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Access, Equity, Capacity: Financing Higher Education . International Forum for Education 2020 Baoyan Cheng February 27, 2009. Daisen-in Temple 大仙院. Soen Ozeki 尾関宗園. Soen Ozeki.

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Access, Equity, Capacity: Financing Higher Education

International Forum for Education 2020

Baoyan Cheng

February 27, 2009


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Daisen-in Temple

大仙院

Soen Ozeki尾関宗園


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Soen Ozeki

Each Day In Life is TrainingTraining For MyselfThough Failure is PossibleLiving Each MomentEqual to AnythingReady for EverythingI am Alive - I am This MomentMy Future Is Here and NowFor if I cannot Endure TodayWhen and Where Will I ?


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Outline

  • Globalization

  • Neoliberalism

  • Milton Friedman

  • Bankruptcy of neoliberalism

  • Cost-recovery policy (cost-sharing)

  • Financial aid policies – student loan programs in the US, Australia and China


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Globalization

  • “The reduction and removal of barriers between national borders in order to facilitate the flow of goods, capital, services and labor” (United Nations, 2002).

  • Thomas Friedman (New York Times columnist; Pulitzer Prize winner):

    The World Is Flat (2005)


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Some criticisms of globalization

  • Increasing inequality

  • Weakening cultural diversity

  • Advancing corporate interests at the expense of the well-being of ordinary citizens

    Documentary:

    The Other Side of Outsourcing (2004)


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Neoliberalism

  • “Invisible hand”; decentralization and privatization; free market and free trade

  • Implication:

    Reduction of government subsidies in public service


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Milton Friedman (1912-2006):1976 Nobel Prize winner, leader of Chicago School of Economics.

  • Friedman the economist, the entrepreneur and the popularizer of free-market doctrine. (Paul Krugman, 2008 Nobel Prize winner).

  • “Consider the following three propositions: Money does not matter. It does matter. Money is all that matters. It is all too easy to slip from the second proposition to the third. And in their zeal and exuberance, Friedman and his followers had too often done just that” (James Tobin, 1981 Nobel Prize winner in Economics)


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Neolibralism and Education of Chicago School of Economics.

  • Milton Friedman: The Role of Government in Education (Capitalism and Freedom, 1962)

  • Milton Friedman: Market competition is the answer to solving educational problems.

  • Video clip from the 1980 PBS TV series “Free to Choose” produced by Milton Friedman


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Globalization and Its Discontents of Chicago School of Economics.

  • Pierre Bourdieu (1930-2002; French sociologist):

    Firing Back: Against the Tyranny of the Market (2003)

  • Joseph Stiglitz (2001 Nobel Prize Winner):

    Making Globalization Work (2006)

  • Paul Krugman (2008 Nobel Prize Winner):

    The Conscience of a Liberal (2007)


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Firing Back: Against the of Chicago School of Economics. Tyranny of the Market

Globalization is “the imposition on the entire world of the neoliberal tyranny of the market and the undisputed rule of the economy and of economic powers, within which the United States occupies a dominant position.”

-- Pierre Bourdieu


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Making Globalization Work of Chicago School of Economics.

“My research on the economics of information showed that whenever information is imperfect, in particular when there are information asymmetries – where some individuals know something that others do not (in other words, always) – the reason that the invisible hand seems invisible is that it is not there. Without appropriate government regulation and intervention, markets do not lead to economic efficiency.” -- Joseph Stiglitz


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Making Globalization Work of Chicago School of Economics.

“[U]nchecked by competition to ‘win the hearts and minds’ of those in the Third World, the advanced industrial countries actually created a global trade regime that helped their special corporate and financial interests, and hurt the poorest countries of the world.”

-- Joseph Stiglitz


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The Conscience of a Liberal of Chicago School of Economics.

“Can we save the economy, bring universal health care to America, and make this a fundamentally more democratic nation? Yes, we can. … The new New Deal starts now.”

---- Paul Krugman


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Neoliberalism and its bankrupcy of Chicago School of Economics.

  • Death of Milton Friedman (2006)

  • Current financial crisis

  • Bank nationalization – prescription given by Nouriel Roubini (New York University professor; “Doctor Doom” who first predicted the economic collapse)

  • More government involvement in public sector: Obama’s stimulus plan of $787 billion targets education and health care.

