Friday, February 03, 2012

A New Funding Model For Universities?

From InsideHigherEd:
With public university administrators continually arguing for tuition increases to counter state appropriations cuts, it seems far-fetched that their budget problems could be solved by eliminating student tuition and fees altogether.

But that’s the idea put forth by a group of students from the University of California at Riverside, who in January proposed a new funding model for the University of California system that seeks to solve two of the system’s biggest problems: unpredictable and large decreases in state appropriations, and the steady increase in tuition costs.

Under the students’ plan, called the UC Student Investment Proposal, students in the system would pay no upfront costs for their education but would agree to pay 5 percent of their income to the system for 20 years after graduating and entering the workforce.
I'm reminded of the Popeye character Wimpy, who would say, "I'll gladly pay you Tuesday for a hamburger today."


Left Coast Ref said...

And if they are a "Intercultural Studies" major, or "Film History" major, 5% of zero is still zero. It's ludicrous.

Anonymous said...

Two big problems with this scheme are:

(1) The kids expecting to get higher paying jobs (e.g. engineering) will be inclined to get normal loans rather than sign up to turn over what is essentially one year's pay. The kids who expect low paying jobs will take the deal. This may not work out financially for the university.

(2) It creates an interesting extra incentive for the second income earner in a family to stay home with the kids. My wife *already* decided to do this after we had our child. Her calculation was that it wasn't worth working for what she would make after paying taxes at my/our marginal rate and then paying for private school plus after school care [she votes Democrat, but won't let our local public schools anywhere near her child. This isn't very fair to the local schools as they are actually okay]. This scheme creates the same incentive as an additional 5% tax ... but only on the person with the 'loan'. Working gets more expensive and staying at home gets cheaper. This also won't help the university financially -- in my wife's case they would have collected 5% of her paycheck for about three years, then nothing.

I like the idea of (a) having the university have some skin in the game, and (b) letting the kids hedge/insure the cost of their education against their future earnings. I just don't think it will work.

-Mark Roulo

Darren said...

Exactly. The incentives are in all the wrong places.

mazenko said...

There's actually a really nice model for funding universities. It's called Europe .... or America up until about ten years ago.