Instead of students borrowing money to pay for tuition, businesses should pay a levy for each graduate they employ, according to the outline of a radical new approach to funding higher education, published by the Higher Education Policy Institute (HEPI) in the United Kingdom.

Twist the system

This system would balance the cost more fairly between students, taxpayers and employers, rather than the current system of charging students up to £9,250 (US$11,800) in tuition fees, the paper, Fairer Funding: The case for a graduate levy, by Johnny Rich, argues. The amounts employers would pay would be equivalent to the student loan repayments made under the current funding system in England.

Revenue from graduate levies would be paid directly to the higher education institution where each graduate studied. Institutions would be financially sustainable because they would share an investment in the future employability of their students, rather than because they maximise their student intake, Rich argues.

The paper comes in advance of the Augar Review’s report in the new year on the future of post-18 education and funding. It also comes as the Office for National Statistics prepares to announce possible changes to student loan accounting rules that could create a black hole in the Government’s budget deficit plans.

He also argues for a redistribution of funds between higher education institutions based on their ability to attract and support students from poorer backgrounds. This would give institutions an incentive to support social mobility and ensure access money is spent more effectively. Rich said: “For too long, higher education funding has been a battleground of competing interests between taxpayers, students, employers and universities. Over three decades, students have come off worst.

Win-win situation

“A graduate levy would mean that everyone shares the same interests: students having opportunities to do high-quality courses, becoming well-qualified for good jobs, filling the nation’s skills gaps. “The proposal is designed to minimise student debt, but also to ensure employers don’t pay more than they contribute now, unless they get more. The same goes for taxpayers.”

In the paper he argues that the graduate levy is neither a loan repayment nor a graduate tax, because it would not be paid into Treasury funds. Instead it would be channelled directly back to the institution where the graduate studied. “This means that, by providing an effective higher education, each university invests in the future employability of its graduates.”

By contrast, in the current system universities chase student demand by laying on more of the popular courses regardless of labour market need, perpetuating the impression to students that there is an open career path, Rich says. Commenting on the paper, Nick Hillman, director of HEPI, said: “We are at a crucial moment for the funding of higher education and this paper wrestles with the challenge of securing greater support from employers”.