Why student loans are a confidence trick for the 85%
The current system of university student funding in England is a confidence trick. It is an attempt to defraud a group of people – poorer students and their families – after having gained their trust by pretending that the system is fair and they will be treated equally. Confidence tricks work by exploiting human traits such as naivety and compassion.
Prospective students are told that it is only fair that they take out a loan to fund their studies at university because otherwise poorer people who do not go to university will, in some way, lose out. They are told that they will on average earn so much more than these people in the future that it is only right that they take out a loan.
A desire for inequality?
These arguments are based on untruths and a desire among some, latent or otherwise, for our future society to be even more unequal. Already the UK has the widest income inequality of any European country other than Lithuania. The Gini coefficient of income inequality, as measured by the OECD, is higher in the UK than it is in Israel, and only just a little lower than that of Russia. It is highly unequal countries, such as the USA and Chile, that tend to introduce the most costly and unfair student loan systems. Chile is also the only OECD country to spend more as a proportion of all secondary spending on private schools, than does the UK.
The only way the current student loans system in England can be justified is if we want the UK to continue being ‘the large country with the widest income inequalities in Europe’ for many decades to come. There is a small minority of English people who do think this is a good idea, but most don’t. For instance, 72% of people in Britain support measures such as maximum salaries for those within the top 1% of earners, 70% support higher top income tax rates, and 62% support a wealth tax on very expensive properties.
We have known that loans are unjust for some time. Even before 2012 when university fees were tripled in size:
‘…debt is unequally distributed. Students who are poor before going to university are more likely to be in debt and to leave university with the largest debts, while better-off students are less likely to have debts and leave with the lowest debts. In 2003, students whose parental annual income was less than £20,480 owed an average of £9,708, and half owed more than £10,392. Students with parental incomes over £30,502 owed just £6,806. So on graduation, the poorest students were 43 per cent more in debt than the richest.’
Students studying at university in France, Germany, Italy and Austria pay just a few hundred Euros a year in fees. In Scotland and Scandinavia they pay no fees at all. One reason that has been suggested for high fees in England is that ‘Oxford, Cambridge and Imperial College London – rank in the planet’s top 10’ when it comes to university league tables. Interestingly, English institutions top European university league tables (tables produced in England). Yet, adults in England up to age 24 are at the bottom of ability when compared to their European peers in mathematics, relatively poor at problem solving, and in the bottom half of the distribution for literacy.
Read more from the full article this extract is taken from.
The argument is expanded further in Danny’s latest book: “Do We Need Economic Inequality?”