English: Reading Comprehension Set 34

Directions: Read the following passage and answer the questions that follows.

DEBATES over how to fund higher education never lie dormant for long. In Britain, recently, there have been reforms about twice a decade; the last one, which hiked tuition fees, all but killed off the Liberal Democrats, members of the previous coalition government. In America, concerns abound over soaring costs and towering student debts. As a result, presidential candidates have been weighing in with plans to overhaul the system.

Why should the state support students in the first place? One argument is that society benefits from educated citizens, who pay more taxes, generate more jobs and help to advance human knowledge. Typically, such social gains justify subsidies. But the private returns to many degrees are juicy enough to encourage would-be students without a subsidy. The New York Fed reckons that a bachelor’s degree provides a 15% return on investment.

A better argument is that a purely private market for funding college would probably struggle. Despite the rosy averages, not all graduates succeed, so borrowing to pay for college is a gamble. Students do not know what job opportunities they will have later on; lenders must guess whether a 20-year-old will become a banker or a busker. Asset-poor youngsters cannot post collateral to compensate lenders for the risk. Unable to raise cash, poor students would be locked out of education without state support.

Governments can help spread these risks around. One option is to fund higher education fully, as many European countries do (the downside being that poor taxpayers subsidise successful graduates). Another is to offer loans on more generous terms than banks. For instance, governments can make repayments conditional on graduates earning a decent income, and collect the money like an additional income tax. Australia pioneered this approach in the early 1990s; Britain has since followed. Today, Hillary Clinton promises to expand America’s hodgepodge of “income-based repayment” schemes if she becomes president.

There are two problems with these schemes. First, taxpayers shoulder some risk, bailing out those who never earn enough to repay. Second, the incentives are skewed. Universities can sell dubious courses at a high price to students who do not care that the degree may not boost their earnings—as the taxpayer will foot the bill. When Britain trebled its cap on tuition fees in 2011, the government promised universities would charge the maximum only in “exceptional circumstances”. But two-thirds of universities—including many middling ones—immediately priced at the cap.

Can these problems be overcome? Marco Rubio, a Republican candidate for president, wants income-based repayment with a twist. Instead of borrowing to pay for college, students could sell a percentage share of their future income to private investors, and use the proceeds to fund their studies. Students’ liabilities would then resemble equity rather than debt.

This idea—which was floated by Milton Friedman in 1955—has several advantages. Students do not face too much risk; if they earn only a pittance, they pay little. But investors will not fund a booze-up; if a course fails to add value, students will be unable to raise enough cash to enroll.

Investors, though, would still face uncertainty over a student’s ability and career intentions. To resolve this, they would need to invest in a whole cohort of apparently similar students, to be sure of backing both high-rollers and hipsters. That might be easier said than done. Income-contingent financing will appeal most to students who expect low incomes; it is most expensive for the highest earners. If students can choose whether to participate, few wannabe-bankers will sign up (although an upper limit on lifetime payments might mitigate this).

Adverse selection plagued an experiment with equity financing at Yale University. In the 1970s around 3,300 undergraduates there agreed to pay 4% of their annual income for every $1,000 of funding they received until the entire group’s fees were paid. But students who expected future riches had no incentive to sign up in the first place to what was in effect an income-redistribution scheme. Worse, those who did take the money could later buy themselves out too cheaply. Alumni were still stumping up a quarter of a century later, and Yale had to terminate the plan.

Unlike the Yale students, investors would see this problem coming, threatening the viability of the contracts from the outset. But they could make their offers more attractive to the best students. For instance, Upstart, a peer-to-peer lending platform that has dabbled in equity financing, predicts students’ future income based on their academic background and area of study. That could enable bright students to agree a more favourable income-sharing agreement, lessening the adverse-selection problem.

To help limit adverse selection, the government might also gradually withdraw subsidised loans, which the best students will usually prefer to equity. The main role for government would then be to help to collect payments through the tax system, as the administrative burden of monitoring incomes would be too great for investors to bear.

That day is a very long way off. In the meantime, a final problem haunts all income-based repayment schemes: moral hazard. With repayments linked to income, graduates are discouraged from working. In Britain, student-loan repayments mean most graduates face a steep marginal tax rate of 41%. Repayments that must be made come-what-may do not create this problem (American student debts persist even through bankruptcy). That means the optimal financing mix for students—as with companies—is probably some mix of discipline-inducing debt and flexible equity. On the path to the perfect scheme, pitfalls abound. But Mr Rubio’s idea is a good start.

