A higher price for education

As IITs raise their fee, it is time to consider innovative ways of financing education for elite institutions that require a higher level of funding to support research.

Written by M Balakrishnan , Pankaj Jalote | Published: April 13, 2016 12:01 am
(Illustration: C R  Sasikumar) The graduating student would then have the option to take up a career without worrying about the education loan hanging. (Illustration: C R Sasikumar)

Last week, tuition fee for undergraduate education in the IITs was increased from Rs 90,000 per annum to Rs 2 lakh per annum. Earlier, last month, IIM Ahmedabad increased the fee of its flagship two-year diploma programme from Rs 18.5 lakh to Rs 19.5 lakh.

As a nation, we are in a great dilemma on the financing of public higher educational institutions. Highly subsidised quality higher education, with admissions based strictly on merit, continues to be a great hope for upward socio-economic mobility. This public demand has also ensured that there is consensus across the political spectrum on the need for setting up new IITs, IIMs, AIIMSs, NITs, etc. On the other hand, as the number of such institutions increases, the budgetary requirements for supporting them will prove to be a challenge.

What are the alternatives? Globally there is a shift towards charging a higher fraction of education costs as fees — even in European countries where, traditionally, higher education was completely free. For the purpose of inclusion of students from economically weaker sections, there is the provision of education loans, often at lower-than-commercial rates. This has resulted in education-loan-driven higher education, which has clear implications for blocking the socio-economic mobility of poor people, even in an affluent country like the United States.

In a country like India, public-funded institutions where the full fee is financed through loans are undesirable for many reasons. One, it will make education inaccessible to many who cannot afford to be burdened with such large loans. Second, heavy debt would result in higher education being seen more as capital investment. It would lead to the clear graduation objective of getting a quick return on investment. The net result would be that graduates would opt for safe career options — even more than they currently do — that provide the “highest package” and not those choices that may be low-paying but have greater social value and impact and which the graduate may genuinely want to pursue. The success of Make in India as well as Start-Up India depends on the ability of young people to take risks and become entrepreneurs. Heavy education loans are unlikely to promote these choices. Medical education in India has already fallen into this trap; with high cost of education in private and foreign institutions, the increase in volume is not resulting in enhanced access for a significant section of the population. Further, in the Indian socio-economic context where, even today, most students pursue academic programmes and careers that are forced on them by family and not out of their own choice, there is another great disadvantage. Just when we were seeing some change — in at least a small fraction of students — the increase in fees or a greater loan burden would put the clock back.

The “loan model” is gaining traction in the public discourse in India primarily driven by the stories of high-paying jobs for IIT graduates. The argument is that if they are earning so much after graduation, why should they not pay for their education. But hundreds of IIT graduates are also following their dreams in entrepreneurship, social service and many such sectors.

However, there is an innovative middle path possible for financing education, at least for the elite institutions that require a much higher level of funding to support research.

In this approach, a tuition fee based on the cost of education is computed. Every selected candidate would have an option to defer payment of a significant part of the fee till after graduation. The key innovation being suggested here is that after graduation, the student would be required to pay the deferred fee, but with a ceiling that it will be at most a fixed percentage of her income for a fixed number of years — say, 15 per cent of income for seven years. The graduating student would then have the option to take up a career without worrying about the education loan hanging over her head. If the graduate chooses a career that is not financially lucrative, her payments for education would be correspondingly low.

In the present context, one more fact is important: The tuition fee increase announced by the government is only for undergraduate education and is likely to apply to only 25 per cent of the students in an institution like IIT Delhi. The reason is that in almost all the larger (older) IITs, roughly only 40 per cent of the students are undergraduates, and after the announced waivers, the tuition fee increase would apply only to 60 per cent of them. Presently, students in postgraduate programmes like the MTech are charged nominal fees, though the motivation for joining these programmes is often similar: Widened career prospects and excellent pay packets. Our proposal can be applied to all students, undergraduate and postgraduate — except, perhaps, to PhD students — as the cost of education is being paid by the graduate through her earnings, rather than by her family.

Such a proposal could evoke cynicism: What will compel the graduate to declare her income truthfully? But in a changed world where an individual’s credit rating is important and tracking instruments like PAN and Aadhaar exist, it is easy to devise a system where the cost of default would be rather high, particularly as alumni need references or verification from educational institutions even years after graduation.

Balakrishnan is professor, IIT Delhi. Jalote is director, IIIT Delhi. Views are personal

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