Mr President, before signing the law on free college tuition, please read this

In addition, it is also worth highlighting that there is no real urgency of aiming for higher attendance in tertiary education given that the country has still many more tertiary education graduates compared to countries in similar level of development. 

The law stipulates that students with financial capacity can volunteer to opt out of subsidy or contribute to the school. One wonders how many will be civic-minded enough to volunteer to contribute when one can get tertiary education for free. It is important to recall that public finance textbooks points to the “free riding” issue as the primary reason for under provision of public goods if financed by voluntary individual contribution. It is argued that there is no compelling encouragement for those with financial capacity to contribute the appropriate amount commensurate to the benefits they receive.   

It is notable that the proposed law attempted to level the playing field between private and public tertiary institution, recognizing their complementary rule in tertiary education. This is done by providing for a tertiary education subsidy (TES) program for students in private HEIs and private-run TVIs to be managed by the UniFAST Board. Furthermore, unlike the program for students in public tertiary institutions, this explicitly provides for prioritization based on income using either the National Household Targeting System for Poverty Reduction (NHTS-PR) or other proof of income. In addition, the TES may cover room and board allowance, additional allowance for disability, and cost of getting professional license or certification.

No such similar explicit provision is proposed for students in public tertiary institutions. Covering the other costs, particularly room and board, besides tuition and other fees is critical if participation of students from lower socioeconomic classes is being encouraged. While this is somewhat inferior to an identical program for both public and private tertiary institutions proposed in the UniFAST, this is clearly a step in the right direction. The remaining issue is how the prioritization of students in the lower socioeconomic classes will be implemented.  

Finally, it is also worth noting that the features of the student loan program introduced in proposed measure addresses the problem haunting existing loan programs such as the Study-Now-Pay-Later (SNPL) program: the very poor repayment rates, which earned the program the moniker “Study-Now-Pay-Never.”

The last known study that looked at the program puts the repayment rate at 2%. The law proposes to incorporate repayment into the collection system of the Social Security System and the Government Service Insurance System rather than through Commission on Higher Education, which is not equipped to collect loan repayments.

In addition, it mentions a clearly laudable provision which requires payment only when income of beneficiaries is above what is called “compulsory repayment threshold” (CRT), making it an income-contingent loan. Income contingent loans have the nice property that frees the beneficiary from paying the loan when his income is below CRT, which may be due not to his fault alone but can be also partly be due to the quality of education he got. 

To lower the likelihood that beneficiaries will earn below CRT, there is a case here for being selective on which tertiary institutions programs are eligible for student loans financing. This is the reason why the UniFAST law provides for certification of which tertiary institutions and programs will be eligible for publicly funded StuFAPs. The results of professional board examinations putting average passing rate around 40% and the proportion of faculty with graduate degrees show that many of the tertiary education institutions and programs are clearly not performing well. This should justify the hesitation of making all tertiary education institutions eligible to provide educational services that are funded by general taxes if the objective is to “ensure optimized utilization of government resources in education.” 

The proposed measure, except for the income-contingent repayment provision in the student loan program, is not clearly superior to the existing policy on StuFAPS such as the UniFAST law in encouraging equitable access to tertiary education. It may even have the unintended consequence of using general taxes to undermine total investments in tertiary education and promote the perverse outcome of greater access to tertiary education for students not from poorer households but from richer ones. – Rappler.com 

Aniceto C. Orbeta Jr is senior research fellow at the Philippine Institute for Development Studies. His research interests include education and labor market, impact evaluation, applied economic modeling, and information and communication technologies.