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Access, Equity, Capacity: Financing Higher Education International Forum for Education 2020 Baoyan Cheng February 27, 2009.

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Presentation on theme: "Access, Equity, Capacity: Financing Higher Education International Forum for Education 2020 Baoyan Cheng February 27, 2009."— Presentation transcript:

1 Access, Equity, Capacity: Financing Higher Education International Forum for Education 2020 Baoyan Cheng February 27, 2009

2 Daisen-in Temple 大仙院 Soen Ozeki 尾関 宗園

3 Soen Ozeki Each Day In Life is Training Training For Myself Though Failure is Possible Living Each Moment Equal to Anything Ready for Everything I am Alive - I am This Moment My Future Is Here and Now For if I cannot Endure Today When and Where Will I ?

4 Outline Globalization Neoliberalism Milton Friedman Bankruptcy of neoliberalism Cost-recovery policy (cost-sharing) Financial aid policies – student loan programs in the US, Australia and China

5 Globalization “The reduction and removal of barriers between national borders in order to facilitate the flow of goods, capital, services and labor” (United Nations, 2002). Thomas Friedman (New York Times columnist; Pulitzer Prize winner): The World Is Flat (2005)

6 Some criticisms of globalization Increasing inequality Weakening cultural diversity Advancing corporate interests at the expense of the well-being of ordinary citizens Documentary: The Other Side of Outsourcing The Other Side of Outsourcing (2004)

7 Neoliberalism “Invisible hand”; decentralization and privatization; free market and free trade Implication: Reduction of government subsidies in public service

8 Milton Friedman (1912-2006):1976 Nobel Prize winner, leader of Chicago School of Economics. Friedman the economist, the entrepreneur and the popularizer of free- market doctrine. (Paul Krugman, 2008 Nobel Prize winner). “Consider the following three propositions: Money does not matter. It does matter. Money is all that matters. It is all too easy to slip from the second proposition to the third. And in their zeal and exuberance, Friedman and his followers had too often done just that” (James Tobin, 1981 Nobel Prize winner in Economics)

9 Neolibralism and Education Milton Friedman: The Role of Government in Education (Capitalism and Freedom, 1962) Milton Friedman: Market competition is the answer to solving educational problems. Video clip from the 1980 PBS TV series “Free to Choose” produced by Milton Friedman Video clip from the 1980 PBS TV series “Free to Choose” produced by Milton Friedman

10 Globalization and Its Discontents Pierre Bourdieu (1930-2002; French sociologist): Firing Back: Against the Tyranny of the Market (2003) Joseph Stiglitz (2001 Nobel Prize Winner): Making Globalization Work (2006) Paul Krugman (2008 Nobel Prize Winner): The Conscience of a Liberal (2007)

11 Firing Back: Against the Tyranny of the Market Globalization is “the imposition on the entire world of the neoliberal tyranny of the market and the undisputed rule of the economy and of economic powers, within which the United States occupies a dominant position.” -- Pierre Bourdieu

12 Making Globalization Work “My research on the economics of information showed that whenever information is imperfect, in particular when there are information asymmetries – where some individuals know something that others do not (in other words, always) – the reason that the invisible hand seems invisible is that it is not there. Without appropriate government regulation and intervention, markets do not lead to economic efficiency.” -- Joseph Stiglitz

13 Making Globalization Work “[U]nchecked by competition to ‘win the hearts and minds’ of those in the Third World, the advanced industrial countries actually created a global trade regime that helped their special corporate and financial interests, and hurt the poorest countries of the world.” -- Joseph Stiglitz

14 The Conscience of a Liberal “ Can we save the economy, bring universal health care to America, and make this a fundamentally more democratic nation? Yes, we can. … The new New Deal starts now. ” ---- Paul Krugman

15 Neoliberalism and its bankrupcy Death of Milton Friedman (2006) Current financial crisis Bank nationalization – prescription given by Nouriel Roubini (New York University professor; “Doctor Doom” who first predicted the economic collapse) More government involvement in public sector: Obama’s stimulus plan of $787 billion targets education and health care. “We are All Socialists Now, Comrades” (Newsweek, Feb. 2009)

16 Restoring the ideals of public higher education in a market-driven era Neoliberal approach: An erosion of higher education ’ s long-standing commitment to advancing public priorities  Access to higher education is limited to those who can pay the cost of tuition  more government involvement in funding higher education is needed  more financial assistance to low-income students CONCLUSION: Necessity for financial aid

17 Tuition increase in the US Increase of college tuition Reason 1: rising cost of providing higher educational services Reason 2: falling subsidies from government

