Comments on: An idea for student loans

By: John MacCormick

John MacCormick — Thu, 20 May 2010 02:43:00 +0000

Hypothetically, this idea could be tied into performance-based funding for institutions. “Simply” require the institutions to buy a slice of the loans owed to Govt by their former students, at a price based on the book value of a loan with average repayment performance. TEIs with successful grads will profit as their grads will repay more, faster than average. Institutions with poor results will book a loss.
All we need to make this work in practice is robust, credible financial institutions that can accurately price complicated “collateralised debt obligations”….

By: Ron Scott

Ron Scott — Thu, 20 May 2010 01:49:59 +0000

I like the general idea. The better an institution is at having graduates earn higher incomes then either a. They are selecting very well or b. Adding value at a superior rate.
If it is a. then there will be demand to be one of the selected few. Will this incentivise poor selection procedures? (in other countries it would be called corruption). Alternatively it might be a home truth to some potential students that they are not going to be top of the heap.
If it is b. then it makes sense to reward superior services.

By: Dean Carroll

Dean Carroll — Thu, 20 May 2010 00:49:06 +0000

As per usual, Jeremy makes an excellent point. The key here is to ensure that the feedback mechanisms and incentives (and sanctions/consequences) across ALL funding ensures that the actors in the tert education ‘market’ meet the objectives. Which I think was actually Dave’s point: the neo-classical liberal assumption of the 1991 Student Loans Scheme was that it was an investment related to higher life-time earnings (ROL): ergo the rules and framework/structures of the SLS should reflect this and be imbedded in the operational delivery of the scheme. If you do not accept the assumptions of the SLS you come up with a fiscally responsible alternative (maybe the industry training model has something to offer here); but if you have loans it is incumbent to have a coherent and dynamic model (which we don’t) that works for its outcomes. Readers of this blog will recall that in December 09 the OECD released figures on economic rates for degree qualifications. New Zealand was bottom of the OECD; and there was daylight between us and the others. The current system isn’t working. The US has much to inform our debate.

By: Dave Guerin

Dave Guerin — Wed, 19 May 2010 23:25:02 +0000

The sector is fighting it hard – there was a long follow-up story by the Chronicle overnight. I’m not too fussed about the specific definition, and don’t have the context to review it, but the idea interests me.

There has been some DOL research relatively recently on the earnings of industry training graduates and I think some return on investment work there is relevant too.

By: Jeremy Baker

Jeremy Baker — Wed, 19 May 2010 23:20:52 +0000

Interesting Dave.

What about those parts of the system that don’t use loans at all?

And I believe the for-profit sector in the US is fighting this proposal quite hard.

Jeremy