As science and technology has improved their access to the basic needs of life, individuals have been able to divert time and attention to culture and entertainment, creating a world in which more and more people are engaged in producing and consuming the products of technical and cultural knowledge.

It is this shift towards the world being dominated by knowledge workers and consumers that makes tertiary education such a critically important component of the educational landscape of every country. The World Bank has been a strong advocate of the importance of countries developing their early childhood, primary and secondary educational systems. In its 1989-1999 'World Development Report, Knowledge for Development', the World Bank argued that the new information-based technology world required countries to invest in tertiary-education systems alongside their investment in early childhood, primary and secondary systems.

The importance of the development of knowledge and of knowledge workers to the development of national economies provides the justification for a public contribution to the financing of tertiary education. It is the reason why in every country of the world, there is significant public investment in the tertiary sector. This investment is directed particularly at the financing of research, a large component of which is a public good. In many countries, governments finance research by providing funds directly to research institutions, which are often also involved in teaching students. In some countries, research is also financed on a competitive grant basis.

At the same time, there is also an important role to be played by private finance in tertiary education. This occurs because although it is clear, from copious research on this subject, that the public returns to tertiary education are high, so, too, are the private returns. Individuals who benefit from a tertiary education are likely to see a significant increase in their life-time earnings relative to their peers who do not benefit from such an education.

The financing problem, however, is that the returns are in the future, but the investment is required in the present. In some cases, the families of students are in a position to make this investment on their behalf, but for many students, particularly in lower-income countries, their families are unable to make such an investment. Under such circumstances, in the absence of public financing, there are many individuals who could acquire a tertiary education that would be beneficial to them and to the society in which they reside, who are unable to obtain such an education.

The ideal solution, of course, is the provision of loans to students to assist them in financing that component of tertiary education that involves the education of students. Recall that there is also a component of tertiary education that involves the generation of research, which students should not be called upon to finance since the benefits of research are to the society at large and not to individual students.

Future earnings

The financing by students of their education, out of their future earnings, is far more socially just than a system of full public financing of tertiary education, in which the poor in the society end up financing the education of individuals who go on to become affluent as a result of their tertiary education.

At the same time, loan programmes have to be carefully structured because of the aversion that students have to taking out loans to finance their education given their uncertainty about their ability to repay their loans after graduation - if they graduate. Levels of risk aversion are particularly high among students from low-income households who are less likely to have family experience of tertiary-education success. These programmes also are unlikely to be successful at increasing the involvement of poor students in tertiary education if they require these students to identify individuals of means who can provide guarantees for their loans.

Income-contingent system

The loan system that deals most effectively with these concerns is an income-contingent loan system which makes tertiary education free at the point of use for students, but obliges them to repay their loans upon successful completion of their tertiary-education studies, in a manner that is linked to the earning ability generated from these studies. Such a system has the following features:

Students, if they so need, are provided with loans, at market-interest rates, which reduces the incidence of arbitrage, for all related tertiary-education expenses (tuition, books, living expenses).

These loans are repayable contingent upon the student obtaining post-tertiary education income.

The loans do not require students to identify guarantors.

Students who are successful in obtaining post-graduation income are required to repay their loans regardless of where in the world they are employed, which can be facilitated through linkages across credit bureaux.

As the global financial environment becomes increasingly difficult, these are some of the approaches which developing countries like Jamaica may need to consider as they grapple with the task of financing educational opportunities for all their citizens, and the financing of tertiary education in particular.

Professor Alvin Wint, pro vice chancellor, Undergraduate Studies, The University of the West Indies. Feedback may be sent to columns@gleanerjm.com.