Higher Education

Question 1

Define Education

Answer 1

An Investment in Human Capital- can lead to greater Economic Growth as it increases Productive Capacity

Question 2

When did HE Reforms start in UK?

Answer 2

2012

Question 3

What were the HE Reforms since 2012?

Answer 3

Shift from Up-front Grants to Student Loans
Increased Tuition Fees
Latest Reform- Loan Repayment

Question 4

What is the Private Investment Decision on Education?

Answer 4

Person Investing in HE does so based on fact that Degree/Studying would give higher wage in future- Private Benefits > Private Costs

Question 5

What is the Net Present Value (NPV) of the Investment?

Answer 5

Difference between the Cost + Interest- adjusted value of future payment

Question 6

What is the equation for the NPV?

Answer 6

NPV = -C + [P / (1 + r)^t]

If NPV > 0, you SHOULD Invest in Education

Question 7

What does the Right Amount of Investment Depend on?

Answer 7

Depends on- Difference between Present Value of Benefits + Present Value of Costs

Question 8

What is the Opportunity Cost of Studying?

Answer 8

Salary/Wage that could’ve been earned if you were Working instead

Question 9

What is the Total Economic Cost (P) of Studying?

Answer 9

Tuition Fees + Opportunity Cost

Question 10

What is the PV of Cost of 3 years Studying?

Answer 10

-C + [C / (1 + r)^1] + [C / (1 + r)^2]

Question 11

2013- What were the Net Earnings of a Degree for Men + Women?

Answer 11

28% Higher for Men

53% Higher for Women

Question 12

What are the 2 questions that need to be figured out when looking at Public Decisions on Education?

Answer 12

1. Reasons to Support Public Education

2. How much should be spent on Education

Question 13

Why would the Gov. want to spend on HE?

Answer 13

Educated Population–> Increase Employment–> Decreased Crime + Welfare Costs

• -> Increased Productivity + Tax Rev.–> Increased Human Capital
• -> Increased Stable Employment–> Decreased Negative health impacts–> Reduced Neg. Externalities–> Reduced Burden on Taxpayer from Healthcare cost

Question 14

If HE is fully Subsidised, which curve would shift?

Answer 14

DEMAND for Education would Shift to Right

Question 15

What UK HE Reforms were introduced in 1998?

Answer 15

Tuition Fees Introduced- £1000 / year

Question 16

2006 Reforms?

Answer 16

Increased Fees- £3000 / year

Question 17

2012 Reforms?

Answer 17

Increased Fee Cap- £3,375–> £9000
Increased Tuition Fee loans to match Fees
Increased Earnings cap for Repayment- £15,000–> £21,000
Positive Real Interest Rate- only reaches 3% at £41k earnings
Increased Loan Write-off Period- 25 yrs–> 30 yrs
Increased Grant + Fee Waivers- encourage poorer students

Question 18

2016 Reforms?

Answer 18

Maintenance Grants changed to Maintenance Loans

Repayment Threshold frozen in Cash terms for 5 yrs- 2021

Question 19

2017 Reforms?

Answer 19

Increased Tuition Fees w/ Inflation- £9,250 / year

Teaching Excellence Framework (TEF) introduced- determines who can Increase Fees

Question 20

What are the Impacts of the Reforms on future Students considering HE?

Answer 20

Increased Debt Levels on Graduation
Expected Lifetime Repayments
Increased amount of Cash students have in their pockets at University

Question 21

Why was the 2012 System more Progressive than the Previous system?

Answer 21

Reduced Repayments for Grads. in bottom 30% lifetime earnings
Increased Repayments for Highest-earning Grads.

Question 22

What was the effect of 2012 Increased Fees on Average Debt levels?

Answer 22

2011-2017- Increase over Double in Average Debt

Question 23

What was the main reason for Increased Average Debt 2012-2017?

Answer 23

Change of Maintenance Grants to Maintenance Loans- especially for Poorer Students
After 2015- Grant Removal– Poorest 40% w/ Largest Debts

Question 24

People in the 2017 System- What share of Individuals can expect to have some debt written off?

Answer 24

77.4%- over 3/4 of students

Question 25

What are the Key Issues with the Reforms?

Answer 25

Increased Debt- many will never pay off
Cost to Taxpayer- write-off Debts
Debt may affect Participation Rates- May cause Unemployment
Reform has been to establish a greater market for HE
There are no longer Quotas on Student numbers
Tuition Fees were raised to compensate for Grant Income Loss from Austerity

Question 26

What is the Issue w/ Borrowing for HE?

Answer 26

Uncertainty- Value of Degree is Unknown
You may Fail
You can’t give or sell Education back- Mortgage you can Sell House if unable to pay