FUNDINGPREFERENDUM

INTRODUCTIONEach year delegates from USI member Students’ Unions across the island gather for Congress to elect the Officer Board to work full-time on behalf of the members and to set USI’s policies. USI Congress is the supreme decision making body of USI. The number of delegates from each member union correlates to the number of members of that union.

One of the fundamental principles of USI is that it strives for an education and training system open to all, irrespective of any consideration so that each individual can realise their full potential.

USI’s current policy in relation to the funding of the Higher Education is that the Exchequer i.e. the taxpayer should bear the entire cost of tuition fees for Irish/EU students through progressive taxation. This policy has been reaffirmed by USI Congress on a number of occasions most recently in 2009.

In light of the fact that the Student Contribution will be €2,250 in September 2012 and the Minister has signalled that it is the Government’s current intention to increase the contribution to €3,000 by 2015, USI National Council has decided to consult the membership to determine if USI’s current funding policy is the most appropriate policy to achieve equity of access.

At USI Congress in April delegates will be asked to decide USI’s position on the funding of Higher Education taught programmes i.e. taught courses at levels 6 – 9 of the National Framework of Qualifications (NFQ).

Delegates will be asked to express their preference from 1 to 6 on a number of proposed funding positions. The text of the question is as follows;

Please rank in order of preference, what should USI’s position on the funding of Higher Education taught programmes be?

• GRADUATE TAX.• ONE HUNDRED PERCENT EXCHEQUER FUNDED.• ONE HUNDRED PERCENT UPFRONT FEES.• STUDENT CONTRIBUTION / REGISTRATION FEE (CURRENTLY €2,250).• STUDENT LOAN SCHEME.• NONE OF THE ABOVE.

The ‘preferendum’ will be conducted by means of a secret ballot via a single transferable vote (STV). If, on the first or subsequent counts, none of the positions have reached the quota, i.e. have attracted more than 50% of the total poll, the position/s which have attracted the lowest number of votes shall be eliminated and the votes redistributed in accordance with the second and subsequent preferences. This process will continue until such time as a position reaches the quota.

Following the result of the ‘preferendum’, the successful position will become USI’s official position on funding Higher Education taught programmes superseding any previous conflicting policy. The successful position will be used by USI to formulate a comprehensive policy the funding of Higher Education taught programmes.

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BACKGROUNDIn 1995/96 the ‘Free Fees’ scheme was introduced for full-time undergraduate students. This scheme replaced up front fees paid by students with a payment from the Exchequer on their behalf.

This scheme applied to all students attending full-time courses in public Higher Education Institutions in Ireland who were:

•ofEU/EEAorSwissnationality, •werefirst-timeundergraduates •andhadbeenlivingintheEU/EEAorSwitzerlandforat least three of the five years preceding their entry to an approved third level course.

When the ‘Free Fees’ scheme was introduced, an annual student services charge or ‘Registration Fee’ of £150/€190 was also introduced which was intended to pay for other student services such as Careers, Chaplin, Counselling, Clubs and Societies along with registration and examination fees.However, over the next 14 years, the ‘Registration Fee’ increased almost annually and each time a similar amount of money was taken out of the funding provided to institutions.

In Budget 2011, the ‘Registration Fee’ or ‘Student Services Charge’ was abolished and replaced with a direct ‘Contribution Charge’ thus ending the requirement for the funding to be spent on registration, examinations and student services. The contribution currently stands at €2,250.

The number of students in Higher Education in Ireland has increased dramatically since the introduction of the ‘Free Fees’ Scheme and Ireland now has the highest percentage of second-level students continuing on to third level anywhere in the EU.

THE POSITIONSTHE FOLLOWING PAGES CONTAIN AN UNBIASED, FACTUAL SUMMARY OF EACH OF THE POSITIONS ON THE PREFERENDUM.

EACH POSITION ALSO CONTAINS A TABLE LAYING OUT THE PROS AND CONS OF EACH.

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If a graduate tax were introduced in Ireland, students would not pay any fees upfront i.e. Higher Education would be completely free at the point of entry. Under the current model where it is anticipated that the student contribution will increase to circa €3,000 per year by 2015, families are finding it increasingly difficult to afford to pay for the costs of education. By ensuring Higher Education is totally free at the point of entry it means that students from all backgrounds have access to a third level education.

