Replacing student loans with sponsorship
Please excuse me for returning yet again to a solution to the UK student loans system. At present, graduates are burdened with debt that can climb, despite repayments, because of interest charges. It would be difficult for taxpayers to fund student costs, given that it would involve poorer people (for the most part) paying higher taxes so that those less poor could be given access to higher incomes in later life.
The money has to come from somewhere, but if not from students themselves or taxpayers, then from whom? The obvious answer is business sponsorship of students.
This is the basic way it could work. A business would pay a student's tuition fees (currently up to £9,535/year) plus a living stipend, in return for a guaranteed employment commitment of at least two years after graduation. The student would graduate debt-free; the business would get a known, committed hire they have helped to shape.
This is not entirely novel, except in scale. Degree apprenticeships (e.g. at Rolls-Royce, PwC, Deloitte) already do something very similar. Military sponsorship has long funded degrees in return for service commitments, and some law and accounting firms fund GDL/LPC/ICAEW studies in return for training contracts.
For businesses, it would be cheaper than the graduate recruitment market in the long run, with no agency fees and no bidding wars for talent. They would help to shape the student's education and culture fit from year one. It would reduce hiring risk because they would know the person over 3-4 years before full employment. And it could target specific skills that they need (such as engineering, data science, nursing, etc). The cost to the business would need to be 100% tax-deductible as a legitimate business expense.
The advantage for the students is that they graduate with zero debt, which would help social mobility. Employment would be guaranteed from day one, as would internships leading up to it. Mentorship and work experience would be built in, and it would be particularly attractive for those from lower-income backgrounds deterred by the prospect of £50,000 of debt.
From the government's point of view, it would reduce the enormous student loan book, currently at about £250bn and growing. Bear in mind that a large proportion of student loans are never repaid anyway, so the current system is already a quasi-subsidy.
Some suggest that the biggest problem might be that businesses will only sponsor degrees that benefit them. This would likely mean on oversupply of sponsored business, STEM and law students, and perhaps an undersupply of sponsored arts, humanities, and philosophy students. In practice, though, today’s graduates in arts subjects make good candidates for jobs in areas such as banking, finance and investment, and there is no reason to suppose this would change.
The casualty courses that business might be reluctant to sponsor, such as various grievance and decolonization studies, would still be available on the current basis of student loans.
This model could genuinely work as alternative to student loans, but it might cause some disciplines to shrink. This would not necessarily be a bad thing.
My excuse for returning to this subject is that it is an obvious solution to a serious and growing problem. I do hope some government will listen to this. If not this government, then maybe the next.
Madsen Pirie