GHELT – A Stress Free Higher Education Loan System

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While socialist oriented countries provide free higher education to citizens that wish to pursue it, other countries have left it in private hands to various extents. In order to pay the cost of this education, students often take loans from various financial institutions in the hope that they shall be able to pay it back easily after they graduate with the help of a good job. It does not always turn out that way though. One can be unemployed or underemployed later depending on the state of the economy or the state of the person in future and repayment can become a huge stress compromising the very quality of life. In addition some of the loan givers may be predatory sharks that can harass much later. There are also many persons, including this author, that are in principle against taking a loan for any activity in life except dire life threatening or very short term emergencies (such as losing your wallet on a trip) unless the loan is a forgivable loan from a non-profit making body. Loans taken with possible future profit in mind are regarded as nothing different from gambling since there is no guarantee of how the future will turn out. That is acceptable for business persons but to impose it on all the students of a nation is really stretching capitalism beyond the red line.

On the other hand, not all are in favor of free higher education because not all citizens go for it while all share the burden. However, the system of higher education for a fee also does not create equal opportunities for all. While the rich student can afford it easily, one from a poor background may have to let it go even though he may have been brilliant at high school level. As a result, the nation too suffers by not creating the best possible educated talent in the country.

Is there a solution to this problem short of making higher education free?  As a matter of fact there is a reasonable solution as described next. It has been named GHELT for short.

The solution to the problem is for government to create a corpus of a loan fund out of which the government, not private organizations provide student loans at reasonable interest rate as the first step. The second step is to link repayment as a percentage of income perhaps through the tax department by paying an additional five percent (or another higher percentage) can be collected as repayments until payment is complete or forgiven after some period.  The precise amount of additional repayment to be charged may be decided after further discussion. There could be an option for a person to pay it back sooner if so desired and if a person is able to.

In this way, if a person is unemployed or underemployed for periods of his or her life, he will have to pay little or nothing in such periods and no stress would be created. Since repayment would be a part of the tax payment process, no additional stress is created.  Often those who receive higher education earn more and can afford to pay a little more tax but just in case some do not then they would not have to pay in this system. In case a person is unable to repay during a life time, the government should forgive the remainder. The forgiven amount would be an expense borne by the government, it may be regarded as a subsidy but it would be much less than the socialist system in which the entire cost of higher education is borne by government.  To the limited extent this loan would be a forgivable loan, it would reduce any stress or dark dreams of unpaid debts.

If such a system is in place the government can do one more thing to improve quality of higher education. It can black list some educational institutions for loan giving if it is felt that they are into excess profiteering, unethical practices or into poor education quality before granting such loans. Even better is for a regulatory body to approve colleges and universities that meet quality before approving them for student loan grants.

It is easy to put checks in place since a loan would be granted only after a student secures admission and submits costs to the loan department. In this age of information technology the entire process can be made smooth and automatic while putting in place checks to prevent misuse. It goes without saying that the loan would be provided on a yearly basis if the student is making progress in his or her course of enrollment. No more than a single year of failure should be permitted, because if a student is unable to cope, it is best he or she leave the program or pay for it on his own.

This system has all the advantages of a socialistic as well as a capitalistic education system while not suffering from the disadvantages of either. We should give this type of system a name for ease of future debate and discussion -. GHELT (Government Higher Education Loan Tax-repayable)

 If GHELT is adopted, the nation would gain by being able to choose the best of students for higher education (rather than the richest), higher education standards would improve since these are directly related to quality of students and students would gain a stress free life. The financial integrity of educated citizens would be higher since nothing compromises it more than a person under financial distress and as result the financial integrity of the nation as a whole would improve since it is the educated who set the standards.
There is someone who would lose though and it is the financial institutions that presently make a profit by giving student loans and perhaps some politicians that draw support form such financial institutions. Another possible disadvantage is that educational institutions may not begin charging too much since loans are easily available but as mentioned in the note, regulation would be required for that and a need to disqualify institutions for loan giving that over charge.
THE SEMI SOCIALIST ALTERNATIVE

Another alternative worth considering is the semi socialist alternative where a nation has both public and private universities. Having both offers a measure of competition, opportunities for innovation and comparison within a nation and helps to fill gaps in educational needs. Here the public funded universities may be free of tuition fees whereas GHELT may be adopted for a set of selected private universities that have been recognized to offer good quality education and are not into profiteering. In the opinion of the author, after a long International career in education in some of the best universities of the world, as well as some private institutions, this last is the very best alternative that any nation on Earth can adopt. It will benefit the nation as a whole and at least 99.9% of its population. A small minority that profits from education shall  however lose some of its profits.

Image is a work of art entitled the Chamber by Roland Vivian Pitchforth (1895–1982)

Comments

Vinod Khurana said…
Wonderful article with a workable solution.I have one more idea and don't know whether it is practical:

Education is uplifting
but comes with a price
higher the level
more exorbitant that price.
A student is a student
poor or rich
if he wants to study
nothing better can there be.
But where and how
to make it possible
a thought is given
but eludes that possibility.
Educational loans
though well meaning
make commerce of that
which is so uplifting.
One way out
that could be tried
is to fund the institution
that shall have the right
to recover from the employer
where the student is employed
and to return to the State
whatever it could collect.
Hope it works
we may give it a try
but educate we must
who want to study
for nothing better can there be!

With regards
Vinod

June 30, 2015 at 8:36 AM
ProfAshok said…
Thanks Vinod for lovely poetry. Your idea has merit, the details would have to be deliberated. Self employed could have higher business tax and those who work for government or non-profits return service. There is some difficulty for those who go abroad though in both the proposals.
July 2, 2015 at 10:40 PM
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