currently has an above-average share of low skilled 20- to 34-year-old graduates but an above-average share of tertiary graduates. Any increases in tuition fees must therefore demonstrably go into better teaching and learning. The Framework of Excellence makes a start to address this, but it does not yet adequately capture the most important element in this regard – the value that universities add to student learning outcomes. 

I also worry that the loan repayment parameters mean many middle-income workers – such as teachers, health professionals, public sector workers – will end up paying more for their education than better earners such as lawyers and bankers. Not least, it needs to be borne in mind that many UK students are likely to have some level of debt for up to 30 years and some research on the broader implications of student debt would be important. Contrast this with Australian students who pay off the loans for their undergraduate degrees within nine years of graduation. 

(Andreas Schleicher is the director for education and skills at the Organization for Economic Cooperation and Development. The article reflects the author's opinion, and not necessarily the views of CGTN.)