A graduate tax could be implemented in two ways. Firstly, a graduate would repay an additional rate of tax for their entire working life however this could lead to a graduate repaying the cost of their course many times over. Alternatively a system could be implemented where a graduate would be asked to repay for a set period of time perhaps 15 years or until such as they have repaid a certain percentage of the cost of their course this ensuring that the burden for education is borne mostly by the Exchequer but contributed to by the graduate.

In a graduate tax funding model the Exchequer would borrow money to cover the cost of Higher Education and the graduate would pay an additional amount of tax after a certain threshold when they begin earning. If the graduate earns below the threshold or is unemployed they don’t pay anything. The additional income from repayments by graduates will provide additional revenue for colleges & universities to invest in additional resources. In a graduate tax model similar to the second option above modelled by the National Union of Students in the UK (NUS UK), a teacher would repay approx £7 per week.

Unlike a Student Loan Scheme, the individual graduate has no personal debt burden i.e. they do not owe any money. This is a particularly important distinction as students from lower socio economic backgrounds are often debt adverse and may avoid Higher Education as they are uncomfortable taking on any level of personal debt. Secondly, by having no personal debt it has no impact on the graduate’s ability to obtain a mortgage, car loan etc.

One major drawback to a graduate tax model is that a graduate may decide to emigrate in order to avoid repayments. A second issue is that the repayments are collected through the general taxation system and there is no guarantee that the money wouldn’t be diverted elsewhere and not be spent on education.

Given the state of the public finances and Ireland’s debt to GDP ratio, it may be difficult for the Exchequer to borrow the funds necessary to run the scheme as there is a lag of a number of years for repayments to begin as the student must graduate and begin earning above a minimum threshold. Like a student loan scheme, the issue of initial funding may not insurmountable and could be advanced by the European Investment Bank or perhaps by borrowing money from the National Pension Reserve Fund.

PROS•Education is open and accessible to all

as it is free at the point of entry and there is no upfront cost.

•Additional resources will be available for maintenance grants as the state will no longer need to cover the student contribution under the existing system.

•Additional revenue may be available to colleges/universities and/or the Exchequer to invest in additional facilities or to deliver additional supports to students.

•Repayments are income contingent, graduates pay an additional levy or percentage through taxation.

•Graduates have no personal debt. This resolves the issue of students from lower socio-economic backgrounds avoiding Higher Education as they are debt adverse and also the issue of graduates being unable to obtain mortgages, car loans etc. due to personal debt burden.

•As graduates do not have a personal debt there is no interest to be paid on repayment.

•Repayments are based on the graduate’s earnings and not their parents as is the case under the current means test

CONS•Graduates may emigrate to avoid

repayments.

•Significant administrative and implementation costs.

•Additional revenue is collected through general taxation and may not be spent on education.

•Graduate tax could involve rolling Exchequer borrowings and debt servicing costs which may not be possible in the current climate.

•There may be a significant time lag before any additional funding is available to colleges/universities as graduates must graduate and begin earning before repaying.

•In some graduate tax models graduates repay for life and thus repay the cost of their programme many times over however; this may be negated by introducing a maximum length of payment and/or maximum repayment amount.

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Higher Education is a public good and having increased numbers of graduates benefits all of society; economically and otherwise.

Ireland has a progressive taxation system which is designed to fund our public services. Third level education is a requirement for many professional careers; similar to how second level was viewed a generation ago.

Graduates will, on average, get better jobs, generate more economic activity and pay on average 70% more tax over the course of their working lives than non-graduates and therefore repay the cost of their education.

However, given the state of the public finances, the numbers of students currently in Third Level education, and the expected rise in that number over the next decade, it would be extraordinarily difficult for the Exchequer to take on even greater percentage of the cost. With a huge percentage of the funding available going to paying for tuition fees for every student, it is likely that less money would be available for grants. Therefore while College would theoretically be free, students without the money to afford living expenses associated with college may still be unable to access Higher Education.

Ireland is an extremely attractive location for EU students to come and study as it is a safe, English speaking country with lower fees than England, Northern Ireland and Wales. This can be seen from the 20% increase in UK students applying to study in Ireland next year. As a result, we have a disproportionate number of EU students coming to study here compared with the number of Irish students going abroad to study. This puts even more pressure the system and is a factor in CAO points for courses.

