Higher education costs have tended to soar in many parts of the world. In the elite private universities of the US, fees have reached staggering levels not only in the professional courses, such as law, medicine and management, but in undergraduate courses as well. The Economist noted recently that fees at American universities have risen five times as fast as inflation over the past 30 years.
In the UK, the government last year allowed universities to almost triple their fees with effect from September 2012. In India, there is anecdotal evidence of fees having risen sharply in professional courses. In non-professional courses, government institutions still charge only modest fees. However, in professional courses, where private colleges dominate, the total fees, including capitation charges, can be exorbitant. How to price higher education and how to ensure access are among the important policy challenges facing the country. But, first, we need to understand what is causing prices to rise so fast in the first place.
In higher education, we have three choices. One, we can have a government-dominated system where education is subsidised. Two, we can allow private universities and colleges to come up with the freedom to charge whatever the market can bear. Three, we can allow private institutions freer entry but regulate fees and make provisions for subsidising needy students.
In non-professional courses, we still have the first model. In professional education, we have attempted to move towards the third model but have ended up closer to the second one. There is regulation of fees in some areas but this only covers the official fee. The official fee is often only a small component of the overall fee, with a large component being collected under the table.
Several arguments are made for privatisation of higher education and market-driven fees. Investment in higher education has high payoffs and can, therefore, be financed by loans. Needy students can be taken care of through scholarships or interest subsidies. Subsidised education provided by the government imposes huge fiscal costs, which, in turn, come in the way of both creation of fresh capacity and quality. Competition in higher education will help moderate fee levels.
Every one of these propositions is questionable. In India, the student is not an independent entity. He is part of a family unit for which the student loan is one of several loan obligations. An education loan undoubtedly adds to the burden of the family. Funding of scholarships is woefully inadequate. Merely letting fees rise does not lead on to superior quality - quality is poor at most private professional colleges despite the huge fees charged. It is also not true that competition helps moderate fees.
In the UK, the government last year allowed universities to almost triple their fees with effect from September 2012. In India, there is anecdotal evidence of fees having risen sharply in professional courses. In non-professional courses, government institutions still charge only modest fees. However, in professional courses, where private colleges dominate, the total fees, including capitation charges, can be exorbitant. How to price higher education and how to ensure access are among the important policy challenges facing the country. But, first, we need to understand what is causing prices to rise so fast in the first place.
In higher education, we have three choices. One, we can have a government-dominated system where education is subsidised. Two, we can allow private universities and colleges to come up with the freedom to charge whatever the market can bear. Three, we can allow private institutions freer entry but regulate fees and make provisions for subsidising needy students.
In non-professional courses, we still have the first model. In professional education, we have attempted to move towards the third model but have ended up closer to the second one. There is regulation of fees in some areas but this only covers the official fee. The official fee is often only a small component of the overall fee, with a large component being collected under the table.
Several arguments are made for privatisation of higher education and market-driven fees. Investment in higher education has high payoffs and can, therefore, be financed by loans. Needy students can be taken care of through scholarships or interest subsidies. Subsidised education provided by the government imposes huge fiscal costs, which, in turn, come in the way of both creation of fresh capacity and quality. Competition in higher education will help moderate fee levels.
Every one of these propositions is questionable. In India, the student is not an independent entity. He is part of a family unit for which the student loan is one of several loan obligations. An education loan undoubtedly adds to the burden of the family. Funding of scholarships is woefully inadequate. Merely letting fees rise does not lead on to superior quality - quality is poor at most private professional colleges despite the huge fees charged. It is also not true that competition helps moderate fees.
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