Public Versus Private Payment for Financing Higher Education

This paper argues on public versus private payment for higher education with reference to loans and grant/scholarship. The author critically evaluate reasons which are consumer ignorance, economies of scale, externalities and the public good and imperfections in the capital and insurance markets for market failure. Among four reasons, only externalities and the public good and imperfections in the capital and insurance markets may provide support for the state’s subsidies to higher education but do not cause it. Hence, the debate about public versus private payment for higher education depends mainly on political decisions rather than on efficiency arguments. However, both politicians and economists would ask the same question: “To what extent higher education should be subsidised?” though their criteria may differ. The author examines the cost-effectiveness, exchange efficiency and financial efficiency to suggest which option of subsidy, loan or scholarships is better.