Colleges/Universities in Ireland are already suffering from lack of funding, if this funding model was to be implemented, i.e. the Student Contribution removed it is likely that general taxation would have to increase to avoid a severe reduction in the quality of education.

The re-introduction of upfront fees transfers the burden for funding Higher Education from the Exchequer to the individual student/family and may release Exchequer funds to be spent in other areas of the economy. Students would be charged fees in line with the full economic cost of their courses. In essence this would be a return to the position in universities prior to the

introduction of the ‘free fees’ scheme.

The additional funding generated by the introduction of upfront fees would likely be available immediately to Higher Education institutions to invest in additional infrastructure and services. Internationally, where upfront fees are charged to students a provision is made to provide scholarships/bursaries/grants to enable students from lower socio-economic to attend Higher Education.

The introduction of upfront fees would pose insurmountable challenges for many students from low to middle income backgrounds and it is likely that significant numbers of potential students would be unable to afford Higher Education potentially leading to both societal and economic issues.

PROS•The number of school leavers

attending third level courses has increased dramatically to almost 7 out of 10 and would likely continue to increase.

•Education is open and accessible to all as it is paid for by the Exchequer.

•Students do not make course decisions based on the cost of courses and instead select a discipline of genuine interest.

CONS•No additional revenue will be available

to colleges/universities and/or the Exchequer to invest in additional facilities or to deliver additional supports to students potentially affecting the quality of education and future employment prospects.

•Students from other EU countries may chose to study in Ireland due to low fee rates and return home after graduation providing no return on investment for the Irish taxpayer.

•In the current climate Exchequer is unable to cover cost.

•No additional funding will be available for maintenance grants.

•Likely increase in general taxation to cover ongoing costs.

PROS•Significant additional revenue will be

available to colleges/universities and/or the Exchequer to invest in additional facilities or to deliver additional supports to students.

•Reduces disparity between different categories of student e.g. full and part-time undergraduate students would both pay fees.

CONS•Potential for student migration i.e.

students choosing to study abroad.

•Additional revenue may be retained by central Government and not used for additional facilities or services.

•Significant equity of access issues for students from low and middle income backgrounds – fees may only be affordable to students from wealthy backgrounds and would result in access issues.

•Means tests are based on the parents incomes and not the future income of the graduate.

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PROGRAMME EU NON-EUArts €5,784 €14,850 Science €7,478 €20,000Medicine €8,862 €39,200

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YEAR COST2006/2007 €8002007/2008 €8252008/2009 €9002009/2010 €15002010/2011 €15002011/2012 €20002012/2013 €22502013/2014 €2500*2014/2015 €2750*2015/2016 €3000*

(CURRENTLY €2,250)The current system of students paying a percentage of the costs of their education by means of the Contribution Charge spreads the costs of Higher Education between the Exchequer and the student/family but the burden is primarily borne by the Exchequer. The current Higher Education Grants system pays the Student Contribution on behalf of approximately 44% of students on the basis of their family income.

The Contribution Charge, formerly the Registration Fee, has increased substantially since its introduction along with the ‘free fees’ scheme in 1996/1997.

The majority of the full economic cost of Higher Education is still bourn by the

Exchequer and it is likely given the state of the Irish economy and the public finances that the Government will seek to continue to increase the Student Contribution in future years resulting in it becoming increasingly difficult for families to meet the cost of the contribution.

Students who are just above the maximum threshold for the Maintenance Grant get no assistance in paying the Student Contribution and in the current climate it is likely that this is having a substantial impact on their ability to obtain Higher Education qualifications.

Since the introduction of the ‘Free Fees’ scheme and the Student Contribution, formerly Student Services Charge or Registration Fee, access rates to Higher Education in Ireland have increased enormously, however the proportion of students from lower socio economic backgrounds has not increased in line with other categories of students.

There has been a dramatic increase in the number of students and a decrease in funding by the Exchequer which has been partly offset by the increase in the Student Contribution. This raises concerns about the lack of funding affecting the quality of education in Irish colleges/universities.

PROS•The number of school leavers

attending third level courses has increased dramatically to almost 7 out of 10 and continues to increase.

•The means tested maintenance grant system ensures that students from lower socio economic backgrounds have the contribution paid on their behalf.

•Students in all courses pay the same contribution irrespective of course costs ensuring that students who opt for more expensive courses do not suffer a financial penalty.

