An Alternative to Tuition Fees

The Education Secretary has just confirmed that university tuition fees will rise next year, for the first time in 8 years. The annual maximum fee will now be £9,535.

Students who leave university with roughly £50,000 of debt have a rough deal.  39% of full-time UK undergraduate students starting in the academic year 2023–24 are predicted to not repay their student debt.

The Adam Smith Institute in its Overton Window paper has already shown a way out of this dilemma. It involves the participation of businesses in student finance. The RAF offers a scheme of academic sponsorship through its University Air Squadron Bursary. If you sign up to the RAF for two years after graduation, your fees are paid for and you leave with no student debt.

Private businesses could be encouraged to take the same route by formalizing degree sponsorships as deductible from corporation tax. In return for a commitment to work for the firm for two years after graduation, they would pay their fees as a tax-deductible expense.

From the students’ point of view this has several advantages, in that not only would there be no debt burden on leaving university, there will also be a job lined up. Furthermore, internships during the vacation would enable the student to step into the job already trained for it.

The employer has the advantage that the graduate comes into their employ fully trained during the vacation internships, and as a known person they have had experience with, rather than as an unknown outsider.

Obviously, there would have to be arrangements if the student changed their mind. This would constitute a breach of promise case in which the student would be required to gradually repay some part of the fees that were expended on their behalf. Illness and tragic factors aside, reneging on one’s contract could incur the necessity to pay back one’s degree costs. Similarly, there would have to be an arrangement if the employer no longer wished to employ the graduating student.

The government’s tax relief on company sponsorship would be offset by the elimination of the almost 39% default rate on student loans. The tax relief for degree sponsorship programmes would cost less than the money it saved in the reduction in student loan defaults it would cause. Under the ASI proposed system, the state would save money.

All registered businesses should be eligible for this student support tax relief, though it would not apply to local government organizations or the Civil Service because they would be using public, rather than private, money. Rendering tax-deductible corporate degree sponsorship programmes is best suited to shareholders’ money, not public money.