This article is part of our series on big ideas for the University Agreement. The federal government is calling for ideas to “reshape and reinvent higher education, setting it up for the next decade and beyond”. An assessment team must complete a draft report in June and a final report in December 2023.
The tuition fees (known as “student fees”) paid by most domestic students are a difficult issue for the Universities Agreement review.
The amount of the student contribution has major consequences for the finances of students, universities and the government. The success or failure of the entire reform process may depend on the management of the politics of who pays and how much.
Some university lobby groups are calling for a fixed student contribution for all subjects and courses. This would reduce costs for many students, but significantly increase student contributions for politically sensitive groups, including education and nursing students.
A multi-rate system for student fees – with the aim of making average student debt repayment times comparable across degree programs – would be more politically acceptable.
Read more: The inequality of Job-ready Graduates for students must end quickly. Here’s how
Current student contributions
That of the Morrison government Job Ready Graduate Policy to determine current student contributions in 2021. For subjects that the government deemed “job ready” or “national priorities”, student fees were reduced to attract students. Prices for other subjects were set at a neutral level or raised to scare off students.
The cheapest annual rate for a full-time student from 2023 is $4,124 for nursing, education and agriculture. Engineering, science, IT, allied health, and performing arts cost $8,301. Medical, dental and veterinary students pay $11,800. The highest rates are for law, business and most arts disciplines, set at $15,142.
These student contributions are added to federal government grants called “Commonwealth contributions”, which also vary by discipline, to create a total percentage of funding received by universities.
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What are university groups asking for?
Two university lobby groups, the Group of Eight (including the University of Melbourne and the University of Sydney) and the Australian technology network (including Curtin, Deakin and RMIT universities), want a single contribution rate for students regardless of courses taken.
The Innovative research universities group (which includes the universities of Flinders, Griffith and James Cook) recommends a two- or three-tier student contribution system, with awards varying according to graduate results.
For job-ready graduates similarly, student contributions were roughly linked to future expected earnings.
Read more: Nobel laureate Brian Schmidt’s big ideas about how Australia funds and uses research
My submission to the University Agreement
Job-ready Graduates assume that student contributions significantly influence students’ study choices.
But interests of studentsand within those interests job prospects and expected salaries are the main drivers behind the course choices.
In practice, the Job-ready Graduates scheme results in financial penalties and rewards for study choices that students would usually have made anyway. For students who borrow under the HELP loan schemedoes this mean longer or shorter repayment times than before.
My entry revision of University Agreement aimed at practical consequences for students, government and universities.
Consequences for students
At first glance, a single annual student contribution makes the repayment costs more equal.
Students in longer courses would pay more overall, but the final HELP debts upon completion would be more comparable between courses than under Job-ready Graduates or the previous student contribution system.
In practice, however, the same debt has different consequences on average, depending on the degree obtained. Annual HELP pay off debt are based on the debtor’s income, so that students with degrees leading to better-paying professions make more progress each year in paying off their HELP debt.
With a single student contribution, graduates in high-paying fields would repay their debt much more quickly than graduates in lower-paying fields.
Slow repayments mean that a greater number of years of outstanding HELP debt is indexed to inflation. This year’s indexation becomes 7.1%. With the result that more debts have to be repaid, the repayment times will increase.
Student contributions based on expected future income reduce these differences in repayment terms. The available analysis of repayment times have flaws (including the mixing of HELP debtors who started and finished their studies at different times) but nevertheless support this statement.
For example, before Job-ready Graduates, law students had to pay more than humanities students, but graduates from both fields took an average of nine years to pay back their HELP debt. Typically, law graduates earn more than arts graduates and thus pay off more debt each year.
Determining the student contribution based on future income leads to more equality of effort in repaying than a flat-rate system of student contribution.
Consequences for the government
HELP debt costs both the government and students money. Normally, the government incurs interest subsidy costs, calculated as the difference between what it costs the government borrow money in the bond markets and the CPI-linked indexation rate.
Unusual CPI is higher than the bond price this year, but this is not expected to last. Not all HELP debtors pay off, with 15% of new debt estimated ultimately be written off at the expense of the taxpayer.
Job-ready Graduates made HELP more expensive. More than doubling the debt of humanities graduates, for example, means it will take them much longer to pay them back in full than before, if they ever do. The interest and costs of debtors will rise.
A policy based on repayment terms would help the government manage its own financial risks by allocating a large portion of HELP debt to students who are likely to repay in full.
Consequences for universities
For universities, the overall funding rate is more important than how it is split between Commonwealth and student contributions. But students’ contributions matter independently in one specific situation: when universities are “over-enrolling.”
This happens when a university reaches her maximum level of Commonwealth contribution funding. Any additional students will only be financed at the rate of the student contribution.
For courses with labour-intensive forms of education or practical components, the student’s own contribution may not cover the costs. For students of health courses, for example universities pay hospitals and other health services for clinical placements.
Job-ready graduates significantly cut student contributions to education and nursing, which have mandatory internships. Universities would lose money if they over-enroll in these courses, discouraging them from offering more student places.
Both the uniform rate and tiered student dues system would be an improvement over Job-ready Graduates, by improving the economics of over-enrollment in education and nursing.
Read more: Why arts degrees and other generalist programs are the future of Australian higher education
The politics of single-rate student contributions
A flat student contribution that left the government and universities in the same financial position as they are today would be about $10,000 a year for a full-time student.
$10,000 is more than double what education and nursing students pay now. While most would still be pursuing their career goals, a large price hike would confuse news coverage as policymakers try to increase enrollment in these fields.
Nursing and education students will have to pay more than they do now to make the system work for all stakeholders, but a multi-fee system would put them in a low or mid-tier student fee of less than $10,000 a year.
Education and nursing are highly feminized and popular with low socioeconomic status (SES) students. Based on the enrollment data for 2021, a fixed student contribution would on average lead to women paying slightly more than under Job-ready Graduates. Students with a low SES would also pay slightly more on average.
The dollar differences aren’t huge, about $1,000 more for women and $1,500 more for low-SES students averaged over a three-year degree. But again, it would confuse government coverage with the Universities Agreement job description require policies to increase low SES enrollments.
What now?
A flat-rate student contribution would be simple and an improvement for Job-ready Graduates for universities and students in courses with high student contributions.
But a three- or four-tier contribution system would do more to equalize the repayment burden between students. It would be generally fairer and politically easier for the government to sell.