CONS•No additional revenue will be

available to colleges/universities and/or the Exchequer to invest in additional facilities or to deliver additional supports to students potentially affecting the quality of education and future employment prospects.

•It has become increasingly difficult for families to afford to pay the contribution as it has increased potentially affecting access rates.

•Increasing numbers of students are having the contribution paid on their behalf as they are in receipt of a grant thus putting additional pressure on the grant system.

•The means test for availing of the state payment under the grants system is based on parents’ income and not future income of the graduate.

•There is a huge disparity where full-time undergraduate students pay the contribution while part-time undergraduate and taught masters students pay full upfront fees.

•It is likely that the contribution will continue to increase.

•Students from other EU countries may chose to study in Ireland due to low fee rates and return home after graduation providing no return on investment for the Irish taxpayer.

•In the current climate Exchequer is unable to cover cost of additional students and will likely have to implement a cap on student numbers.

YEAR COST1996/1997 €1901997/1998 €3171998/1999 €3301999/2000 €3532000/2001 €3712001/2002 €3962002/2003 €6702003/2004 €6702004/2005 €7502005/2006 €775

Anticipated increases as announced by the Minister for Education & Skills in February 2012

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Student loans schemes exist in several countries across the globe where the Government has decided that to ensure a high quality of education the Exchequer and the graduate should jointly bear the cost of Higher Education. To ensure access to Higher Education the State puts in place a loan scheme which is open to all students and does not require a guarantor. The student pays no money upfront and does not begin repayments during their studies. Under this scheme Higher Education is free at the point of entry and thus accessible to all.

If a loans scheme was implemented in Ireland, it is likely that it would be ‘income contingent’. That means, that after graduation, no student would have to starting repaying their loan until their income was above a certain threshold and not at all if they were unemployed.

Following graduation a graduate would start repaying the loan after they earn above a defined threshold until either; the loan was paid off or a fixed number of years had passed in which case the remainder of the loan would be written off. The more a graduate earns, the faster they would repay the loan however, if the graduate was unemployed they would make not any repayments. The revenue raised through a student loan scheme could be used to provide additional resources or student supports and to increase the quality of education offered to students.

There are however some drawbacks to a student loan scheme, for example graduates could emigrate to avoid paying the loan thereby leaving the system with a significant shortfall. Research has also shown that students who are coming from lower socio-economic backgrounds are ‘debt averse’ meaning they are less likely to take out loans to pay for Higher Education, even when, on average, it is in their long term economic interest to do so.

Students with student loans may find it harder to get other loans to such as mortgages as they already have a significant debt burden. In some loan schemes interest on the unpaid balance is added on annual basis until the loan is written off or repaid.

Because the State no longer has to pay the student contribution on behalf of students receiving a grant, this releases additional money to extend the maintenance grant to additional students to help them cover the costs of attending Higher Education such as transports, books, accommodation etc.Finally, given the state of the public finances and Ireland’s debt to GDP ratio, it may be difficult for the Exchequer to borrow the funds necessary to run the scheme as it takes a number of years for repayments to begin. The issue of initial funding may not be insurmountable and could be advanced by the European Investment Bank or by borrowing money from the National Pension Reserve Fund.

If the position of none of the above is successful, delegates will have decided that none of the five options for are acceptable as USI’s funding positions.

PROS•Education is open and accessible to all

as it is free at the point of entry and there is no upfront cost.

•Additional resources will be available for maintenance grants as the state will no longer need to cover the student contribution under the existing system.

•Additional revenue may be available to colleges/universities and/or the Exchequer to invest in additional facilities or to deliver additional supports to students.

•Repayments are income contingent, graduates only repay what they can afford based on earnings after a threshold.

•Repayments are based on the graduate’s earnings and not their parents as is the case under the current means test.

CONS•Lower income groups are debt

adverse and may decide to avoid Higher Education to avoid debt.

•Graduates carry significant personal debt burden potentially leading to issues obtaining mortgages, car loans etc.

•Graduates may emigrate to avoid repayments.

•Significant administrative and implementation costs.

•Loan system could involve rolling Exchequer borrowings and debt servicing costs which may not be possible in the current climate.

•There may be a significant time lag before any additional funding is available to colleges/universities as graduates must graduate and begin earning before repaying.

•The graduate’s personal debt may be subject to an annual rate of interest.

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