The Time Value of Exchequer Funding, and the Fees Debate

Ireland“In an article in today’s Irish Times, Sean Flynn reports that parents will get a discount of about 20 per cent for those who pay upfront – in order to generate funds for the exchequer in the short term. This is in the context an ‘income-contingent loan scheme’ for financing higher education, a being considered by Minister for Education Batt O’Keeffe. ‘At present, the State pays €350 million to the third-level system in lieu of fees each year. Sources say the plan to offer a discount of about 20 per cent for upfront payments could yield €70 million.’ The article doesn’t say, but I assume that ‘paying upfront’ means paying fees at the start of each academic year, rather than paying fees for an entire course at the start of the course. A question that parents with cash may ask themselves at the start of each academic year is ‘Can I earn 20% (risk-free) on this lump-sum over the next year?’. I would be very surprised if anyone answered yes to this question (even in boom times), so it seems like a highly-loaded incentive scheme …” (more)

[Martin Ryan, Geary Behavioural Economics Blog, 25 March]

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