This is a guest blog. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the World Bank.
In 2014, Colombia instituted a student loan scheme--Ser Pilo Paga-where the loan is forgiven as long as the student graduates from the program. The idea was to improve equity by supporting able students from low-income families to access higher education. Recently, the government terminated the program because its cost was unsustainable in the budget.
Why do we agree with this decision?
Investments in education can be justified from many perspectives. One of the most robust ones is based on the socioeconomic benefits it produces relative to its cost. The international literature shows that education investment is very profitable from the private and social point of view. But before adopting a given policy, we should ask a few questions: What level of education should we invest in? What type of education? What kind of inputs should we use and what processes?
For many decades education economists have calculated the economic returns to education investment as a way to assess the individual’s labor market earnings or productivity increase from each additional year of formal schooling completed. Typically, this analysis shows that investments in education have a positive private rate of return (about 10 percent) and is much higher in low-income and middle-income countries. For Colombia in 2012 the private rate of return to investment in higher education was about 20 percent.
Although investment in Ser Pilo Paga make sense because it has the highest private rate of return, one needs to ask if it is the best way the government should invest scare resources to improve access and equity of the education system. To answer this question, one needs to consider the social rate of return. Unfortunately, we do not have this information yet. However, the international literature can give us some clues.
First, let’s point out that distribution of education outcomes in Colombia are highly inequitable. Many of those who will enjoy a 20 percent returns on their investment, would do so by participating in the Ser Pilo Paga program. The net pre-primary enrollment rate in Colombia stands at 45 percent. The 5th grade survival rate (percentage of a cohort of students enrolled in the first grade of a given level or cycle of education in a given school year who are expected to reach a given grade, regardless of repetition) is 85 percent. The quality of education measured by PISA, UNESCO or SABER is very low. It has been found that cognitive achievement is related to the socio-economic status of students. Clearly, in Colombia students from high-income families tend to get higher SABER scores. Further analysis shows that in Colombia students are not only subject to unequal learning related to their own socio-economic conditions, but also these inequalities are further accentuated by attending schools with a low socio-economic status. This deteriorates even further the situation of the students from low-income families. This study also shows the inequity of the education system where poorest students tend to be negatively affected not only by their socio-economic condition but by the schools they attend. The educational system in Colombia is experiencing a situation in which students have unequal learning opportunities, originating in the socio-economic conditions of the students, and the school system does not correct for this.
This should not be a surprise as Colombia is Latin America’s second most unequal country after Honduras, according to World Bank calculations in 2015.
Another important piece of information comes from research conducted in the past two or three decades; it has shown that investing in early childhood development (ECD) may be the most cost-effective educational investment and one with the highest social rate of return. James Heckman, Economics Nobel Laureate, said that we cannot afford to postpone investing in children until they become adults, nor can we wait until they reach school – a time when it may be too late to intervene. ECD has a high social rate of return in part because it takes place during the time when the human brain grows the most. If a child does not receive needed support at this stage of her/his life, opportunities may be missed, a misfortune that we have seen many times.
Rigorous evaluations of preschool programs in the United States have shown social rates of return up to 18 percent.
In addition, empirical evidence shows that quality ECD increases educational success and adult productivity and reduces future public expenditure. As examples of the first type of impact, ECD is associated with improvements in education test scores at the primary education level and further reduction of grade repetition and dropouts; increase in high school graduation rates; reduction of behavioral problems, delinquency and crime; and better employment and earnings. As for reduction in public expenditures, ECD increases school effectiveness and reduces social services, crime, and health (teen pregnancy and smoking) costs. And finally, it reduces welfare dependency.
Policymakers in Colombia, where a significant percentage of low-income families cannot provide any ECD or even pre-school education should at least consider the possibility to invest in pre-school education and should pay attention to good ECD practices elsewhere, were countries, like Sweden, for example, invests up to 2.5 times more public resources on a one-year-old that on a high school or a university student. In other words, they focus investment on the stage of life where social returns are highest. Good ECD programs shape the brain architecture and help set the stage for future learning, positive behavior and good health outcomes. And ECD saves resources in the long run because it prevents problems before they start and reduces later need for special education and other remedial measures.
Regarding the Ser Pilo Paga program, we are concerned that there might be better alternatives to improve the equity and quality of the education system in Colombia.
Not giving attention to the economic dimension of education investments increases the probability to jeopardize the prosperity of future generations by misusing scarce resources, some time literally wasting them and perpetuating inequity, poverty and social exclusion.