“Education is the most powerful weapon which you can use to change the world.” These words of Nelson Mandela capture the importance of obtaining an education for every individual across any generation. Millennials, too, recognise the importance of getting educated. In fact, according to the Pew Research Center, they are the most educated generation yet. However, the major impediment that comes in their way of entering the formal schooling system and, later, higher education is limited availability of finance.
Education funding is the most important means to strengthen education systems in the world. This has evolved over the years. In mid-19th century, governments across the world did most of the funding using revenue from taxes levied at the local level. Around the 20th century, the growth of the education sector became a global phenomenon. Other sources of education financing such as external grants or loans provided by foreign government, private organisations such as NGOs, and local administrations were being increasingly tapped. The amount spent by developing countries on improving the condition was close enough to the average spent in developed countries. A historical decline in education inequalities was observed during this time. UNGC’s Millennium Development Goals were signed in 2000, in which the second goal was to achieve universal primary education. The first decade of the 21st century saw increased international financial flows for development assistance. Post-2010, there was a notable reduction in the amount of public funds being used to finance education. Secondary and tertiary levels of education receive more funding than the primary level. Notable examples in this regard would be Europe and Sub-Saharan Africa where less development assistance is provided for primary education. The UNICEF report, The Investment Case for Education and Equity, 2015, shows that in low-income countries, on average 46% of public resources for education are allocated to the 10% of students who are most educated – while this figure goes down to 26% and 13% in lower-middle and upper-middle income countries respectively. Larger allocation to higher education is important to ensure better national competitiveness through innovation, and to enhance the skills of millennials. Moreover, there is cross-country heterogeneity with respect to the importance of the education sector vis-à-vis other sectors. For example, American Samoa and Kiribati spend more than 12% of their national income on education while countries such as Bangladesh and Bermuda spend only about 1% for this purpose.
What is interesting to note is even when more public funds are allocated and private funding is also playing its part towards higher education financing, they are not enough. The demand for higher education among millennials is constantly growing and this is inevitably transforming this sector from an elite to a mass system across different parts of the world. The traditional revenue-driven model was based on public funding, student tuition fees and other charges collected from them, along with endowments. A major component of the revenue so collected goes into paying salaries to the faculty. It is necessary because of the increased opportunity cost of employment avenues. Besides dwindling public funding, the rate of increase in the cost of higher education exceeds the inflation rate in most countries. As a result, the cost of higher education is escalating at an alarming rate. Even in a country like India, where higher education has traditionally been highly subsidised, the government is pulling its purse strings. Across the world, public funding is moving from committal funds to assessment-based funding. Now even the youngest millennial is an adult and is ready for higher education. It is the responsibility of all stakeholders to ensure that education is within the means of each interested millennial. Christensen and Eyring in 2011 introduced the concept of ‘disruptive innovation’ in their book The Innovative University. This idea was used to implement information and communication technology in education, which was done by the introduction of online courses. Virtual education not only reduced the cost of education for millennials but also helped improve the quality of teaching. Many universities have ‘Work-Study Programs’ and offer an opportunity to study and work part-time simultaneously under such initiatives.
Countries are designing different models for sustainable funding of education. In some countries, like Germany, need-based student aid is provided for students, while in the UK, financial institutions are generally tapped to raise capital. New Zealand follows a Performance-Linked Funding Policy wherein students over the 50th percentile receive 100% government funding, while the remaining students receive 95%. To keep a check on the exorbitant tuition fees, a Tuition Grant Scheme (TGS) is in place in Singapore where students enjoy a substantially subsidised tuition. A new system of philanthro-capitalism has been introduced in India where capitalistic style objectives direct the entry of philanthropic enterprises in the education sector. Compared to the slow growth rate in higher education enrolment in North America and Europe, India enjoys the advantage of a large youth population so higher education sees enrolment in huge numbers.
Millennials are doing their bit to reduce strain on resources. Some students enter the workforce while being enrolled in higher education to either financially support themselves or to gain practical experience. Many start-up stories unfold in universities. Many millennials believe in the ‘earn while you learn’ concept. Education loans are becoming increasingly popular as a means to finance education in developed as well as developing countries. According to an estimate by CNBC, student debt stands at nearly $1.5 trillion and, roughly, one in four American adults is paying off student loans.
Financing of higher education institutions assumes great significance in today’s extremely competitive world. Higher education makes an immense contribution towards building the social capital of a nation. The government should have a futuristic outlook and increase spending on education with a focus on the quality. This is important because millennials see education as a means not only to acquire a degree but an avenue to enhance their knowledge and employability. While need-based grants and scholarships are available to some students, there are many who are denied these. Industry can provide lucrative internship opportunities to students, which help them finance their education. Policymakers should assess the impact of student loans as a source of financing education. Loan servicing results in reduced disposable income, which may impact the economic growth of a country adversely. For example, the Federal Reserve Board of Washington, DC concluded in a study that increasing student debt in the US has resulted in reduced homeownership. The growth of the housing sector is important for the economic revival of any country because of backward and forward linkages. High student debt will have implications for workforce composition as well. A study from NerdWallet predicts that students who graduated from US colleges in 2015 will have to delay retirement until the age of 75, in part because of the increasing burden of student debt. It is, thus, imperative for policymakers across the world to brainstorm and find ways to finance education in a manner that it becomes a win-win situation for millennials and their successors – Generation Z.
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