Thursday, 11 October 2018

A selective education model that could be popular, if not populist

I've just been reading about a new approach to vocational training pioneered by an entrepreneur in the USA. Recognising that many prospective mature students cannot afford fees, Lambda School in San Francisco offers an intense seven month online course in software coding for free. Students sign up to hand over 17% of their subsequent earnings for 2 years as long as their salary exceeds $50,000. If they don't reach that income in 5 years they repay nothing and the payments are capped at $30,000 in total. One example was quoted of a low-earner who was living in subsidised housing but now earns over $100,000 a year working as a software engineer for the insurance giant AIG. Lambda is looking to broaden out into other subjects.

So, no student debt in this privately operated scheme which is operated as a "graduate tax" rather than a loan -  pretty much how Martin Lewis of reckons our university funding system should work.

There is an obvious catch. Lambda naturally selects the students it is going to take a risk on. The basis is interesting. Not where they went to high school, their college grades or their current job but on whether they are "willing, driven and capable". A person of average intelligence but above average drive would be accepted.

Our higher education system is a fudge. There is selection: uni departments decide what grade offers to make to individual applicants. But if you want to get to university to do something/anything then you pretty much can. So in the end determined applicants can saddle themselves with a big debt. As Martin Lewis often explains, it's not really a debt because it doesn't have to be repaid if you never earn enough and it doesn't count as a debt against your credit rating, when applying for a mortgage for example. And, unlike normal debts, it isn't written off by bankruptcy. But it's seen as a debt, just as the Tories' abandoned care funding proposals were portrayed as a dementia tax when they were nothing of the sort. In politics much is about what are called the "optics". Just ask Nick Clegg!

I am left feeling that the Lambda approach could work here, but only for for mature students and retraining as the likelihood of a return on students of generalist subjects might not be reliable enough to make a business.

But I have come to the view that funding for students and universities does need to be reformed. Not because the loan system is unfair - I don't think it is, at least not materially, even if I find it hard to justify the current interest rates in excess of 6%. But that only really affects a subgroup of students and, by design, only those earning enough will ever pay it. Most other countries have similar schemes even if they call it a graduate tax.

No, the reason I think it needs reform is that the system has become unsustainable.  It is now projected that three-quarters of graduates will never repay their loans. Some say make it all free, like it used to be in the old days. But only 10% went to university then, now it is approaching 50%. The real problem is we have too high a proportion going to university and all sorts of things are deemed to be university subjects when they probably shouldn't be. The Chartered Institute for Professional Development says almost half of all UK graduates end up in jobs that do not require their expensively acquired skills. For example, more than 40% of people in property or estate management have degrees - in 1979 the figure was less than 4%.

Basically, our system isn't selective enough. Weak candidates can get to uni and many will never repay their loan. It's seen as their 'right' to do so, whereas the representatives of the taxpayer should have a say on their prospects. Somewhere a business decision based on that risk of non-repayment needs to be taken, a bit like the Lambda model.

I'm not suggesting that loans (or free tuition against a graduate tax) should only be given where the chance of repayment is very high, but the balance must be shifted. There needs to be rationing by a quota system. Indeed, I've long thought that the numbers of loans available for courses should be loosely related to what the economy needs. (Only loosely, mind, as I don't trust the people who would be given responsibility to get it totally right). We already have defacto quotas for occupations such as medicine, so why not extend that?

Oh and one other thing. I was also reading about what has made people vote on lines seen as populist - for Brexit, Trump or populist parties in Europe*. It seems there are lots of myths - bigotry, age, membership of an alienated underclass, etc. And myths they are. The average income of a Trump supporter was nearly 30% higher than the US median; attitudes to race, gender and cultural change were more important than income. 41% of US millenials went for Trump. While Brexit was indeed popular with those on low incomes, 51% of people on average or just above average voted Leave. Half of people aged 35-44 voted for Brexit.  Vince Cable said folk who voted for Brexit longed for a world "where faces were white". Also not true: Brexit was supported by one in three black and ethnic minority voters, for reasons such as preference given to EU immigrants over non-EU nationals and anxiety over historically high levels of immigration.

I'll leave you to read for yourself the factors that have influenced votes for options perceived as populist, apart from one. While there wasn't a correlation between income and voting for Brexit, there was with education. 84% of Brits under 34 with a degree voted Remain, but only 37% of their peers without a degree did so. More generally, there was a correlation between voting for Brexit and a feeling that "politicians do not listen to people like me", 58% of whom voted Leave.

There is a huge group of young people who I would guess feel ignored and unloved by the politicians: the 51% of them who don't go to university. They don't get loans on what are actually very preferential terms and they don't have many people championing them. No wonder some of them feel alienated.

Tony Blair's ill conceived target of 50% of 17-30 year olds going to university is within a whisker of being met. Progress towards it has not been diminished by the size of fees or the  concerns about student debt. The system is dysfunctional. We should scrap the target and rethink the whole issue.

The Lambda model might have a place in a more varied and more market-driven system, rather than our pretty much one size fits all approach, which is clearly failing.

* Why is populism on the rise? How Brexit and Donald Trump gained support. Sunday Times 7 October 2018. Lambda School was covered in "University for free - unless you get a job" in the same edition.

P.S. another interesting thing about Lambda. It isn't accredited in the U.S. The reason? It would have to have a full time qualified librarian which, as an online business, it doesn't need and can't justify. It relies on what employers think of its graduates. I'm not sure I'd want to do that for medicine, say, but it does show how regulation can be inappropriate in some circumstances.

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