The many problems with a market for higher education

Financial Times:

In April this year, the Office for Students will become the “regulator and competition authority” for the English higher education sector. The establishment of this authority, complete with its own “chief executive”, captures perfectly the transition of the country’s university sector, where income from tuition fees has gradually supplanted direct government funding over the last few decades.

This process of government-encouraged marketisation — one of those rare instances where Latinate jargon is actually instructive — naturally leads to a conception of the student as a customer or consumer.

It has therefore generated high levels of competition between universities, which encourages them to do new things, like improve their accommodation, advertise on YouTube, or issue hundreds of millions of pounds of debt in international capital markets.

So what kind of a “market” are we dealing with here? Enter: the National Audit Office, which in December produced a report on the matter. It pointed out that the average student debt for a three-year degree is £50,000 – a “legal financial liability”. The independent body, which is funded by Parliament, also revisited the theme this week in a blog, which argued that students “don’t have the same protections at the point of sale as some other services”.

The strengthening of these incentives is closely connected to the consumer-protection issue. The marketisation process, as a corollary to competition, introduces (and even encourages) the threat of failure. This risk incentivises aggressive marketing on the part of cash-strapped universities, who are selling a service mostly paid for with government credit.

It’s not going to end well, is it.