Tue | Jul 17, 2018

Bruce Golding | Accessing university education

Published:Sunday | May 7, 2017 | 12:00 AM
Bruce Golding
Professor Archibald McDonald has questioned the viability of Government's bailing out delinquent university students every time there's an outcry.

Last Wednesday at his induction into the UWI's Roll of Honour, Prime Minister Andrew Holness called for a public discussion on the funding of university education. This came against the background of the Government's recent decision to provide grants and loans to cover the fees owed by 339 final-year UWI students who were in danger of being barred from sitting their terminal examinations.

It also followed concerns expressed by pro vice-chancellor and Mona principal, Professor Archibald McDonald, that, welcomed though it was, the sustainability of such an initiative in future years was dubious, and it was, in principle, inequitable, since it did not address the needs of other students who are struggling financially to get to final year.

I cannot recall what tuition fees were when I attended the UWI in the 1960s, but it didn't seem to cause any stress to my father, who had two sons at the UWI, and had to meet those costs from his salary as a member of parliament, which was then £S3,000 or $6,000 per year. Mind you, that would be equivalent to $6.2 million at today's values. So much for those who carp about the salary of members of parliament, which is currently less than $3.5 million! In those days, the Government covered more than 90 per cent of the UWI's expenses, but then the number of Jamaican students was just over 2,000.

For the academic year 2014-2015, fifteen thousand, nine hundred and five Jamaicans were enrolled at the UWI. The Government's budgetary allocation to the UWI was $7.4 billion, equivalent to $468,116 per student. This does not include loans of $1.5 billion and grants of $47.7 million provided that year by the Students' Loan Bureau (SLB) to 4,190 of the 15,905 Jamaican students.

University education is expensive in every part of the world. Accessibility, therefore, depends, to a large extent, on how much of that cost the student is required to bear. The operating costs in 2014-2015 for the combined campuses of the UWI with a total enrolment of 47,395 were $58.6 billion, or an average of $1.2 million per student. Tuition fees collected, however, amounted to $7.4 billion, or 12.5 per cent of operating costs. The rest was made up by contributions from regional governments (43.3 per cent) and fundraising and income-earning projects (38.3 per cent). This left a deficit of $3.4 billion (5.8 per cent).




As at the end of the academic year 2014-2015, the UWI was owed $13.6 billion (Jamaica's share, $161.3 million) by regional governments and $4.2 billion in uncollected student fees. This situation occurs with such undeviating regularity that it has placed the university under severe financial stress, and it is the ingenuity of its leaders and management and the goodwill of a few benefactors and committed alumni that have averted crises that would have forced it to curtail important academic programmes.

The cost of tuition for undergraduate programmes at the UWI varies among courses of study and ranges from $276,000 to $624,605 million per annum. The total fees for an undergraduate degree at the UWI, depending on the length of study, can therefore be anything between $828,000 and $3.1 million, not including books and living expenses, a cost that the majority of Jamaican families simply cannot afford. Students, understandably, complain about tuition costs and protest loudly whenever these fees are increased. Yet, even if the UWI were able to collect every cent of the fees currently charged, it would not amount to much more than 15 per cent of its operating costs.

Universities in wealthy countries benefit from substantial state funding. Several countries in Europe provide tuition-free education to university level, but this is only made possible by extraordinarily high income tax rates, exceeding 50 per cent in some cases. In the US, federal, state and local government contributions to universities last year totalled US$157.5 billion, an average of US$7,800, or more than J$1 million per student. In spite of this, annual tuition costs at government-funded universities in the US currently average US$9,650 (J$1.25 million) for state residents and US$24,610, or J$3.2 million, for out-of-state residents. Foreign students are charged much more.

US universities also benefit from robust endowment funds that currently total US$535 billion, generating some US$24 billion in annual income, and while these funds cannot be applied to tuition expenses, they do cover capital expenditure and research funding, thereby relieving the pressure to hike tuition fees.

The conundrum facing countries like Jamaica, therefore, is twofold:

(a) how to make university education affordable to as many people as possible, which is critical not only to national development, but to personal development and the reduction of the population's heavy dependence on welfare spending; and

(b) how to do so without depriving the other segments of the education system - basic, primary and secondary - without significant improvement to which the majority of students would not qualify for admission to university, even if it was affordable.

The average of $468,116 per UWI student that the Government provided in 2014-2015 compares sharply with the provisions at the lower levels of the education system: $19,463 (early childhood), $100,971 (primary) and $129,309 (secondary).




It is not the first time that the issue of this disparity has been raised, in fairness to Dr Omar Davies, who, I recall during a Budget Debate more than 10 years ago, called for a discussion on the matter. The prime minister has now placed the issue on the national agenda and has given a clear indication of the direction of his thinking. He mooted that instead of paying this amount directly to the university, it may be better to provide it as a loan to the student through the SLB.

The student would now be required to bear the full tuition costs, but facilitated by a loan to be repaid over an extended period. In that sense, the student is being required to invest borrowed funds in his own educational and professional development predicated on the expectation that the increased market value of his skills will enable him comfortably to repay the loan.

Over time, this would increase the amount available for student loans and the number of students able to benefit because of the increased flow of repayments into the revolving fund. In the short term, however, it merely reroutes the flow of funds through the SLB to the university and doesn't generate any additional funds for student enrolment, nor does it allow for reallocating any of these funds to the lower rungs of the education system.

If the discussion is pursued in earnest, the issue of rebalancing the Government's spend on education by allocating a greater portion to the basic, primary and secondary levels must be addressed. This would, however, require that non-budgetary sources be found to adequately fund student loans.

The broad thinking outlined by the prime minister offers some interesting possibilities. It is significant that he likened the long-term repayment arrangements for student loans to a mortgage. Mortgages are marketable securities, and an ever-increasing and well-managed mortgage portfolio can be used to leverage long-term investment funds.

Fannie Mae and Freddie Mac in the US were established as publicly traded companies. The SLB has assets in excess of $15 billion that can provide both value and cash flow. The Government's demand on the local capital market is declining, leaving the market with more liquidity and a greater appetite for investment instruments. The SLB's ability to access cheaper funds from multilateral sources would allow for the cost of market-raised funds to be diluted in order to ensure that loans to students are kept affordable.

The SLB's loan portfolio, which has a delinquency rate of approximately 25 per cent, would need to be reorganised, starting with applying more market-based criteria to its loan approvals. Too many students insist on pursuing courses of study with shaky earning potential and find themselves after graduation unemployed or underemployed and unable to repay their loans while vacancies in both the public and private sectors remain unfilled.

Some years ago when I directed the SLB to earmark a portion of its loan disbursements for study in disciplines that were in short supply, the Guild of Students complained that it was interference with academic freedom. University education is an expensive investment, and that investment decision cannot be based solely on intellectual excitement or appeasement. The attitude of some student borrowers who confuse obligation with entitlement would have to be curbed.

There are other possibilities that can be contemplated, but it is important that the discussion proceed among all stakeholder groups, including, in particular, the students themselves. The prime minister, quite rightly, posited the issue in a non-partisan, consultative way and signalled his intention to engage in discussions with the Opposition. Such an important issue deserves the kind of consensus that attended the Education System Transformation Programme launched more than a decade ago.

- Bruce Golding is a former prime minister. Email feedback to columns@gleanerjm.com.