  • “We are All Socialists Now, Comrades” (Newsweek, Feb. 2009)


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Restoring the ideals of public higher education in a market-driven era

Neoliberal approach: An erosion of higher education’s long-standing commitment to advancing public priorities

Access to higher education is limited to those who can pay the cost of tuition

more government involvement in funding higher education is needed

more financial assistance to low-income students

CONCLUSION: Necessity for financial aid


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Tuition increase in the US market-driven era

  • Increase of college tuition

  • Reason 1: rising cost of providing higher educational services

  • Reason 2: falling subsidies from government


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Average Published tuition for Undergraduates by Type and Control of Institution, 2008-09 (Source: College Board)


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Average Published Tuition and Fees in Constant (2008) Dollars, 1978-79 to 2008-09 (Source: College Board)


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Total Educational Costs per Full-Time Equivalent Student Dollars, 1978-79 to 2008-09 (Source: College Board)by Carnegie Classification in Constant (2005) Dollars, 1995-96, 2000-01, and 2005-06 (Source: College Board)


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Total Net Tuition and Fee Revenues as a Percentage of Total Educational Costs by Carnegie Classification, 1995-96, 2001-02, and 2005-06 (Source: College Board)


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Cost-recovery policy in developing countries Educational Costs by Carnegie Classification, 1995-96, 2001-02, and 2005-06 (Source: College Board)

Rationale:

  • Improved efficiency: optimal use of resources

  • Enhanced equity

  • Public vs. private returns to education


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Case of China Educational Costs by Carnegie Classification, 1995-96, 2001-02, and 2005-06 (Source: College Board)

i. Expansion of higher education

In 1980, 1.66 million enrollment

In 2004, 20 million enrollment – largest in the world

ii. Tuition-charging policy (1989 and 1997)

  • In 2003, 5,000-6,000 Yuan ($600-720) tuition and fees,

  • 2,622 Yuan ($320) of per capita annual net income for rural households

  • 8,472 Yuan ($1,020) of per capita annual disposable income for urban households

    iii.Necessity of financial aid


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Types of loans Educational Costs by Carnegie Classification, 1995-96, 2001-02, and 2005-06 (Source: College Board)

  • Mortgage-type student loans

  • fixed repayment rate of interest and fixed repayment period

  • Example: US (the Stafford loan program)

  • Income-contingent type

  • Pay a certain proportion of future income

  • Example: Australia (Higher Education Contribution Scheme)


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Government-subsidized Loan Program Educational Costs by Carnegie Classification, 1995-96, 2001-02, and 2005-06 (Source: College Board)


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Effect of the loan program Educational Costs by Carnegie Classification, 1995-96, 2001-02, and 2005-06 (Source: College Board)– findings from my research

The loan program enables needy students to spend ¥528 more on food on average for one academic year, to work 26 hours less on average for one academic year, but does not have much effect on students’ expenditure on educational resources or their psychological well-being (e.g. anxiety level).


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Case of America – Major Federal Loan Programs Educational Costs by Carnegie Classification, 1995-96, 2001-02, and 2005-06 (Source: College Board)


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Grants vs. Loans, Growth and Percent Share of Total Aid, 1963-64 to 2002-03 (Source: College Board)


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Research findings on the effect of financial aid on college access/enrollment

  • Studies on the effect of prices on enrollment

  • Studies on the effect of grant aid on enrollment

  • Studies on the effect of loans on enrollment


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The issues of default and debt burden access/enrollment

  • Characteristics of defaulters and reasons for defaulting

  • Appropriate level of debt and the effect of debt on student borrowers


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Case of Australia access/enrollment

  • Historical background

  • Commonwealth involvement

  • Post-WWII expansion


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Higher Education Contribution Scheme (HECS) access/enrollment

  • The idea of income contingency

  • Design of HECS, the most successful income-contingent loan program

  • Impact of HECS on college access/enrollment

  • Reasons for its success in Australia


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Issues to consider for developing countries in loan program design

  • Issue 1: Conventional loans or Income-contingent loans?

  • Issue 2: Should the government provide guarantees for loans?

  • Issue 3: How to reduce default?

  • Issue 4: Should loan interest be subsidized by the government?

  • Issue 5: How to determine eligibility?


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A short presentation: Option 1 design

On financial aid policies

in your country/region

  • What is the historical context of tuition-charging policies?

  • Are there financial aid policies in place?

  • How effective do you think those financial aid policies are?

  • How do you think those policies can be improved?

  • What are the effects of the current economic crisis on those policies?


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A short presentation: Option 2 design

On the impact of globalization

on your country/region

  • What is your understanding/definition of globalization?

  • Do you think globalization is a good or bad thing?

  • How has globalization affected the educational system/practice in your country/region?

  • What do you think of the current economic crisis from the perspective of globalization?


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