Young people from poorer families are badly underrepresented in higher education. That risks exposing them to a lifetime of reduced earnings and undermines the foundations of wider economic growth. What can be done? Economically disadvantaged students benefit from a mix of grants and loans in third-level education, but they also need better support from the earliest years of their school careers.
The Great Recession showed clearly that no social group or country is totally immune from the impact of a major economic slowdown, no matter how high its levels of education. But it also showed that, even in times of economic crisis, high skill levels offer some of the best protection for both economies and individuals. At the most basic level, it’s clear that having a higher level of education helped people to keep or change their jobs during the recession. For instance, between 2008 and 2010, the early years of the downturn, overall unemployment rates in the OECD area jumped from an already high 8.8% to 12.5% for people without an upper secondary education, and from 4.9% to 7.6% for people with upper secondary education. By contrast, unemployment rates for people with higher education remained well below 5%. Similarly, OECD data show that the already wide gap in earnings between people with higher education and those with lower levels actually grew during the global recession. And this phenomenon is no longer seen only in the industrialised world. In fact, the greatest earnings premium on higher education is now found in Brazil, where the financial advantage for highly educated workers is around three times that, on average, for workers with higher education degrees in OECD countries.
So, acquiring advanced skills offers a clear advantage. But not everyone can do so. It is deeply troubling that young people from disadvantaged families are greatly under-represented in third-level education. On average across OECD countries, the proportion of young people from such families who complete higher education is only around half as high as it would be if student numbers reflected the social makeup of the wider population. And this is just the average; in some countries the odds are as low as around a fifth. Conversely, a young person with at least one parent who has earned a degree is, on average, almost twice as likely to be in higher education compared with the proportion of these families in the population.
High tuition fees can make it particularly difficult for disadvantaged students to go to university, which raises the question of how best to support such students–free tuition, loans, grants or a mixture of the three? Before trying to answer that question, we need to look at the evolving roles of public and private funding in higher education. Over the past decade, the share of household spending on higher education institutions has more than doubled in the OECD area, but this has not been accompanied by a fall in state spending. Indeed, no OECD country has seen a decline in public financing for higher education since 2000. What’s happening in effect is that more private money is allowing more places to be made available to more students for better higher education. In other words, we need to weigh the barriers to education created by the financial burden on the individual against the barriers created by squeezed public financing, which risks limiting the expansion of higher education. That may explain why OECD data show no cross-country relationship between levels of tuition fees and the participation of disadvantaged youth in higher education. Some countries have high tuition fees, but still manage to provide a large share of disadvantaged youth with access to higher education; others have no tuition fees, but offer few opportunities for disadvantaged youth to obtain one of the limited places in university.  So how can countries leverage tuition to open up educational opportunities to more students while not erecting barriers? The data show that neither governments that regard tertiary education mainly as a private good, nor students who are calling for abandoning tuition fees, have got this right. Instead, those countries that share the costs of higher education between students and taxpayers in line with their respective benefits are most effective. OECD data show that tertiary education creates large social benefits in the form of economic growth, social cohesion and citizenship values that justify public investment. Equally, in light of the very significant–and growing–private benefits of tertiary qualifications, individual graduates should be expected to bear some of the cost, too. The case for costsharing is strongest when tight public budgets would otherwise lead to cuts in the number of tertiary students, a decline in the quality of instruction, or a decrease in the resources available to support disadvantaged students. Cost-sharing allows systems to continue to expand with no apparent sacrifice of instructional quality, and makes institutions more responsive to student needs. Institutions also become less reliant on taxpayers’ money and are able, within certain limits, to raise their own funds. The savings from these kinds of arrangements can be used to broaden access to tertiary education by expanding student support systems. All things in moderation, however. Countries that rely solely on the market to determine the cost of higher education, such as the United States, often see tuition fees rise to such stratospheric levels that higher education becomes inaccessible to many prospective students. And that, in turn, undermines these countries’ own intentions of raising the level of their populations’ educational attainment. Thus, there is a case to be made for fee-stabilisation policies that contain costs. But beyond that, the most crucial ingredient for success is an effective system of student support. This is best based on a universal, income-contingent loan system complemented with a means-tested grants scheme. The loans help students pay for their education during the years they are studying and, if the loans are income-contingent, reflect students’ ability to repay the loan after graduating. Because they are progressive, the loans offer lower public subsidies to graduates with higher private returns on their investment in education. Means-tested grants promote access to higher education among more vulnerable groups, including young people who simply do not have good information about the benefits of a tertiary education. These grants can be linked to satisfactory progress, such as completion of a specified number of credits; but they are most effective when, together with loans, they cover all tuition and living costs for prospective students who would otherwise have to forgo higher education. Yet even the most sophisticated approach to financing tertiary education offers no guarantee of equitable outcomes. New OECD data show why. In short, the problems facing students from disadvantaged backgrounds begin long before the years of higher education. The impact of socioeconomic background on 15-year-old students’ performance in 2000, as measured by the OECD’s Programme for International Student Assessment (PISA), explained 37% of the difference, between countries, in the proportion of students from families with low levels of education who were enrolled in higher education nine years later. In other words, countries that are unable to mitigate the impact of socio-economic background on student performance during compulsory education are unlikely to solve that problem in higher education. But here, too, countries as different as Finland in Europe, Canada in North America, or Japan and Korea in Asia, show that this can be done. Others show that it doesn’t take decades to achieve significant progress: a major overhaul of Poland’s school system helped to dramatically reduce differences in performance among schools, turning around the lowest-performing schools, and raising overall outcomes by more than half a school year, all in just six years. Portugal was able to consolidate its fragmented school system and improve both overall performance and equity; so did Germany and Hungary. Their success should encourage us to believe that well-thought-out reforms really can help to open wider the doors of education.
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