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Will the real Commonwealth Scholarships please stand up?

Written by Mary Kelly, Equity Director at QUT and NCSEHE Visiting Fellow

The approach to ‘Commonwealth scholarships’ proposed in the Federal budget diverts attention away from the destruction of the existing Commonwealth Scholarships scheme; it trashes the legacy of both Menzies and Nelson, and won’t be enough to counter the deterrent effects of higher prices and larger debt for low-income students.

The back story

Before Whitlam abolished fees, Menzies had in place a system of Commonwealth Scholarships (CS) which paid for tuition fees and a living allowance. Anyone who is 60 or older will remember these, and most working class people who went to university at that time had either a Commonwealth Scholarship or a State-provided teaching scholarship.

After a long hiatus, Brendan Nelson re-introduced Commonwealth Learning Scholarships (CLS) in 2004 and farmed them out to universities to allocate to low-income students, under strict guidelines. But, the dollar amounts were modest ($2k and $4k) and they were only for one purpose – education/living costs. There was no pretence that they were to assist with tuition fees, and neither was there a need, given the HECS settings at the time. By 2010, these CLS, re-named as Start-up and Re-location scholarships, were moved to Centrelink and became an automatic top-up to those on the means-tested Youth Allowance, Austudy or Abstudy. Thousands of low-income students, both urban and rural, currently receive these Commonwealth Scholarships, which have become an integral part of how they make ends meet.

Scholarships as loans and debt

The Government budget proposes to slash $800m dollars from these existing Commonwealth Scholarships over 5 years, by restricting who can get the Re-location scholarship, and by converting the Start-up scholarship to a loan. The latter move will ensure that our poorest students (who are the only ones who get the Start-up) will exit with more debt than their high-income counterparts in the same courses. It was Labor who first suggested converting the Start-up to a loan (to help fund the Gonski plan) although the Senate blocked the measure, so it has not happened yet.

It is one of the worst public policy ideas either party has ever come up with and deserves to be strongly rejected by the Parliament.

Not only does it lock in higher debt for our poorest students, it sets an alarming precedent about what the Government should or shouldn’t pay for. If the Start-up can become a loan, then why not the Re-location scholarship? (In fact, this was recommended by the Commission of Audit, and it is curious that the Government didn’t take up its suggestion – perhaps to avoid the wrath of the rural lobby). And if these Centrelink-administered scholarships can be loans, then why not Youth Allowance itself?

Whether fees go up or not, low-income students will continue to struggle with living and educational costs, and the existing CS, which are for this purpose, should be retained.

Scholarships via student fees

The Budget’s new idea – that one dollar in every five of higher fees must be used for scholarships or other supports – cannot be used as a defence for this demolition of the existing system and will be no substitute for the lost CS.

For a start, the very existence of higher fees, plus the proposed faster growth of debt, is what generates the need for a new type of scholarship – that of fee exemptions or discounts – scholarships that are not currently provided by Government.

So, the 1-in-5 formula will have to generate enough money to cover two types of scholarships – those for education/living costs plus those for fee exemptions/discounts.

Rough modelling would suggest this is unlikely.

Whatever dollar amount is added to the fees by a university, 20% of it will be enough to provide a fee exemption for about 16% (1 in 6) of that student cohort. For example if $30k was added to the cost of a course of study, and 500 students paid it, then an additional 100 students would be able to have a fee exemption from that additional cost. Given that the low-SES national target was 20%, the community representation is notionally 25%, and many universities have low-SES cohorts above that level, there is not going to be sufficient money raised even to provide enough fee exemptions, let alone make up for the $800m being stripped from CS for living costs.

Keep in mind that the Government is removing some of its own current contribution to fees, forcing all universities to put their prices up by about 30% (on average) just to maintain the status quo. The 1-in-5 formulation may not even apply to this catch-up price rise but only to amounts above that – one of the many matters still unclear from the budget.

So, timing-wise, higher debts and higher prices will kick in straight away, but the 1-in-5 compensatory scholarships could remain elusive and unpredictable for many years.

Keep in mind also that even the existing regime of Commonwealth Scholarships is insufficient for our poorest students and most universities have their own schemes of ‘equity’ scholarships, often from philanthropic sources, as a back-up. For example at QUT this year we will support about 2,000 low-income students with over $4m of needs-based scholarships.

The absurdity of the Government’s policy position is that putting up fees generates the need for the new type of scholarship, a need that cannot be met from within the proposed formulation. And the scheme to meet existing needs – for living/educational costs – is being demolished.

Their proposal creates a new problem with no solution, while eliminating the solution to an existing problem.

On the debt side of things, the effect of applying a commercial interestrate to the debt is to change the loan from one which is income-contingent (which determines when you have to payback) to one which is now also time-contingent: how much you pay back will depend in part on how long you take to pay it off. Those who can’t pay back quickly (poor people and women) will have growing debt, regardless of their income at the time, or even if they are in the paid workforce: more reason to have fee exemption and fee discount scholarships that help low-income people avoid accruing debt in the first place.

Confused purpose and name

There are two other anomalous and peculiar suggestions related to the 1-in-5 money in the budget papers, being the name of the proposed scheme and the purposes of the money. The 1-in-5 funds are to be used for ‘scholarships and bursaries, outreach activities, tutorial support, mentoring, fee exemption and assistance with the cost of living”, and this is all to be called a ‘Commonwealth Scholarship’ scheme.

Without a single Commonwealth dollar being used, and with the proposed uses not necessarily even being scholarships, this is the biggest misnomer since ‘friendly fire.’

More worryingly, these proposed purposes are eerily like that of the Higher Education Participation Program (HEPP), which universities use for outreach and support of low-income and Indigenous students. (In fact, this is the only program which explicitly supports collaborative activity in the pre-tertiary domain to stimulate interest in tertiary study.) With the 1-in-5 money looking a bit like HEPP#2, the temptation in future years will be for Governments to get rid of the real HEPP on the grounds that another source of money is available for these purposes – funded by students themselves. To a lesser extent, the intended purposes of the 1-in-5 money also overlap with SSAF (support) funding, generating similar confusions and dangers.

The underlying principle is simple – it is Government not students who should be paying for scholarships for needy students, and it is Government not students who should be providing seed-funding for outreach and support of disadvantaged students.

This means that:

  1. The existing Commonwealth Scholarships – Start-up and Relocation – should not be converted to loans
  2. Institutional equity scholarships should continue to be encouraged
  3. The HEPP funding should continue to seed-fund both outreach and support of disadvantaged students
  4. The 1-in-5 money (if fee rises go ahead) should only be for tuition fee exemptions and discounts, not for other outreach/support purposes – and should get a proper name!

A lot of our current HEPPP-funded outreach work with low-income school students and adults is designed to counter myths like ‘uni is too expensive.’ We inform these prospective students that it is quite possible to be poor and still get by at university by doing three things – access income support such as Youth Allowance (with its attached CS); work part-time; and access institutional equity scholarships (if family support is not available). We also tell them not to worry about HECS debts as they will be able to pay them off slowly.

That sound you can hear is not just equity practitioners muttering about what the hell we are going to tell them now, it’s the sound of Robert Menzies turning in his grave as his own party trashes his legacy.

Posted 30 May 2014 Posted in Editorial, General, Indigenous, Low SES