We examine ways of funding higher education, comparing upfront tuition fees with graduate taxes. The tax dominates, as volatility in future income is transferred from risk-averse students to the risk-neutral state. However, a double moral hazard problem arises when students' efforts to raise...

Levy on graduate earnings should replace state funding of universitiesAlthough graduates tend, on average, to earn more than non-graduates, the ‘graduate premium’ varies greatly by subject and by year of graduation. It also varies significantly between individuals.There is considerable...