FINANCING HIGHER EDUCATION IN SINGAPORE

Abstract

The rising cost of higher education and the simultaneous reduction in government grants to the universities imply that the institutions have to look for other sources of income. They may also have to raise tuition fees in order to meet the shortfall in revenue. Indeed, they have been revising their tuition fees upward since 1987. Such fee increases have expectedly resulted in much consternation among the students. The case for government subsidies is weak on both economic and equity criteria. A survey, conducted for this Academic Exercise, produced results that support the scaling down of government subsidies on the grounds of equity. Instead of depending on subsidies, the less-affluent students could take out loans to finance their tertiary education. Although there are a number of student loan programmes in Singapore, none provides an insurance against low-incomes. Such a need for insurance may become more significant given the increasing difficulty on the part of the graduates to find employment. Because of imperfections in the capital market, a strong case for government provision of loans and insurance emerges. It is proposed that the policymakers consider implementing an income-contingent loan repayment scheme which incorporates the features of loan, equity financing and insurance. It could be run along the same line as the Yale Plan. At the same time, the universities should look elsewhere for funds.