  1. What is the similarity between ongoing debate in america and England ?
    I. funding higher education
    II. reforms in education sector
    III. concerns over increasing debts

    Only I
    Only II
    Only III
    All of the above
    None of these
    Option A

  2. What are the benefits of a society to support its students?
    I. educated students produce educated progeny
    II. generate subsidies
    III. generate jobs

    Only I
    Only II
    Only III
    All of the above
    None of these
    Option C

  3. What is the most appropriate synonym of “rosy”:
    None of these
    Option D

  4. What, according to the author, is true about college funding?
    Students are unsure about their job opportunities.
    Everyone can’t afford collatral to support their loans.
    Lenders should know what a student is going to become.
    All of these
    None of these
    Option A

  5. How, according to the passage, government can be helpful to students to curb their financial problem?
    converting repayments into income tax
    offering loans on generous terms
    funding higer education, fully
    All of these
    None of these
    Option D

  6. Define: “booze-up”
    None of these
    Option C

  7. What are the advantages of the idea of “selling a share of students’ future income to private investors”?
    Risk Free
    Repayment is propotional to Income
    Investors will fund a booze-up
    Both A & B
    None of these
    Option D

  8. What is the most appropriate antonym of “floated”:
    None of these
    Option C

  9. What is the tone of the passage?
    None of these
    Option D

  10. What is the most appropriate title of the passage?
    Funds for Higher studies
    Education Funding
    Graduate Stock
    Both B & C
    None of these
    Option C


Related posts

42 Thoughts to “English: Reading Comprehension Set 34”

  1. Hi there! This is kind of off topic but I need
    some guidance from an established blog. Is it difficult to set up your own blog?
    I’m not very techincal but I can figure things out pretty fast.
    I’m thinking about making my own but I’m not sure where to start.
    Do you have any ideas or suggestions? Thank you

  2. What’s up friends, fastidious paragraph and fastidious arguments
    commented at this place, I am truly enjoying by these.

  3. Do you mind if I quote a couple of your posts as long as
    I provide credit and sources back to your site? My website is in the very same area of interest as yours and my users would really benefit from a lot
    of the information you present here. Please let me know if
    this okay with you. Thank you!

  4. I believe people who wrote this needs true loving because
    it’s a blessing. So let me give back and show my hidden information on change your life and if you want to with no joke truthfully see I will share info about how
    to find good hackers for good price Don’t forget.. I am
    always here for yall. Bless yall!

  5. What i don’t understood is in reality how you’re not actually
    a lot more smartly-favored than you may be right now.

    You are so intelligent. You recognize therefore significantly in terms of this subject,
    produced me in my view imagine it from numerous various angles.
    Its like men and women aren’t involved except it’s something
    to do with Lady gaga! Your individual stuffs excellent.
    At all times take care of it up!

  6. If some one wants to be updated with latest technologies after that he must be go to
    see this site and be up to date daily.

  7. Hi there everybody, here every one is sharing these knowledge,
    therefore it’s good to read this web site, and I used to visit this website daily.

  8. I am curious to find out what blog system you happen to be utilizing?
    I’m experiencing some small security problems with my latest
    website and I’d like to find something more secure.
    Do you have any recommendations?

  9. We are a group of volunteers and starting a new scheme in our community.

    Your web site offered us with valuable information to
    work on. You’ve done an impressive job and our whole community will be grateful to you.

  10. I’m not that much of a internet reader to be honest
    but your blogs really nice, keep it up! I’ll go ahead and bookmark your website to come back later.
    Many thanks

  11. Fantastic blog you have here but I was wanting to know
    if you knew of any user discussion forums that cover the same topics talked about in this article?

    I’d really love to be a part of group where I can get opinions from other knowledgeable people
    that share the same interest. If you have
    any recommendations, please let me know. Kudos!

  12. WOW just what I was looking for. Came here by searching for website

  13. Howdy just wanted to give you a quick heads up and let
    you know a few of the images aren’t loading correctly.
    I’m not sure why but I think its a linking issue.
    I’ve tried it in two different browsers and both show the same outcome.

  14. Thanks for the good writeup. It in truth was once a amusement account
    it. Look advanced to far added agreeable from you! By the way, how could we
    keep up a correspondence?

