Yes, that’s certainly the argument you commonly hear. I find it more plausible for a subsidy on tuition than for a subsidy on the cost of living. After all, tertiary students are adults, in contrast to students at primary and secondary school.

However, even if you think that the tuition fees and cost of livign should be treated equally, there are difficulties with it. For a start, the empirical evidence suggests that most of the increase in surplus is likely to be captured privately by the student, so it’s hard to justify a subsidy on that basis.

The increased tax payments are certainly greater than the cost of the subsidy in most developed countries, and that’s often described as a ‘public return’ from tertiary subsidies. However, it’s more properly treated as an inter-generational wealth transfer via students, since there isn’t actually an increase in surplus as a consequence of the subsidy/tax. If we wanted to make an inter-generational transfer of wealth then there are more efficient ways to do it.

I think there are very plausible arguments for providing government-backed student loans and repayment thresholds, but we should remember that students are essentially investing when they go to university, not providing a public service. If I quit my job to invest in a new business idea that may make me rich after four years of penury, would the government pay for my investment costs and provide me with a living wage in the meantime? If not, then why is a student’s investment treated with such reverence?