18 Average Published tuition for Undergraduates by Type and Control of Institution, 2008-09 (Source: College Board) Tuition Sector2008-092007-08$change%change Public Two-Year$2,402$2,294$1084.7% Public Four-Year In-State $6,585$6,191$3946.4% Public Four-Year Out-of-State $17,452$16,586$8665.2% Private Not-for- Profit Four-Year $25,143$23,745$1,3985.9% For-profit$13,046$12,489$5574.5%

19 Average Published Tuition and Fees in Constant (2008) Dollars, 1978-79 to 2008-09 (Source: College Board)

20 Total Educational Costs per Full-Time Equivalent Student by Carnegie Classification in Constant (2005) Dollars, 1995-96, 2000-01, and 2005-06 (Source: College Board)

21 Total Net Tuition and Fee Revenues as a Percentage of Total Educational Costs by Carnegie Classification, 1995-96, 2001- 02, and 2005-06 (Source: College Board)

22 Cost-recovery policy in developing countries Rationale: Improved efficiency: optimal use of resources Enhanced equity Public vs. private returns to education

23 Case of China i. Expansion of higher education In 1980, 1.66 million enrollment In 2004, 20 million enrollment – largest in the world ii.Tuition-charging policy (1989 and 1997) In 2003, 5,000-6,000 Yuan ($600-720) tuition and fees, 2,622 Yuan ($320) of per capita annual net income for rural households 8,472 Yuan ($1,020) of per capita annual disposable income for urban households iii.Necessity of financial aid

24 Types of loans Mortgage-type student loans I. fixed repayment rate of interest and fixed repayment period II. Example: US (the Stafford loan program) Income-contingent type I. Pay a certain proportion of future income II. Example: Australia (Higher Education Contribution Scheme)

25 Government-subsidized Loan Program 1999 policy2004 policy EligibilityFull-time, needy students at public higher education institutions Same as 1999 policy, but sets the quota of 20% of total enrollment at each institution Interest charged to student Prevailing commercial rate; 50% subsidized while students are at school 100% subsidized by government while students are at school Maximum amount 6,000 Yuan ($720) per yearSame as 1999 policy Repayment terms Starts by the end of the 1st year and ends within 4 years after graduation Starts by the end of the 2nd year and ends within 6 years after graduation

26 Effect of the loan program – findings from my research The loan program enables needy students to spend ¥ 528 more on food on average for one academic year, to work 26 hours less on average for one academic year, but does not have much effect on students’ expenditure on educational resources or their psychological well-being (e.g. anxiety level).

27 Case of America – Major Federal Loan Programs ProgramYearTerms (current) Perkins1958Originally known as National Defense Student Loan Program 1986 changed to Perkins; provide low-interest (5 percent interest rate) to undergraduate, graduate and first-professional students with exceptional financial need Stafford1965Originally known as Guaranteed Student Loans; can be subsidized or unsubsidized; limits are $ 2,625 for first-year students, $3,500 for second-year students, and $5,500 for those who have completed two years of study PLUS (Parent Loans for Undergraduate Students 1981Unsubsidized; restricted to parents; require no financial need test; interest rate is the lesser of 3.25 percentages points above the bond equivalent of the one-year T-bill rate or 12 percent; payments of at least the interest cost begin within sixty days of the issuance of loans SLS (Supplemental Loans for Students) 1981Unsubsidized; limited to financially independent undergraduate, graduate and first-professional students; replaced by the Stafford Unsubsidized Loan Program in 1992

28 Grants vs. Loans, Growth and Percent Share of Total Aid, 1963-64 to 2002-03 (Source: College Board)

29 Research findings on the effect of financial aid on college access/enrollment Studies on the effect of prices on enrollment Studies on the effect of grant aid on enrollment Studies on the effect of loans on enrollment

30 The issues of default and debt burden Characteristics of defaulters and reasons for defaulting Appropriate level of debt and the effect of debt on student borrowers

31 Case of Australia Historical background Commonwealth involvement Post-WWII expansion

32 Higher Education Contribution Scheme (HECS) The idea of income contingency Design of HECS, the most successful income-contingent loan program Impact of HECS on college access/enrollment Reasons for its success in Australia

33 Issues to consider for developing countries in loan program design Issue 1: Conventional loans or Income- contingent loans? Issue 2: Should the government provide guarantees for loans? Issue 3: How to reduce default? Issue 4: Should loan interest be subsidized by the government? Issue 5: How to determine eligibility?

34 A short presentation: Option 1 On financial aid policies in your country/region What is the historical context of tuition-charging policies? Are there financial aid policies in place? How effective do you think those financial aid policies are? How do you think those policies can be improved? What are the effects of the current economic crisis on those policies?

35 A short presentation: Option 2 On the impact of globalization on your country/region What is your understanding/definition of globalization? Do you think globalization is a good or bad thing? How has globalization affected the educational system/practice in your country/region? What do you think of the current economic crisis from the perspective of globalization?

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