James Griffiths and Marilyn Harrington, Social Policy

Key issue
Government policies to increase participation in higher and vocational education and training have had mixed results. Three main areas of concern have emerged: containing the cost to government, ensuring quality education and reducing student debt.

Increasing access to tertiary education

The tertiary education sector comprises higher education (university) and vocational education and training (VET). It is a diverse sector, including public and private universities, state and territory government technical and further education (TAFE) institutes and private VET providers.

Since 2007, significant government efforts have been made to increase participation in the tertiary education sector. In higher education, this has been through the creation of an uncapped demand-driven system for bachelor-degree places. This means, in part, that the Government no longer places limits on the number of undergraduate students public universities can enrol. In VET, this has been through the introduction of contestable funding (where public and private providers compete for funds), and by expanding student loans to the VET sector through the VET FEE-HELP program.

The graph below shows the number of new higher education students has increased steadily since the uncapped demand-driven system was progressively implemented from 2009.

The spikes in new VET students shown in the graph may be partly explained by the progressive implementation of VET reforms from 2009 to 2012. However, since 2012, the number of new VET students has noticeably fallen. Peter Noonan from the Mitchell Institute has attributed the fall to declining funding, VET competition with universities, increased training fees and ‘a rationalisation of programs—particularly at TAFEs—that had moved some courses further away than many students were prepared to travel’.

Figure 1: Commencing domestic students in tertiary education, 2007 to 2014

Note: VET commencing students are mostly domestic students. Source: Parliamentary Library, using data from the Department of Education and Training (Higher Education Data Collections) and National Centre for Vocational Education Research (Government-funded students and courses) online datasets.

Containing the cost of tertiary education

Costs to government

The increases in the number of government-supported higher education and VET students have been accompanied by significant increases in government expenditure. In higher education, the Review of the Demand Driven Funding System reported that uncapping bachelor places had increased the cost to government from $4.1 billion in 2009 to $6.1 billion in 2013. The Review estimated that the cost would reach $7.2 billion by 2016–17. In VET, the most recent VET FEE-HELP statistical report shows that the value of loans increased from $25.6 million in 2009 to $1.8 billion in 2014.

Higher education

In an attempt to contain costs, the Government proposed widespread changes to higher education in the 2014–15 Budget, including an average 20 per cent reduction in student subsidies. Although these measures have not been legislated, their projected savings continue to appear in the budget forward estimates.

The Government’s recent discussion paper, Driving Innovation, Fairness and Excellence in Australian Higher Education reconsiders the 2014–15 budget proposals and presents other options for reform. These options include reductions in government subsidies, changes to the Higher Education Loan Program (HELP) and limited fee deregulation for ‘flagship courses’, whereby institutions could be given the freedom to set fees for ‘a small cohort of their students enrolled in identified high quality, innovative courses’. Notably, the Government has ruled out fee deregulation across the entire higher education sector as a means to contain costs.

The options proposed in the discussion paper have met with a mixed response. The Group of Eight (Go8) and the Regional Universities Network, for instance, oppose the idea of flagship degrees, concerned that they would create a two-tier university system.

Vocational education and training

The Mitchell Institute’s response to the Government’s discussion paper, Redesigning VET FEE-HELP, suggests that the expansion of student loans to the VET sector has led to cost-shifting by some of the states for some courses. The states and territories have been able to reduce the number of places they subsidise, with students able to access Commonwealth VET FEE-HELP loans instead.

Ensuring quality in tertiary education

Higher education

The quality of the student cohort is an issue in higher education. More students with lower Australian Tertiary Entrance Ranks (ATARs) are being accepted into university. Coinciding with the introduction of the uncapped demand-driven system, the share of offers to applicants with ATARs of 50 per cent or less increased from 1.6 per cent (3,607 applicants) in 2012 to 4.4 per cent (9,723 applicants) in 2016.

To address concerns that students are being accepted into courses for which they are not academically prepared, the Minister for Education and Training asked the Higher Education Standards Panel (HESP) to provide advice about ways to improve the transparency of higher education student admissions policies. The Go8 universities support the HESP’s recommendations, including the proposal to publish minimum, median and maximum ATARs for every degree. The Go8 has also suggested the publication of student progression rates.

Vocational education and training

In VET, the issue of quality relates to both students and providers. Contestable government funding has created an incentive for new providers to enter the VET market, although the evidence on whether this has occurred is mixed. Also, the Victorian Registration and Qualifications Authority recalled almost 10,000 VET qualifications in 2014 and 2015 ‘because of concerns about poor training and standards breaches’. A recent Senate inquiry also examined the private VET sector and found the national regulator, the Australian Skills and Quality Authority (ASQA), was struggling to adequately regulate the sector, protect the rights of students and act firmly and quickly to stamp out abuses.

Declining rates of VET course completions, in part due to the suitability of students for courses, is also an issue for the sector. In response, the Government has implemented new minimum literacy and numeracy standards for VET FEE-HELP students and made other amendments to the scheme.

Reducing tertiary student debt

The Grattan Institute’s report, Doubtful Debt: the Rising Cost of Student Loans, shows that the proportion of unpaid student loan debt is increasing. It estimated that by 2017 the Government will have $13.0 billion in loans that it does not expect to collect (known as ‘doubtful debt’). One reason for this debt is the repayment threshold—some debtors will never earn more than the income threshold or will do so for too few years to repay all their debt. The major cause of the amount of doubtful debt, however, is that HELP debts in deceased estates are written off.

The Government’s proposal to reduce the current repayment threshold from $54,869 to $50,638 has bipartisan support and there is also some support for collecting HELP debts from deceased estates.

A major concern for the VET sector is providers who have used unethical sales techniques to sign up students to a VET FEE-HELP loan. These students may have no hope of repayment. The Government’s proposals in its discussion paper, Redesigning VET FEE-HELP, are intended to redress unethical provider practices. Meanwhile, the Australian Competition and Consumer Commission has launched legal action against five VET FEE-HELP providers.

Future directions for tertiary education

It is not clear if, or how, the higher education system will be changed based on the options presented in the Government’s discussion paper. The Go8 asserts that the uncapped demand driven system has ‘harmed the economy, diminished the value of higher education, and created the false view that anyone without a degree is a “failure”’. However, there appears to be little political appetite to restore caps on university places.

The process of VET reform has already begun with the Government’s recent changes to VET FEE-HELP. However, the future of the scheme is still under consideration as canvassed in the Government’s recent tertiary education discussion papers. A new National Partnership (NP) with the states and territories will also have to be negotiated to replace the existing (NP) Agreement on Skills Reform, which is scheduled to expire in 2017. The sustainability of TAFEs also remains an issue.

Further reading

J Griffiths and M Harrington, ‘Tertiary education ’, Budget review 2016–17, Research paper series, 2015–16, Parliamentary Library, Canberra, 2016.

P Noonan, Participation in tertiary education in Australia: policy imperatives and scenarios, Mitchell Institute policy paper, 2/2016, Mitchell Institute, Melbourne, 2016.

 

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