Higher Education: Need or investment in luxury?

Higher education is no more a public good. Nor has it remained a public responsibility. It is now being marketed as a luxury commodity. At best, as an investment. The idea of higher education being a luxury may be repulsive to many, particularly those who see it as a dire national necessity, socially and economically. But it is now the stark reality of our time. The phenomenon is no more confined to private providers. Public higher educational institutions are equal partners in this process.

Most advertisements, communications and marketing strategies of the so-called ‘premier institutions’ are now centred on the idea of excellence being exclusive and elitist. Potential customers are led to believe that their higher education would make them a class apart, heads and shoulders above the masses. The fees they want to charge is invariably based on a pricing policy that seeks to capitalise on the Veblen Effect, which, in simple words, means that ‘what is expensive must necessarily be excellent’. They are made to believe as to how anything affordable by the masses can ever be par-excellence.

A break-up of unit cost of higher education in these institutions, though rarely available in public domain, reinforces this trend further. The teaching and research-related expenditure, including faculty compensation, books and journals, teaching-learning and research resources, may not necessarily constitute the bulk. Much of the expenses are likely to be on account of luxuries and comforts -- state-of-the-art amenities, super-deluxe residential facilities, exclusive eateries and cafeterias, elitist sports and so on.

Public funding has been dwindling. Institutions are being compelled to mobilise resources on their own, through fee-raises, self-financing programmes, paid seats and increased cost recoveries and user charges. They are mandated to become self-sufficient sooner than later. Centrally-funded technical and higher educational institutions no more get development grants from the government. They are now given loans by the Higher Education Funding Agency (HEFA), a special purpose vehicle created by the Ministry of Education and Canara Bank.

Depending on the age, nature and type of the institution, some may be exempt from paying the principal and the interest while others would have to repay both over a 10-year tenure.

The loan is sanctioned only if they demonstrate the ability to repay. Most institutions propose to enhance fees and cost recoveries to become eligible. The trend is fast catching up with state governments as well. A few are, in fact, going a step further, as they are contemplating doing away with maintenance grants as well by urging the institutions to become self-sufficient sooner
than later.

Most professional and technical universities, with a large number of affiliated colleges, get no grant from their state governments. They generate resources through affiliations and other fees, to not only meet their establishment expenses, maintenance costs and infrastructural development but also to create corpus of an envious magnitude.

So much so, some of them have now become liable to pay income tax on the ground that they are no more eligible for exemption as they are not substantially funded by the government. Income tax liabilities may yet be disputed, but higher educational institutions in general are now under the ambit of GST, which they must pay on all non-fees income.

They are thus obliged to recover not only the direct cost of higher education but also the taxes and expenses on account of cross-subsidisation of the fee-exempt students. Obviously, the cost of higher education for students has become onerous. But why would students want to incur such a hefty expenditure on their higher education?

Because, they are given to believe that higher education is an investment with high to very high private return. This is particularly true in the case of professional higher education, where institutions play a prominent role in creating this perception.

Students are lured through the number of companies visiting the campus for placement, the number of offers per student, the median CTC, the highest CTC and so on.

Undoubtedly, higher education has been an investment, but of a different kind. It used to be an investment in human capital needed by the nation for growth and development. A national necessity, it was publicly funded to a large extent. Presently, however, it is being projected as a private investment with returns accruing to the recipients of higher education alone. Educational loan schemes of commercial banks too, lend credence to the idea. After all, banks do not finance consumption expenditure and hence education must be an investment.

Higher education is probably the riskiest of all investments with variable and uncertain rate of return and long to very long payback periods. Unlike investment in physical and financial assets, investment in higher education is akin to sunk cost with secondary market or salvage value. It will remain so even when students have their higher education credited to their ABC depository as it too does not provide resale or exchange option.

A stronger regulatory mechanism with commitment to grievance redressal might make higher educational
institutions return all the costs charged from students if the degree fails to offer the promised return. But what about
so many years of time that the students spent in earning the investment
in degrees?

Highly educated people queuing up for menial jobs that are meant for much less educated people is now more a norm than exception. So far, the illusion of higher education being an investment for better prospects continues. But for how long? No one knows. What will happen to the nation if people decide to give up on higher education?

(The writer is a former Advisor (Education) in the Planning Commission.)