Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 180
degrees as well? Is this dependence real or imputed? That is, how should the state deal
with student claims of estrangement from family members, particularly as the student’s
age increases? How should the state address dynamic family circumstances (such as
family dissolution) in allocating responsibility for student support? Even assuming that
this information could be gathered and assimilated in a principled manner, other daunting
implementation issues confront means-testing of ICLs. How should the state calibrate the
vouchers to recognize different degrees of financial disadvantage? In other words, should
the state seek to create a cash-deductible portion of every income-contingent loan
conferred reflecting differential advantage, and, if so, what factors other than socioeconomic
circumstances should be used to determine the magnitude of the deductible
portion (e.g. number of children enrolled in university, membership in a minority ethnic,
racial or religious group that has been the subject of historic discrimination)?
Brief enumeration of the various design issues involved in the creation of a meanstested
loan program indicates that public resolution of these issues is bound to be
normatively contentious and politically destabilizing as disappointed program applicants
challenge both the ex ante criteria and their ex post application to speciflc cases, creating
significant costs without offsetting benefits. Moreover, to the extent that there are
significant positive externalities associated with university education, a case for partial
state subsidization of students from all family backgrounds can be made. For these
reasons, we do not believe that means-testing of income-contingent loans should be
deployed in this setting.
Having argued in favour of broad eligibility for participation in the ICL voucher
program, it is worth recalling that the state still possesses the ability to provide targeted
assistance to certain students in the form of grant-based vouchers that would reduce the
lifetime cost to the student of the income-contingent loan. For instance, the state could
confer grants on students from certain groups (however defined) that are underrepresented
in university relative to their percentage in the relevant population base in
order to encourage their enrollment in university. However, it should be emphasized that
the rationale for this assistance is based on the state’s role in promoting equality of
opportunity, and not on any adverse impact of the ICL plans on students from lowincome
backgrounds. Since, by definition, ICL programs contemplate repayment solely
on the basis of post-graduation income, students from all income backgrounds should
have no rational basis for declining to assume the responsibility for education-based debt.
Given that the magnitude and pacing of loan repayment will turn on income, the risk of
delayed (or defaulted) repayment is borne by the state or, perhaps more narrowly, by all
participating students. Thus, concerns over the innate debt aversion of students from lowincome
backgrounds are not implicated under the ICL program we are proposing.
Qualified suppliers
As we have indicated, at the heart of our proposed voucher system is the promotion of
increased responsiveness, innovation and differentiation by university suppliers, and the
belief that this conduct is best achieved through heightened institutional competition for
students. This competition will emanate not only from existing institutions, but from new
entrants as well. Thus, a necessary part of policy reform will be the removal of barriers to
entry by new or existing out-of-state institutions. The question remains, however,