  15. 745090 233427Yours is really a prime example of informative writing. I believe my students could learn a great deal from your writing style and your content. I may possibly share this article with them. 709659

  16. Hola! I’ve been following your weblog for a long
    time now and finally got the bravery to go ahead and give you a shout out
    from Houston Tx! Just wanted to say keep up the great job!

  17. I like reading an article that will make people think. Also, many thanks for permitting me to comment!

  18. Hi! I know this is somewhat off-topic but I had to ask. Does operating a well-established blog
    like yours require a massive amount work?
    I am brand new to blogging but I do write in my diary on a daily basis.
    I’d like to start a blog so I will be able to share my personal experience and feelings
    online. Please let me know if you have any recommendations or tips
    for brand new aspiring blog owners. Thankyou!

  19. If some one needs expert view regarding blogging afterward i advise him/her to
    go to see this website, Keep up the fastidious work.

  20. You have made some good points there. I looked on the internet to learn more about the issue and found most
    people will go along with your views on this website.

  21. Hi there, its fastidious post on the topic of media print, we all
    be aware of media is a enormous source of data.

  22. Great delivery. Great arguments. Keep up the great work.

  23. I was curious if you ever thought of changing the layout of
    your website? Its very well written; I love what youve got to say.
    But maybe you could a little more in the way of content so
    people could connect with it better. Youve got an awful lot
    of text for only having one or two images. Maybe you could space it
    out better?

  24. Hello, after reading this amazing piece of writing i am also glad to share
    my knowledge here with colleagues.

  25. excellent points altogether, you simply received a
    new reader. What may you recommend in regards to your put up that you simply made a few days in the past?
    Any sure?

  26. I always emailed this blog post page to all my friends, because if like to read
    it next my friends will too.

  27. After looking at a number of the blog articles on your blog, I truly like your technique of blogging.
    I bookmarked it to my bookmark webpage list and will be checking back soon. Take a
    look at my web site as well and let me know your opinion.

  28. I read this post fully on the topic of the difference of most up-to-date and
    previous technologies, it’s amazing article.

  29. I every time spent my half an hour to read this weblog’s content all the time along
    with a cup of coffee.

  30. Saved as a favorite, I like your web site!

  31. I think this is among the most significant info for me.
    And i am glad reading your article. But want to remark on few general things,
    The site style is ideal, the articles is really great : D.
    Good job, cheers

  32. Good day! Do you know if they make any plugins
    to protect against hackers? I’m kinda paranoid about losing everything I’ve worked hard on. Any tips?

  33. What’s up colleagues, how is the whole thing, and what you wish for to say concerning
    this post, in my view its truly remarkable in support of me.

  34. Wow, this piece of writing is good, my sister is analyzing these things, so I am going to inform her.

  35. hi!,I really like your writing so a lot! share we be in contact extra approximately
    your article on AOL? I need an expert on this house to unravel my
    problem. Maybe that is you! Having a look forward to look you.

  36. Great website you have here but I was curious about if you knew of any discussion boards that cover
    the same topics discussed in this article? I’d really
    love to be a part of online community where I can get responses from other knowledgeable
    individuals that share the same interest. If you have any
    suggestions, please let me know. Thank you!

  37. Also a thing to mention is that an online business administration program is designed for scholars to be able to smoothly proceed to bachelors degree programs. The 90 credit education meets the lower bachelor college degree requirements and when you earn the associate of arts in BA online, you will possess access to the newest technologies in such a field. Several reasons why students have to get their associate degree in business is because they can be interested in this area and want to have the general education and learning necessary just before jumping in to a bachelor college diploma program. Thanks alot : ) for the tips you actually provide in the blog.

  38. Wow! This blog looks just like my old one! It’s on a totally
    different topic but it has pretty much the same page layout and design. Excellent choice of colors!

  39. I read this post fully about the resemblance of most recent
    and earlier technologies, it’s amazing article.

  40. Hi! Do you know if they make any plugins to assist with Search Engine Optimization? I’m trying to get my blog to rank for some targeted keywords but I’m not
    seeing very good success. If you know of any please share.
    Appreciate it!

  41. Spot on with this write-up, I truly feel this web site needs a lot more attention. I’ll probably be returning to read more, thanks for the information!

Comments are closed.