Higher Education Equity in the 2014 Budget
The following summary considers the significant elements of higher education funding announced in the 2014 Federal Budget with particular regard to higher education equity and the potential impacts on students from disadvantaged backgrounds. All assumptions are based on information to date, with detail yet to follow from the Departments of Education and Treasury, and assume that the recommendations are passed in the Senate without alteration.
1. Continuation of the demand driven funding system (DDS)
The Australian Government currently funds a Commonwealth supported place (CSP) for all domestic students accepted into an eligible bachelor degree course at a public university. This will continue.
FOR: Evidence to date is that the DDS system has been the single greatest contributor to increased enrolments of students from disadvantaged backgrounds. Under the DDS all equity groups (with the exception of remote students) have seen increases in their overall share of enrolments.
AGAINST: Puts slight upward pressure on short-term Government debt, due to the commitment to provide Commonwealth Grant and HECS-HELP support for each undergraduate domestic student.
UNKNOWN: With the removal of the 20% low-SES enrolment target, institutions may alter (or maintain) bias in student selection processes that work against disadvantaged students.
2. Extension of DDS to sub-bachelor places and private providers
From 2016, the Government will be extending the demand driven system to include all higher education diplomas, advanced diplomas and associate degree courses. Students enrolling in these courses will be able to access a CSP.
FOR: Sub-bachelor places have great potential in providing an alternative pathway into higher-level degrees for many students who require additional support and preparation at the tertiary level. Currently, these students often pay up-front fees at private providers to complete sub-bachelor degrees before articulating to university courses. The cost of these courses will now be paid for under HECS-HELP. The increased competition and capacity of the private education market may further increase these students’ options.
AGAINST: Puts greater pressure on Government debt, due to the commitment to provide Commonwealth Grant and HECS-HELP support for each undergraduate domestic student. Furthermore, enabling courses are not included in the DDS, which implies greater expense to both government and student if this demand flows into sub-bachelor programs.
UNKNOWN: Whether the higher education sector will focus on providing sub-bachelor courses designed to assist disadvantaged students or instead focus on more profitable diplomas/short courses targeting less disadvantaged students. Also whether or not there will be a significant shift in some universities away from bachelor and towards sub-bachelor offerings.
3. Fee deregulation from 2016
From 2016, universities will be able to set their own tuition fees for the courses they offer.
FOR: Provides a significant revenue stream that will reduce the cross-subsidisation of teaching and research and thus possibly improving teaching quality (e.g. smaller classes).
AGAINST: Coupled with the Government’s continued commitment to HELP, has great potential to create a distorted, ‘irrational’ market where neither student nor university is overly sensitive to price signals and competition. This could result in an explosion of the HECS debt, creating a major issue that will need to be resolved in the future e.g. by abolishing HECS or capping it. One implication is that the level of HECS debt ultimately repaid falls as time to repay debt increases.
Alternatively, if students behave ‘rationally’ and become sensitive to price increases, this will most probably disproportionately impact disadvantaged students.
UNKNOWN: What prices will be set by the universities, and whether ‘competition’ between them might produce significant fee variations (including the potential for lower fees). There is no accurate way of determining. However current levels of international student tuition fees provide an indication. Also, previous experience in Australia and recent experience in England suggest fees will rise (not fall) and that there is likely to be little price differentiation between universities except possibly for prestigious courses at the Group of Eight, where very high fees may result.
Also unknown is whether an increase in student fees will cause more students to access HELP rather than pay upfront (currently 20% of students pay upfront).
Finally, to date HECS has helped ameliorate debt-aversion in disadvantaged students. However fee deregulation might cause these students to be less inclined to consider higher education.
4. Changes to HELP
The existing 25% FEE-HELP loan fee and the 20% VET FEE-HELP loan fee will be removed from 1 January 2016. The FEE-HELP limit will be removed and there will be no limit on the amount of FEE-HELP (and VET FEE-HELP) assistance that a student can access. Students will be required to commence repaying their loans at a new (lower) minimum repayment threshold (estimated to be $50,638 in the 2016-17 year). HELP debts will be indexed by the Treasury 10 year bond rate (to a maximum of 6.0 per cent per annum) rather than the Consumer Price Index (CPI). The HECS-HELP benefit for graduates who take up employment in education, nursing, early childhood, maths and science will be discontinued for periods of employment after 30 June 2015.
FOR: The removal of the loan fee makes the loan less expensive for students. The removal of the FEE-HELP limit helps students access more expensive courses.
AGAINST: The other changes increase the cost to the student. Removal of the FEE HELP limit may make the scheme even more attractive and encourage irrational behaviour (3 see above). Also, as per 3 above, increased used of FEE-HELP can undermine the sustainability of the HELP system. Also, the use of a higher interest rate means that HELP debts will accumulate at a substantially faster rate than has been the case in the past.
UNKNOWN: See point 3 above.
5. Revised student contributions
From 1 January 2016, the maximum student contribution amounts for Commonwealth supported students will be removed and the Commonwealth subsidy paid for these places will be reduced on average by 20 per cent.
FOR: Reduces government expenditure, increasing viability of HELP scheme.
AGAINST: Increases student debt as student fees are increased to fund education.
UNKNOWN: See (and in conjunction with) points 3 and 4 above.
6. Creation of Scholarships for disadvantaged students
All higher education providers will be required to commit $1 in every $5 of additional revenue to a new Commonwealth Scholarship scheme to support student access, participation and success. Institutions will be required to use this funding to provide access and participation opportunities for disadvantaged students through the Commonwealth Scholarships scheme, such as scholarships and bursaries, outreach activities, tutorial support, mentoring, fee exemption and assistance with costs of living.
FOR: Creates significant new resources to support disadvantaged students.
AGAINST: Potentially universities will use this revenue to underwrite existing initiatives, rather than create new ones. Means that universities will have to increase fees to cover the $1-in-$5 allocation. Also, the bulk of funding generated may occur in Go8 universities with limits to their scope or self-described mission to increase low SES and equity participation.
UNKNOWN: The detail of how the scheme will operate – although the government has promised to clarify the structure of benchmark fees. Also it is unknown whether this is designed to phase out HEPPP in the long term (see point 7 below).
7. Changes to Higher Education Participation and Partnerships Programme (HEPPP)
The streamlined programme, renamed the Higher Education Participation Programme (HEPP), will have two components from 1 January 2015 — the new Access and Participation Fund (APF) and the existing National Priorities Pool. The new APF will provide identified funding to universities to support programs that assist current and potential students from disadvantaged backgrounds to enter and succeed at higher education. The National Priorities Pool will make strategic, national level investments that will focus on key national priorities or support and complement the efforts of individual institutions.
FOR: HEPPP (now HEPP) has been maintained and theoretically has not been cut, with savings to the Government coming from reduced reporting, rather than cutting programs.
AGAINST: The use of the phrase “Alongside the introduction of the new Commonwealth Scholarships scheme” suggests that HEPP will be reduced in the medium term, as the assumption is the new scholarships (see 6 above) will supersede it.
UNKNOWN: The long-term future of HEPP.