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Issue #1647      July 16, 2014

The end of public higher education in Australia

Australia’s system of public higher education will come to end if Christopher Pyne and Tony Abbott are successful in getting their proposed changes to higher education regulation and funding through both Houses of Parliament. No longer will entry into a public university be determined on the basis of a student’s academic ability but on their ability to pay. In the new privatised, higher education sector merit will no longer matter, money will.

Cuts to funding for CSPs

In a series of policies euphemistically referred to in the Budget papers under the broad heading of “expanding opportunity”, the government will:

  • Cut funding for Commonwealth supported places (CSPs) on average by 20%
  • Open up CSPs to non-university higher education providers, including for-profit providers, and
  • Expand CSP funding to sub-bachelor higher education qualifications.

In aggregate, these measures are forecast to increase total CSP enrolments by 80,000 fulltime equivalent students, and save the Commonwealth in the order of $1.1 billion.

The cuts to government funding vary considerably from discipline to discipline. While the average cut of 20% represents an average cut of $2,120 per CSP, funding for engineering, surveying and science will be cut by $4,717 per student (-28.1%). social studies by $3,567 per student (-37.2%). On the other hand funding per mathematics and/or statistics student will increase by $2,458 (+25.6%).

Government Discipline Funding Rates

The critical point about these changes to funding is that with the exception of mathematics and statistics universities have little or no capacity to reduce fees assuming they will need at least the current level of resourcing to provide a quality education. Indeed in the vast majority of cases universities will be forced to increase fees, and in the case of engineering, surveying, science and social studies by over 50% simply to maintain the same level of resourcing as they currently receive.

Therefore, it is highly disingenuous for the Minister to say that it is entirely up to universities to set their fees and it has nothing to do with the Government.

Other higher education cuts

Other cuts to higher education announced in the Budget include:

  • 10% reduction in government funding to Research Training Scheme places (saving $171 million over four years) and the consequent introduction of tuition fees (capped at $3,900 per year) for higher degree research students to make up the gap.
  • $51 million of savings over four years by cutting participation grants under Higher Education Participation and Partnership Program (HEPPP), and
  • $121 million of savings over four years by ceasing reward funding.
  • $87 million of savings over four years by abolishing HELP benefits scheme which provided a discount on HECS repayments for graduates who take up related occupations or work in specified locations.

The Commonwealth forecasts savings of more than $200 million over four years by indexing all higher education grants to the Consumer Price Index (CPI) from 2016, which in the vast majority of cases will be far less generous than the current Higher Education Grants Index (HEGI).

While this measure might only save relatively small amounts of money in the short term, over the longer term it will be a significant loss of funding to the sector. For example, the government’s forward estimates show while it will save only $24 million in 2015–16 that will have risen to $109 million by 2017–18 and will grow exponentially from there.

While the Australian Research Council had a 3.25% efficiency dividend imposed upon it (saving $75 million over four years), the government found an additional $140 million over four years for 100 mid-career Future Fellows. While this is only half the number available in previous years, it was a welcome extension of this program.

There was also a $150 million grant in 2015–16 for National Collaborative Research Infrastructure Scheme (NCRIS). Funding beyond 2015–16 is yet to be determined.

Cuts to science and research agencies

The Budget also included significant cuts to a number of major science and research agencies. Totalling about $880 million over four years, they include:

  • $111.4 million cut from CSIRO.
  • $120 million cut from the Defence Science & Technology Organisation (DSTO).
  • $27.6 million cut from the Australian Nuclear Science and Technology Organisation (ANSTO).
  • $7.8 million cut from the Australian Institute of Marine Science (AIMS). 

Money raised by the Medicare and other health co-payments is supposed to be invested into the Medical Research Future Fund (MRFF) until it reaches $20 billion in about 2020. Dividends from the MRFF (expected to be $1 billion by 2023) will be used to support medical research, although there is already scepticism about this.

