In a society with extreme inequalities in household income, a redistributive policy is required if access to higher education is to be widened. This in turn requires a differential pricing effect, which can best be achieved by linking policies for fee increases to the provision of financial aid.
So says deputy vice-chancellor Professor Martin Hall*, who questions what the most appropriate financial aid and fees policy is for a public higher education institution in South Africa.
"Each year in South Africa universities have to decide on increases in tuition fees and, due to the absence of a national framework policy for university fee increases, this is invariably a difficult issue," he explained. "We need to ask: what is a fair price for the opportunities that a university education offers, and how can financial aid policies be strengthened in order to widen access to these opportunities by helping those who can't afford to pay for it?"
In answering these questions, Hall advocates an "equity targeted" policy - one in which the university first agrees on the socioeconomic profile it wishes to achieve in its student community. Costing and pricing mechanisms are then used in close association with admissions policies and targets to achieve a mix of tuition fees and financial aid to broaden social and economic inclusion. Key performance indicators will be used to measure progress in attaining these objectives, and close alignment will be maintained with state support, through the national student loan scheme.
"This is the most appropriate approach for a country with one of the steepest gradients between wealth and poverty in the world, high levels of unemployment and under-employment, large numbers of families, which have yet to participate in higher education, and ambitious objectives for economic and social development," he added.
According to Hall, percentage-based policies maintain common pricing and the only way to widen access through this route is to hold down percentage increases for all students. But this leads to a downward spiral of reduced income for the university and reduced provision for student support, working against the initial objective.
"It would seem, then, that the best way to maintain both sufficient income for the university and to counter economic exclusion would be to have differential pricing of tuition, related to the available disposable income of the prospective learner," he said.
But in practice, differential pricing would be difficult to apply directly since it would require means testing for all students and their families. It would be very expensive to administer and would be open to abuse. This is where Hall believes financial aid policies can be used as an appropriate substitute.
"Using financial aid in this way keeps the price of tuition relatively consistent, and at a level of affordability for the more affluent students and their families, who in principle should pay an appropriate price for their education, taking into account the direct and indirect benefits this education will bring them after graduation, including increased earning power."
Hall says financial aid then provides a proxy for differential pricing by inviting learners to make a case for support on the basis of their ability to pay, providing appropriate information to make this case.
"It is inevitable that any review of financial aid policies - seeking to widen access by extending variable financial aid to those with higher levels of family income - will create a demand for increased financial aid provision. But universities have two resources at their disposal: their own income, derived from tuition fees, and state-provided loans, via the NSFAS scheme."
With regard to its own income from tuition fees, Hall noted that a university could increase its fees substantially and use the additional income to extend the net of financial aid, giving access to a significant number of new students from families who are excluded from opportunity on financial grounds. Such a policy would be redistributive in the name of social justice in that it would have the effect of using increased income from wealthy families to provide resources for students from poorer families.
Hall observes: "Such a proposal will, in all probability, be protested. But this needs to be understood against the lifestyle choices that some students and their families make, such as recent-model cars, overseas travel, clothes and entertainment.
"Any consequent lifestyle sacrifices need to be set against the benefits in terms of the social justice of widening equity. This is considerable, since the vast majority of students supported at university in South Africa through financial aid are first-generation entrants to higher education. It can be argued that we will have achieved a new maturity in the political discourse of higher education when a future SRC adopts the manifesto 'increase fees for social justice'," he added.
The second resource is the state and the NSFAS scheme and Hall maintains there is every indication that the Ministry of Education is open to constructive dialogue about the most effective use of state resources in support of equity of access.
"Universities need to enter into this dialogue with clear objectives, and unburdened by an inappropriate adherence to past assumptions. We need to change the way we think about the level of tuition fees," he concluded.
*These views are Professor Martin Hall's own, and are not necessarily shared by the University of Cape Town.
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