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Attention Summary. Funding Irish universities properly is a national priority. I argue for the reintroduction of fees, and propose a mechanism to help students and their families pay the costs of their education.

Irish universities need more money if they are to compete internationally. The Minister for Education is considering the reintroduction of fees for third level students. I think this is a good idea, and I'd like to propose a mechanism to help students and their families pay for the cost of their education.

The basic idea is this: following admission to a course, when students and their families pass a means test, they automatically qualify for a very low interest loan, which covers tuition and living expenses over the course of the degree. This loan is paid back in subsequent years. Those who can't pay, don't. The government takes out the loan for them in a transparent process. The funds for the loan come from the interest earned on the national pension fund. In addition, we create a government-backed high interest savings account for parents who wish to save for their children's education. Think SSIAs for college.

Take a pencil and paper and follow my reasoning. We have 84,000 students enrolled at HEA institutions alone out of 131, 000 students in third level education nationally. If the numbers enrolled at HEA institutions alone grows in line with population growth, we'll have 100,000 students in higher education by 2015. The problem is to pay for these students when they can't pay for themselves, and minimise the hardship taking large amount of personal debt entails, while allowing the universities the funding to compete internationally. Assume we increase fees and maintenance to 30,000 per year for each student, a number which certainly overstates the true amount, even in 2015. Then we need 100,000 times 30,000 = 3 billion euros per year to cover every HEA student in Ireland, even those who don't exist yet. We currently spend 1.4 billion on third level education. This back of the envelope calculation obviously overstates the case, but bear with me for the sake of the argument. The national pension fund can earn this in interest, and is expected to grow to 140 billion by 2025, so the money is there to fund it. Though the fund lost money this year, it has made 3.8% returns since 2001, more than enough to fund a loan system like this several times over. Once the principal and interest is paid back into the national pension fund, the fund will remain as capitalised to fulfil its original purpose of securing old age pensions into the 21st Century. Several authors, including Prof. Philip Lane of TCD, have argued against using the National Pensions Fund for domestic purposes, but I believe a case can be made on social welfare grounds for using the funds generated on the principal of the pension fund to further a social good like higher education.

Liam Delaney and Gerard O'Neill both think the fees argument won't stack up, but I think they might have the wrong end of the stick. If we bundle all of the education spending into one transparent fund, and effectively double the amount of funding to universities on a per year basis, we'd solve the funding problem at the heart of the university system, in my opinion.

So, how would the scheme work? Means test each student and/or their family when they apply through the CAO for courses. Allow the universities to price each course individually according to demand for the course as measured by the CAO. If they can pay for an individual course, students automatically qualify for a national pension fund-backed loan, with an very low interest rate designed just to cover administration costs and defaults. If students can't pay, the government pays for the loan, from the same fund, exactly as in the current system. Marginal cases get referred to a board which arbitrates on a case by case basis. Students pay back loans, into the pensions fund, at their own pace, when they get their degrees. As mentioned above, allow the creation of a high interest, government-backed investment account, SSIA-style, to cover the cost of education, so parents with the means to help their children can do so in a cost effective manner from the moment of their children's birth. Those parents without the means to help their children are not penalised in this system---the government policy is still welfare-enhancing. Those who can pay, do, and those who can't, don't.

Universities are currently constrained by the government to cap the price they charge for the service they provide---education. Because the quantity of people wanting to be educated is relatively stable over time, and the cost of educating them is rising, the total surplus available to universities is getting smaller. This is not the way to fund a world class university system. Under the suggested plan, universities can access increased funds through a competitive system on a course-by-course basis, so while the `price' of medicine is unlikely to go down over time, demand for (and hence the price of) courses like computer science can fluctuate. Students can make informed decisions on individual courses, based on which they qualify for through the CAO and means-testing schemes, and decide which ones they most want to go into. Now the well funded universities can offer scholarships and bursaries to attract better students, buy better facilities, and hire superstar faculty. The university will offer a better educational experience, and the degrees students are awarded will be worth more nationally and internationally.

Who loses in this plan? The private grind schools will see demand for their services waning while the local authority will lose out, but they'll manage. Those families who previously benefited from the free fees will obviously not be impressed. However, the quality of their childrens' educations will increase as the university will have the resources to offer a world-class educational and research environments. As we progress towards a knowledge society, a properly resourced and internationally competitive university sector can only be welcomed.