Higher education reform

Budget Review 2017–18 Index

Carol Ey

Funding arrangements

The 2017–18 Budget removes the unlegislated proposed changes to higher education funding arrangements contained in the 2014–15 Budget (which amounted to savings of $3.4 billion).[1] The replacement measures proposed in the 2017–18 Budget provide a similar quantum of savings, at an estimated $3.8 billion over five years, representing the largest savings measure in the Budget.[2]

In the 2016–17 Budget the Government announced that it was reviewing the unlegislated 2014–15 measures, and delaying proposed implementation pending further consultation.[3] To support this consultation process it released a discussion paper, Driving Innovation, Fairness and Excellence in Australian Higher Education.[4] On 1 May 2017 Minister Birmingham announced the Government’s response to these consultations, which forms the basis of the measures in this Budget.[5]

Funding of Commonwealth supported places

Commonwealth supported places (CSPs) are the subsidised undergraduate and some postgraduate coursework places available to domestic students at all public universities and some private institutions. Universities receive the funding for these places through student contributions (with most students taking out Higher Education Loan Program (HELP) loans to finance their contributions) and the Commonwealth Grants Scheme (CGS). The split between student contributions and government funding (via the CGS) varies depending on the field of study. For example, in 2017 a student undertaking a law degree will contribute $10,596 to the cost of their study, while the Government contributes $2,089; someone studying science or engineering courses will contribute $9,050 compared to a government funding of $17,071; and a student in the humanities will contribute $6,349 with a government contribution of $5,809.[6]

In this Budget, the Government is proposing to ‘rebalance’ the relative contributions of students and the Government, increasing the student contribution towards their tuition from an average of about 42% in 2017 to around 46% in 2021.[7] This will be through a combination of increasing student contributions by 7.5% (1.82% annually over four years from 2018) and introducing an efficiency dividend of 2.5% in each of 2018 and 2019 on the CGS payments to institutions. Overall, this will mean an estimated reduction in the base funding for CSPs to most universities of between 2.6% and 2.9% depending on their course mix.[8] The Government has justified this reduction by noting that universities ‘appear to have become more efficient over time, especially as they have achieved greater economies of scale’.[9]

HELP repayment thresholds

While increasing student contributions will have some impact on students, the major effect on students of the proposed changes in this Budget will be in relation to Higher Education Loan Program (HELP) repayment arrangements. These changes represent the first major amendments to the repayment arrangements since 2004–05, although a new lower income threshold of $51,596 at a repayment rate of 2.0%, applying from the 2018–19 tax year, was legislated in 2016.[10], [11]

The Government is proposing a significantly reduced minimum repayment threshold of $42,000 in
2018–19, with a repayment rate of 1.0% of income, compared to the current minimum of $55,974 for 2017–18, with a repayment rate of 4.0%.[12] In addition, it is also proposing to increase the proportion of income required to be repaid at most income levels above the minimum. The Budget also proposes that, from 1 July 2019, these thresholds will be indexed to the Consumer Price Index rather than Average Weekly Earnings.

This measure is in response to growing concerns about the level of HELP debt and, in particular, the proportion of debt not expected to be repaid.[13] The Government estimates that in 2016–17 some 23% of new HELP debt will never be repaid; the proposed Budget measures, in addition to changes requiring repayment of debt by those living overseas from 1 July 2017, is expected to reduce the non-repayment level to around 17% in 2017–18, through increasing the proportion of debtors who are paying back at least part of their loan each year.[14]

The impact of this proposal varies across the income scale, with the greatest relative impact for those with incomes just under $52,000, who will have a tax increase of 2.5% resulting in an increased payment of some $1,300.[15] Based on 2016 taxation data, these changes would increase the number of those repaying their HELP debt from around 350,000 to over 500,000, out of a total of more than 2.2 million debtors.[16] These new payers will be in the lower income ranges with the greatest relative impact.

It should be noted that these new repayment arrangements would apply to all HELP loans, as well as VET Student Loans, Trade Support Loans and Student Start-up Loans.

Other funding measures

There are a number of other changes to higher education funding proposed in this Budget including:

  • 7.5% of the CGS funding to universities to be contingent on performance from 1 January 2018. For 2018 funding, universities will be required to participate in the reform of admissions information and cost of teaching and research transparency initiatives, while the metrics to be used to allocate this funding in the longer term will be developed in consultation with the sector during 2017–18.[17]
  • Ceasing access to CSPs for most permanent resident visa holders and New Zealand citizens. Currently, these students are able to access CSPs but are not eligible for HELP loans. It is proposed to change these arrangements so that these students are eligible for HELP but are required to pay the full cost of their courses. Students who are enrolled prior to 1 January 2018 will retain their current eligibility, while those on permanent humanitarian visas and eligible New Zealand Special Category Visa holders who meet the long-term residence requirements will continue to be eligible for both CSPs and HELP loans.
  • Replacing the loading for enabling courses, which are offered to under-prepared students to assist them in undertaking further higher education qualifications, with a student contribution which may be paid through HELP. At present the Government allocates places for these courses and then provides a loading for each place.
  • Introducing a scholarship system for postgraduate coursework CSPs, enabling students to choose the university at which they wish to study. Current funding arrangements allocate CSPs to specific institutions for specified courses meaning that, in some cases, students undertaking the same degree at different universities are covered by different funding arrangements. It is also proposed to reduce the allocation of CSPs for postgraduate coursework by 3,000 places a year from 1 January 2018 in line with current utilisation.[18]
  • Extending the demand-driven system to include CSPs in sub-bachelor level diploma, advanced diploma and associate degree courses at public universities for students who have not completed another higher education qualification, thereby removing the current caps on places in these courses.
  • Providing CGS funding from 1 January 2018 for Work Experience in Industry units undertaken by students which provide a credit towards a Commonwealth-supported qualification.

All the funding measures will require legislation for implementation.

Other measures

The Higher Education Participation and Partnerships Program (HEPPP), which provides funding to universities to conduct activities to improve the access, retention and completion rates of students from low socio-economic status (SES) backgrounds, is to be reformed. From 1 January 2018, the HEPPP will be split into two components, one of which will provide a loading of $985 per low SES student and performance funding for universities that improve their success rates for low SES and Indigenous students, while the other component will have a greater focus on evaluative research and outreach programs.[19] This measure will require legislation.

The Promotion of Excellence in Learning and Teaching in Higher Education program will cease, with responsibility for the Office of Learning and Teaching Digital Repository and for Teaching Awards being transferred to Universities Australia. This measure does not require legislation.

Support for the regions

Several budget measures seek to improve the access to higher education of students in regional areas:

  • $15.0 million over four years has been provided to establish and support up to eight regional study hubs to support students in regional areas undertaking distance study[20]
  • $12.5 million will be provided over six years to assist with the establishment of the Central Coast Medical School and
  • $24.0 million over four years will be provided to establish a Rural and Regional Enterprise Scholarships program to provide at least 1,200 scholarships of up to $20,000 for students undertaking undergraduate, postgraduate or vocational training and education qualifications in priority areas of study.

These measures do not require legislation.

 


[1].          Information and figures in this brief have been taken from the following document unless otherwise sourced: Australian Government, ‘Part 2: expense measures’, Budget measures: budget paper no. 2: 2017–18.

[2].          Australian Government, Budget 2017–18: budget overview, 2017, Appendix D: major savings.

[3].          J Griffiths and M Harrington, ‘Tertiary education’, Budget review 2016–17, Research paper series, 2015–16, Parliamentary Library, Canberra, May 2016, pp. 49–51.

[4].          Australian Government, Driving innovation, fairness and excellence in Australian higher education, Department of Education and Training (DET), Canberra, May 2016.

[5].          S Birmingham (Minister for Education and Training), A stronger, sustainable and student-focussed higher education system for all Australians, media release, 1 May 2017. For details of the proposals see Australian Government, The higher education reform package, DET, May 2017.

[6].          Australian Government, Allocation of units of study to funding clusters and student contribution bands according to field of education codes 2017, DET, n.d.

[7].          Australian Government, Higher education reform package, op. cit., p. 10.

[8].          Ibid., pp. 13–14.

[9].          Ibid., p. 12.

[10].       K Jackson, Higher Education Support Bill 2003, Bills digest, 56, 2003–04, Parliamentary Library, Canberra, 2003, pp. 2–3.

[11].       Budget Savings (Omnibus) Act 2016, Schedule 1.

[12].       Australian Government, Higher education reform package, op. cit., pp. 15–16.

[13].       Australian Government, Driving innovation, fairness and excellence in Australian higher education, op. cit., pp. 19–20.

[14].       Australian Government, Portfolio budget statements 2017–18: budget related paper no. 1.5: Education and Training Portfolio, p. 55; and for information on the repayment arrangements for those living overseas see Australian Government, ‘Overseas obligations’, Australian Taxation Office (ATO) website.

[15].       Australian Government, Higher education reform package, op. cit., pp. 15–16.

[16].       Parliamentary Library estimates based on ATO, Taxation statistics 2014–15: Individuals—Table 20; debtors figure from Australian Government, Driving innovation, fairness and excellence in Australian higher education, op. cit., p. 19.

[17].       Australian Government, Higher education reform package, op. cit., p. 27.

[18].       Ibid., p. 23.

[19].       Ibid., p. 22–3.

[20].       Ibid., p. 21.

 

All online articles accessed May 2017. 

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