Restructure for growth and development

It’s time to rethink higher education and its relationship with financial independence

May 14, 2021 05:13 pm | Updated July 06, 2022 12:37 pm IST



Education has long been touted to play a key role in reducing socio-economic inequalities. Multiple studies, both in India and abroad, have reaffirmed the belief that higher education leads to better financial outcomes. An entire generation was raised on the premise that education would be their ticket to financial independence. Fuelled by massive public and private funding, gross enrolment ratios increased significantly across the globe.

However, things haven’t exactly gone to plan. Student loan debt in the U.S. is the second biggest consumer debt category with nearly 10.8% NPAs; closer home in India, banks are staring at the prospect of writing off one in every 10 loans. This is primarily due to the students’ inability to service their education loan debts with their salaries; that is, if they manage to secure a job to start with. In the U.S., student debt is cited by Gen Z and millennials as a reason for delaying key life milestones like family planning, buying a home, or even taking risks because of the lack of financial flexibility. This also has long-term negative consequences for the economy and society. The apparent dichotomy is best explained by the fact that not all education is equal. Higher education is in dire need of reforms to ensure that it helps improve one’s standard of living and overall quality of life.

Quality and employability

Aligning the cost of education with the quality of the product is the first step. Assessing the quality of education through an employability lens will ensure that we are addressing the ‘unemployable graduates’ problem. Universities have an incentive to misreport employability information, as it helps them fill the seats. An employability scorecard, similar to the Annual Status of Education Report (ASER) by NGO Pratham, developed by an independent body can go a long way in helping students make an informed decision. The same can be used for continued accreditation of universities.

Universities must ensure a superior quality end product. Funding for the higher education sector should be in the form of outcome-linked impact investment bonds. Furthermore, universities should be a part of any model education loan scheme where they are on the hook for loan defaults arising due to unemployability. Some universities in the U.S. and alternate education providers are already offering Income Sharing Agreements (ISA) where the interests of the student and university are aligned. These should be the de facto funding programmes for prospective students.

Students prioritise employability when selecting universities. With the rapid changes in technology upending traditional business models, future jobs are not yet defined. Therefore, programmes need to be designed with continuous feedback from the industry. Thus the future of higher education will not be limited to a three- or four-year degree programmes; instead, it will be a life-long learning experience. Institutes will have to change their revenue model from an upfront fee model to either a subscription model or education in smaller modules.

The core curriculum will focus on creative thinking and problem-solving skills, and developing an entrepreneurial mindset. Students can then enroll in programmes on an as-needed basis, breaking down the system of traditional degree programmes. This in turn will increase affordability for the broader population, who will not be burdened with debt that they find hard to justify and even harder to repay. Indian universities can also learn from their international counterparts when it comes to multi-disciplinary programmes with an emphasis on liberal arts and other soft skills.

One would be certainly remiss if the need for the inclusion of basic financial education in higher education is not included in any discussion of rethinking higher education. A higher salary does not necessarily lead to financial independence. Lack of basic financial understanding results in many individuals struggling with investment and saving decisions, thereby jeopardising their prospects.

Investment in education is made with the expectation that it will lead to a brighter future in terms of professional and personal growth. However, it is time to retire the misplaced notion that a degree equals knowledge. We need to ensure that the institutes of higher education provide a breeding ground for creativity, allowing individuals to explore their potential. It is even more important in the Indian context to get this right to benefit from the demographic dividend rather than it acting as a trigger point for massive unrest down the line.

The writer is Founder & CEO, GyanDhan

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