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Family Background and University SuccessDifferences in Higher Education Access and Outcomes in England$
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Claire Crawford, Lorraine Dearden, John Micklewright, and Anna Vignoles

Print publication date: 2016

Print ISBN-13: 9780199689132

Published to Oxford Scholarship Online: November 2016

DOI: 10.1093/acprof:oso/9780199689132.001.0001

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Why and How do Governments Fund Higher Education?

Why and How do Governments Fund Higher Education?

(p.25) 2 Why and How do Governments Fund Higher Education?
Family Background and University Success

Claire Crawford

Lorraine Dearden

John Micklewright

Anna Vignoles

Oxford University Press

Chapter 2 explains why governments fund the teaching function of universities and student living costs and the ways in which funding can be provided. Reasons for government intervention include the ‘social returns’ to higher education (the benefits to society as a whole), failures in credit markets (the difficulty in getting a loan from a private supplier in the absence of suitable collateral), and concern over equity between people from different family backgrounds. Three approaches to funding are described: (i) ‘free’ university funded by general taxation, (ii) government loans to students to be repaid after graduation, and (iii) a graduate tax—‘free’ university but with higher taxes on graduates. The chapter explains how fees plus loans to cover fees can be part of a policy that also aims to reduce the socio-economic gap in university entry—provided the loan has a particular form known as an ‘income contingent’ loan.

Keywords:   Social returns, equity, efficiency, tuition fees, income contingent loans, graduate tax, higher education, England

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