Changes to student scholarships

Two of the largest cuts in the Budget were to student scholarships. The government will save over $800 million by abolishing existing student start-up scholarships and cutting out relocation scholarships for students moving between or within capital cities. Despite these dramatic cuts the Minister for Education has continually referred to a massive increase in scholarships for disadvantaged students.

What the Minister is referring to are his new “Commonwealth” scholarships which will be funded from $1 out of every $5 of increased student fees. As has been pointed out, these scholarships are highly inequitable on a number of different levels.

Changes to student fees

In an attempt to allow the market to work its magic in relation to higher education the government has decided to completely deregulate university fees and open up public funding to non-university providers including for-profit private providers. As the article on the similar policy framework for VET in Victoria shows the market is more likely to weave mayhem than it is magic. As the evidence shows the contestable market model in Victoria is an example of policy and market failure.

From 2016 universities and other providers can charge Commonwealth supported students whatever they think the market will bear. While it is impossible to know the full impact of unregulated prices and competition, educated estimates can be made based on factors like:

  • The relative popularity of different degrees – the more popular, the higher the price.
  • The levels of income students expect to earn from different types of qualifications – the higher expected income, the higher the price.
  • The likely level of competition from non-university providers (based on the costs of delivering a degree and the need to obtain professional accreditation) – the greater the level of competition, the lower the increase in price.
  • There will be substantial increases in fees and in the majority of cases this is likely to be in the range of 30% to 100%. There will however be examples of massive increases in fees in some disciplines. According to Professor Ross Milbourne, Vice-Chancellor of the University of Technology, Sydney, the deregulation of university fees will see the cost of some degrees rise to as much as $100,000 or $200,000. Modelling by Universities Australia, following that by the National Tertiary Education Union (NTEU), comes to similar conclusions. This is not denied by the Minister.

Changes to HELP

The Budget changes to HELP will mean that the costs students face in servicing their HELP debts will increase considerably. The HELP repayment thresholds will be lowered and students will be charged market interest rates on outstanding HELP loans by indexing them to the 10 year government bond rate, not CPI as is currently the case. To offset these, administrative fees of 20% and 25%, which currently apply to some HELP loans, will be abolished at a cost of $23 million over the forward estimates.

These changes will not only dramatically increase the cost of servicing student debt ($2.1 billion over four years), but are highly inequitable. Students whose families are in a position to pay their fees up-front will avoid having to pay real interest on HELP loans.

In order to understand the impacts of fee increases and the changes to HELP; the NTEU has undertaken a comparative analysis which demonstrates the impact of the proposed changes using the example of a student undertaking a three-year accounting degree under conditions which applied before Budget night, and anyone undertaking a similar degree under the new arrangements.

The analysis (which is undertaken in current 2014 values and assumes a real interest rate above the inflation rate of 2%) shows that if the student was enrolled before the Budget they would have a HELP debt of $30,255 which would take about 10 years to repay. If however, that student enrolled after Budget night that student might graduate with a debt of $75,000 (as a result of fee deregulation), take 23 years to repay it and end up paying a total of $99,000 including $24,000 in interest.

While these changes are worrying in themselves, when the analysis is undertaken for someone taking a career break to care for family members for example, it shows they will suffer from cumulative outstanding debt and interest payments mounting up over time. If a student undertaking a three year $75,000 accounting degree takes a six year career break, they would end up taking 36 years to repay a total of $120,000 which includes $45,000 in interest payments, in 2014 dollars. It also shows how compounding interest impacts with the level of outstanding debt being higher when they return from their career break.

Conclusion

There is little doubt that the changes to higher education funding and deregulation announced in the first Abbott Budget will have profound and radical implications for our universities, their students and the communities they serve. The removal of the upper limit on university fees together with cuts to government funding will result in higher fees for students.

For the first time higher degree research students will be asked to pay tuition fees of up to $3,900 per year. It is yet to be determined what impact this will have on the number of students prepared to undertake a PhD.

Higher fees together with the imposition on real interest rates on student debts will also increase the cost of servicing student debt. As the analysis shows this is highly inequitable especially for students taking a career break who are predominantly women.

* Paul Kniest, NTEU National Office

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