Forever A Loan?

Adam Lawler explores whether income contingent student loans are becoming an increasingly viable option for Irish students or not.College is expensive. This is a truth universally-acknowledged and accepted grudgingly as a fact of life designed to make things harder for us. After all, nothing is more Irish than the narrative of struggle. The question is, do we have to struggle, or are we making it harder for ourselves? When countries from Australia to America to the Netherlands who have income-contingent student loans, are in danger of using an outdated model?
Some parents rightfully balk at the average cost per annum of sending their child to college
As it is, we benefit from a ‘free fees’ system which is not free, as the government covers the cost of attending university while asking students to pay a contribution of approximately €3,000. This is the system we have been implementing for years, but the flaws in such a system are obvious. Some parents rightfully balk at the average cost per annum of sending their child to college and in a lot of cases have to rely on financial aid in the form of grants like SUSI, which can be difficult to acquire for some due to the sometimes laborious application process and requirements.This is in addition to some thinking that our failure to adapt is leading to Irish colleges to drop in university rankings. The National Competitive Council chairman Peter Clinch wrote in the council’s ‘Competitive Challenges 2016’ report that the under-funding of higher level education is to the detriment of our worldwide status, and that “while controversial, if we are to avoid damaging Ireland’s competitiveness, we have no option but to introduce a funding model for higher education that combines increased state funding alongside deferred payment of fees through income-contingent loans.” Is Irish third-level education being funded enough? Perhaps that is not as much the question as how our universities will fare in the long shadow of uncertainty caused by events such as Brexit, and how relevant and competitive we could remain if we changed with the times.
It could get to the point where Irish ICLs are not a pipe dream but a necessity
With the stakes in mind, how do income contingent student loans work? Simple: by offering higher education for free, until the student has started earning above minimum income, with fees depending on the course and college. This would mean that students would not immediately be hit by the brick wall of fees at the point of entry, an aspect of college which for many students, is a deterrent from attending at all. As with most types of loans, payment plans can be negotiated so as to be affordable as we advance in our careers, and would only eat a small percentage of earnings (in some countries between 0 and 8 percent). In America students repay the loan over a period of ten years. In a concurrent programme in Sweden, the period is a considerably more extensive at twenty-five years. England offers a less pressurised thirty years. In a piece for the New York Times, Susan Dynarski perfectly captures why this loan system, especially ones with a longer repayment time, works because of the nature of finance itself: “We pay for cars over five years and homes over 30 years because homes last a lot longer than cars. An education pays off over a lifetime, so it makes sense that student loans should be paid off over a long term.”The downsides of the income-contingent loan system are, however, clear to see from the outset. The nature of the concept means that some students would feel as if they are still paying for their tuition long after they have finished using it. Everyone has heard the stories of Americans, bogged down by loans until they are in their thirties, who are under extreme pressure to pay them off on time. To them, student loans might as well form the shiver-inducing concept of the next series of American Horror Story. It is a long-term commitment, one that arguably should not be foisted upon bright-eyed eighteen year-olds seeking only to enter the world of higher education without understanding the full cost until years down the line, when they will be forced to delay financial commitments such as home-ownership, indefinitely.There is also the question of whether this system would actually be viable in Ireland. It is hard to tell. Emigration poses a problem for such a system in a country where its young people rightfully flee for greener pastures at the first opportunity. However, costs and sheer numbers of budding students are ever-increasing with projections that €600 million in additional core funding will be needed within the next four years. It could get to the point where Irish income-contingent loans are not a pipe dream but a necessity, so now is the perfect time to start making plans.