• A
  • A
  • Europe privatizes public debt through student loans

    - Replacing government subsidies with student loans is an “effort to transform public debt into private debt,” Greek HE expert Vangelis Tsiligiris argues. Policymakers needed to find macroeconomic answers to respond to massification in higher education and graduate unemployment.

    The Dutch government is set to switch from publicly financed higher education towards a student loan system. Vangelis Tsiligiris, cross-border expert and Greek College Principal, put this development into a European perspective following up on his recent essay describing how the crisis triggered a new wave of neoliberal HE policies.

    From debt crisis to identity crisis

    With the turmoil created by the Eurocrisis, it is becoming ever more evident that higher education is closely associatedwith macroeconomic policymaking which has been severely affected by the on-going global recession.

    What is more: the situation in EU has transformed into an "identity crisis" where the different member countries compete to prove that they are not associated with those states that are commonly referred to as the P.I.G.S. For quite a few years now the debt crisis was considered a 'bug' of the south. However, it is now becoming obvious what several prominent economists were arguing since the beginning of the crisis, that the crisis in Europe is a systemic crisis which should be dealt in a coherent manner at a central economic policymaking level.

    Selective monetarism legitimizes harsh austerity measures

    Unfortunately, the EU has proven to be extremely bureaucratic and conservative in dealing with the debt crisis. At the heart of this is the long-existing cultural divide between the north and south of EU countries which was hidden until recently. Additionally, the debt crisis has coincided with the rise of neo-liberalism in Europe and elsewhere. Its advocates have blamed government intervention and public spending for the global recession calling for rationalisation of fiscal policies and use of monetary policy to restore competitiveness.

    This mentality shift was also accompanied by calls for "selective monetarism" which supports devaluating currencies in debt-ridden countries like Greece while at the same time selectively increasing the money supply in the intra-banking markets. Unfortunately, this has also legitimised severe austerity measures in EU countries. In the past, the IMF used those under the title of Structural Adjustment Policies with only limited success. These austerity measures and developments at macroeconomic level directly impact the higher education policies in European member states.

    Graduate unemployment and degree massification

    In the UK and other EU countries it becomes clear now that replacing direct government funding in higher education with student loans is an effort to transform public debt into private debt. This falls under a more general policy by European governments to reduce or eliminate public deficit and foster fiscal consolidation. Thus, higher education policy has entered a phase of "macroeconomic influence" and increasingly academic objectives are being misplaced by financial indicators.

    At the same time, two additional developments will have sweeping consequences for European higher education.

    First of all, unemployment of young graduates is reaching record-high rates. Unfortunately, the contemporary globalised economy has not appropriately addressed the issue of employment. In the EU and elsewhere, the prevailing understanding of competitiveness today is increasingly associated with lower minimum wages and flexible labour conditions, something which stands in stark contrast to the objective of governments to widen participation in higher education and training a better-educated workforce. This becomes particularly problematic and ethically questionable if you also take into account the increased financial burden on students and their families. Thus, even within the current rational financial context of analysis, higher education appears to have a declining return on investment (ROI) for students and their families.

    Second, the inflation of qualifications has shifted upwards standards in the labour market following the increase in the number and nature of providers along with the booming demand and participation rates in higher education. Undergraduate degrees are transformed into standard qualifications taking the place of vocational training diplomas. This devaluation of undergraduate and postgraduate qualifications in the employment market has to be considered when governments want to integrated graduates into the economy.

    Unbalanced budget no longer a phenomenon of the south

    The above two factors are creating a situation where higher education institutions are placed in the middle of a crossroad without a definite choice of directions.

    The recent break-up of the Dutch coalition government marks the beginning of the end of a period where public debt and fiscal imbalances were characteristics of the south. Sooner or later, Europeans should have to deal with the real problem of cyclical imbalances between member states. An appropriate instrument for this, e.g. Eurobonds, has to be chosen to respond to this.

    Only if macroeconomic problems are dealt with in a comprehensive and effective manner, higher education institutions are able to focus on responding adequately to the challenges created by the massification of higher education.