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Tuition Fees and University Funding
Dr Kim Jackson
Social Policy Group
In the 1996-97 Budget the Commonwealth Government announced that universities
would be able to charge up-front undergraduate tuition fees for local
students from 1998. A number of universities have already indicated that
they will take advantage of this opportunity. Table 1 gives an indication
of the range of tuition fees proposed and compares them with Higher Education
Contribution Scheme (HECS) rates, course cost estimates and past fee levels.
University tuition fees were abolished in 1974, when the Commonwealth
Government assumed full responsibility for the funding of higher education.
At the time, tuition fees were providing 10.6 per cent of the universities'
income, with State Governments (35.7 per cent) and the Commonwealth (43.0
per cent) being the other major contributors. However, both the Commonwealth
and State governments also contributed through scholarship schemes which
paid all or part of tuition fees, generally without means-testing. In
all, 61 per cent of university students received assistance in paying
tuition fees. The real contribution from students was less than 6 per
cent of university income.
Universities have been able to charge full-cost fees for overseas students
since 1986, and for certain postgraduate courses since 1989, the year
that also saw the introduction of HECS, which combined tuition fees and
student loans in the one scheme. The original HECS rate was intended to
reflect 20 per cent of the average operating costs of a place (indexed
for cost increases), although it was further raised in 1992. In 1997 the
single rate was replaced by three separate rates derived from a combination
of course costs and projected graduate income. HECS repayments are income
contingent, so there will always be unpaid liabilities under the scheme.
It is currently estimated that the Commonwealth will, in the long term,
recover over 90 per cent of the HECS payments it makes to institutions
on behalf of students.
Some points of interest that emerge from the Table 1 are:
- the market has priced economics with law, whereas HECS rates it as
the equivalent of arts.
- students undertaking courses in the two lowest cost bands (Arts, Science)
are subsidising those in the highest (Dentistry, Medicine, Veterinary
Science). The standard HECS rate for Arts and Science is equivalent
to 33 per cent of the median fee and 40 per cent of total costs, whereas
the HECS for dentistry etc. is only 25 per cent of the median fee and
33 per cent of total cost.
- the universities' margins (the difference between the fee and marginal
cost as a percentage of the cost) are Economics/Law (62%), Arts (41%),
Science (38%) and Dentistry etc.(36%).
Table 2 contains estimates of the relative contributions of students
and governments to university income for selected years. Points of note
are:
- the relatively small impact of the abolition of fees in 1974 compared
to that of the introduction of HECS in 1989;
- the cost shift from government to students will continue with the
1997 HECS increases;
- despite the shift in costs from government to students, enrolments
have increased by 50 per cent in the 1988-96 period;
- the universities have increased their income from sources outside
HECS and governments from 16 per cent in 1987 to 27.4 per cent in 1995.
Table 1: Fees, HECS and Costs
Field of Study Up-front Fees HECS Total Marginal 1971
1998 1997 Costs 1997 Costs Fees
($ pa)(1) ($ pa)(2) ($ pa)(3) ($ pa)(4) ($ pa)(5)
Arts 9 - 11 000 2 475 / 3 300 8 110 6 500-7 700 2 500
Law 11 - 12 000 4 125 / 5 500 8 110 6 500-7 700 2 600
Economics 11 - 12 000 2 475 / 3 300 8 110 6 500-7 700 2 500
Science, 13 - 15 000 3 525 / 4 700 12 110 9 050-11 100 2 750
Engineering
Dentistry, Vet. 20 - 24 000 4 125 / 5 500 16 700 13 100-19 200 2 800
Science
- Based on reports of proposed fees from Melbourne, Deakin, Monash,
Sydney and UNSW.
- HECS discount rate (for up-front payment) and standard rate for 1997.
The equivalent rates for 1996 were $1832/2442 per annum (all courses).
The HECS standard rate was set at $1800 in 1989 and indexed for cost
increases; in 1992 the rate was raised to $2250 ($144 above the normal
indexation increase). The up-front discount was raised from 15 to 25
per cent in 1993.
- DEETYA indicative minimum course fees for overseas students. These
are estimates of the per student total annual operating and capital
cost of each course, as it is Government policy not to charge overseas
students less than the full cost of each course.
- Estimates of the cost to the university of each additional student.
Taken from C. Heaton and D. Throsby, Cost Functions for Australian
Universities: a Survey of Results with Implications for Policy,
Centre for Economic Policy Research Discussion Paper No. 360, February
1997. These are 'full cost' estimates: tuition-only costs would be around
60 to 70 per cent of the costs quoted. Marginal rates can also vary
widely according to the size of institution, with the possibility that
larger universities could have marginal costs greater than average costs.
Figures adjusted to 1996 prices using the CPI.
- Average of tuition fees for first year (full-time) of Bachelor degree,
adjusted to current prices using the change in CPI annual average prices
from 1971 to 1996 and rounded to nearest fifty.
Table 2: Government and Student Contributions to University Income,
1971 - 1995 1
Source of Income 1971 1981 1987 1989 1995
% % % % %
Student Contributions
HECS 2 10.4 11.0
Tuition fees 3 5.3
Overseas student fees 1.5 5.9
Postgraduate fees 0.2 1.0
Adult/continuing education fees 0.1 0.9 1.0
Other fees and charges 1.3 3.3 3.9
Estimated Total Student Contributions 6.7 0.0 2.3 16.3 22.8
Government Contributions
Commonwealth government 4 48.1 89.3 82.9 66.7 58.2
State governments 35.7 0.8 1.0 4.6 1.4
Estimated Total Government Contributions 5 83.8 90.1 83.9 71.3 61.6
Other sources of income 6 9.5 9.9 13.7 12.4 15.6
- Major sources for this table are DEET, National Report on Australia's
Higher Education Sector (1993), p.75; DEETYA, Selected Higher
Education Finance Statistics 1995, p.14; ABS, University Statistics
1971 Pt. 3 Finance, p. 6; DEET, Selected Higher Education Statistics
1990, p.132. The results should be regarded as estimates because
of variations in definitions and approaches over the 25 years covered
by the sources.
- Up-front HECS payments plus 90% of Commonwealth HECS payments to institutions
on behalf of students who defer, i.e. it has been assumed that 90% of
HECS obligations will be met. This is a conservative estimate, as Ann
Harding's cohort microsimulation model concludes that females will repay
91% and males 98% of their HECS debts. See A. Harding, 'Financial Implications
of HECS Changes', paper delivered at Conference on Policy Perspectives
on Higher Education Financing, ANU, 25 June 1996, p.7.
- Income from tuition fees less Commonwealth expenditure on such fees
through the Commonwealth University Scholarship Scheme (CUSS).
- Includes 10% of deferred HECS payments and expenditure on fees under
CUSS.
- Includes government contributions for superannuation not identified
by source.
- Includes donations, bequests, investments and other income.
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