High graduate debt state-side is rare and considered highly undesirable

Sir Peter Lampl reports on how US universities don’t want students leaving with big debts

I’m in the United States this week, visiting Ivy League universities to find out more about what they offer, preparing the ground for next year’s Sutton Trust US summer schools.

Here, the situation is very different. For one thing, one can’t help but be impressed by these magnificent universities and the quality of what is on offer. They certainly deserve their standing in the international league tables.

The American undergraduate has a much broader education than their British counterpart, typically spending two years taking a broad subject mix before majoring in one or possibly two subjects.  At Harvard an admissions officer told me that a distinguished former President said that when you graduate from Harvard, the objective is that you know a little bit about everything and a lot about one or two things. As someone who had to specialise much too early, as is the case with the English system, that strikes me as a pretty good principle.

But it is also on student funding that the differences between the US and the UK are starkest. American universities don’t want to see students starting life with significant debts.  This may surprise those who argued for raising the tuition fee to £9,000 for all in England thinking that we are just catching up with the Americans.  Nothing could be further from the truth.

An excerpt from the Princeton Financial Aid brochure puts it in perspective.  “Our no loan policy has made it possible for most students to graduate with little or no debt.  About 75% of our students graduate debt free.  Of the remaining 25% who choose to borrow, usually for additional expenses such as a laptop computer, the average total indebtedness at graduation is $5000.  For comparison, about 66% of college seniors in the United States graduated with loans in 2010, and they carried an average debt of $25,250.”

So the reality is that a third of Americans graduate with no debt and the two-thirds who do have loans to repay carried an average debt of $25,250 (£15,700) and that is for a four-year programme.  This contrasts sharply with the system in England where graduates will owe on average almost 3 times as much – $73,000 (£45,000) after only a 3 year course.

Americans find this hard to understand.  I remember talking to Lou Gerstner, former IBM chairman and CEO and now a major education philanthropist, about the plans to treble university fees in England. “What: you’re loading students from low and middle income households with debt? He asked, “What are you doing that for?  That’s a bad thing to do.” I now understand where he was coming from.  In the US, the newspapers complain about states raising tuition fees by 7% per year. People are astonished to hear that we just put ours up by 200% in one year.

Harvard, Yale and other Ivys have large endowment funds enabling them to provide needs blind admissions to students from anywhere in the world, with accommodation and tuition fees – worth $60,000[1] (£37,000) a year – free to those with family incomes below $65,000[2] (£40,000) a year.  All student support funds are means-tested.

Columbia, Brown,the University of Pennsylvania and many others pay the tuition and accommodation costs of all their less privileged students from the US and the costs of study for many less privileged overseas students.

Around seventy five per cent of US students go to public universities, which have big state subsidies, whereas we have cut the teaching grant in England by 80% so we are funding just one tenth of university teaching costs, effectively removing state funding for supporting undergraduates.

The truth is that when it comes to debt, we are a complete outlier amongst developed nations, drastically reducing state funding of universities when others are increasing theirs.

US universities want graduates to feel able to go into teaching or get involved in public service rather than head to Wall Street, without worrying about paying back a mountain of debt. They also want their graduates to feel able to go to graduate school, and indeed at the University of Pennsylvania in Philadelphia which I visited, two thirds of its graduates go to grad school within five years of graduation, which is typical for leading US universities.

In England last week, we learnt how less privileged graduates are being put off studying for Masters degrees and doctorates, with a potential cost to their careers and our economy.  The Higher Education Commission report highlighted how postgraduate education in the UK is becoming increasingly the preserve of well-off students from overseas.

By contrast, Ivy League universities are on a hunt for the best talent in the world, and they don’t want their affordability to stand in their way. So they will fund those that can’t afford full fees in their studies, the vast majority from abroad as well as the US.   I support the Commission proposal for a state-backed loan scheme that should be pursued alongside other measures to support non-privileged postgraduate students.

The Sutton Trust has also commissioned research in this area by the Institute for Fiscal Studies, looking at what the effects of leaving university with large debts are on the ability to go to graduate school, buy a house, start a family and so on.

But we need to think again about the debts we are loading on our low and middle income graduates– and learn the lessons from America about how to fund our universities and our students.

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