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Student Finance - the analysis

There still seems to be a lot of confusion about the issue of student tuition finance. There always will be a cost for tuition whether you call it fees or capitation. Somehow or other the costs of the lecture theatres, lecturers etc will have to be paid for.

There are three potential sources for this. One is from general taxation, another is from individual students and/or their families and a third is collectively from graduates.

The government's proposals retain a proportion of funding from general taxation even though it goes through the finance system.

They reduce the proportion that is raised from individual graduates. Only a minority of graduates will ever hit the cap. It increases the proportion that is raised collectively in two ways. Firstly by increasing the amount contributed by those graduates who earn over £21,000 per annum whereby the net present value contributed over a lifetime increases because the additional annual cost increases until people earn over £41,000.

This is because the interest rate is really more of a tax calculation than an interest calculation. Normally interest rates go down as it becomes more likely that someone will pay for something. To ensure an equitable collective sharing of the burden the opposite is being done.

There is an argument as to whether it is fair to have a cap on graduate contributions. I think in fact that there is a good argument for this.

It remains, however, that this "fairer alternative" which moves on substantially from the current system is both better for the less well off graduates and moves towards a substantially different system - one in which the costs of tuition is split between the tax payer, graduates collectively and individual graduates.

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