The Institution of Engineers, Australia, also draws attention to the
actual condition of ‘austerity’ in our universities. It says:
funding for universities has fallen sharply over the last twenty years. Few
industries have been subject to such a sharp financial adjustment as the
tertiary education sector... The short-term health of the university - its
ability to “make-do” with swelling class sizes, or part-time, low paid
lecturers, or without replacing laboratory equipment or replenishing the
library, or by accepting increasing numbers of fee-paying students, or by
directing faculty activities away from teaching and scholarship towards
entrepreneurial energies – may be its worst enemy is the need to make a case
for increased public revenues.
This description of declining conditions and infrastructure crisis is
fairly typical of accounts provided by other submissions and witnesses, with
library and laboratory conditions and crowded class rooms a recurring theme.
Universities that cannot increase their fees enough to cover salary
costs will be forced to take measures that further erode the quality of higher
education and further retard its potential. These measures may include
increasing the cost of student fees and charges, the rationalization of courses
and research, and even the closure of campuses. Clearly, the core principles of
the proposed reforms – sustainability, quality, equity and diversity – are not
reflected in this situation.
Student-teacher ratios are another recurring issue. The rate of increase
of student numbers is not being matched by the rate of increase of staff
numbers. The latest available figures, for 2002, place the student to teacher
ratio at 20.4:1. This represents a 7 per cent deterioration on the 2001 figure.
The ratio has worsened by around 40 per cent since 1990, when it was 12.9:1.
The student-staff ratio is a telling indication of the diminishing value of
indexed grants, particularly since 1996.
to Teaching Staff Ratio 1993-2002
The committee concurs with the view of Professor Gavin Brown, the
Vice-Chancellor of the University of Sydney, when he says:
...the most significant defect [in the reform
package] is the lack of an effective mechanism for indexation of the government
The committee believes that it is for this reason, mainly, that the
financial positions of most universities over the long-term are not sustainable.
Further in this chapter, on the new sources of revenue which the Government has
opened up to universities, it will be argued that there is a large amount of
wishful thinking on the Government’s part. It is likely that only those
universities in the Group of Eight, and not all of those, will be able to
access the revenue streams from HECS and private fees that are promised by the
Government. For most universities, these revenue streams will be trickles. The
committee believes that a further infusion of funds will be necessary beyond
2007 as a result of the Government’s inaccurate income projections. In the
meantime, universities will have, in the absence of full indexation, yet more
years of uncertainty before them.
It is recommended that the Wage Cost Index (Education) be used in
the formula to index university grants in order to provide the funding required
to maintain and improve educational quality without increasing the fee burden
on students and their families. The Australian Greens and the Australian
Democrats support an increase in indexation, equivalent to that in public
contribution: the Commonwealth Grants Scheme
Until now, the Commonwealth has notionally funded universities on a
historical basis which has its origins in an exercise embarked upon at the end
of the 1980s, and resulted eventually in a structure known as the Relative
Funding Model (RFM). The idea of the RFM was to strike a series of rates,
expressed in a matrix, which accurately reflected the average per-student
teaching and associated costs by discipline cluster and level in higher
education. These rates were then applied to universities, according to their
enrolments by discipline and level of course.
The purpose was to level the playing field so that old historical
anomalies – based on the former location of each institution vis-à-vis the old
‘binary divide’, for instance – were eliminated in the Unified National System
brought about by the Dawkins reforms. The crucial point here is that this
exercise was at least notionally an empirical one. It was designed to
ascertain the actual costs, based on a survey of a range of institutions and
institution types, to be applied to all universities so that a level playing
field was created.
In practice, the exercise was far from purely empirical. Vested
interests and political considerations, as well as extraneous policy pressures,
shaped both the original draft cost matrix and the final outcome. However, the
committee notes that the intention of the model was to reflect actual teaching
costs and fund universities so that they could adequately meet those costs.
Over time, institutions have shifted the balance of their student load and
concomitant changes in Commonwealth funding levels, subject to annual
negotiation as part of the Profiles process, which have only partly reflected
these shifts. Universities have been able to enroll more students, for
instance, by moving their enrolments into ‘cheaper’ courses.
HECS has not been a direct contribution to institutions, designed to
defray these costs, but a uniform payment on the part of graduates to the
Commonwealth in recognition that they had benefited financially from their
higher education, and that has been argued that they should contribute retrospectively
to its cost. Under the proposed new arrangements, universities would
essentially have one major ‘customer’ – the Commonwealth – and thousands of
minor individual customers – the students. How institutions balance their
finances will depend on how they manage these two income sources.
The committee emphasises that the intent and the shape of the proposed
new Commonwealth Grants Scheme (CGS) differs starkly from that of both the
Relative Funding Model exercise itself and its outcome.
With the CGS the Government is in effect setting prices rather
than reflecting costs. As the sole buyer of teaching services in the new
purchaser-provider model, the Commonwealth has the power to set these prices,
for different kinds of courses, as it chooses. For instance, it had decided to
set the price for Law at a very low level, while that for Agriculture is much
higher, both in dollar terms and in terms of the proportion of the actual cost
of providing these courses. The considerations it has brought to bear in making
these pricing decisions can only be guessed at: they are not transparent or
However, it should be noted that, for pragmatic reasons, the Government
has based much of its pricing structure on the old Relative Funding Model. This
is because, if it departed too radically from this base, the Commonwealth funds
to be made available to each institution would vary wildly and uncontrollably
from the status quo of existing levels. Already we see that some universities
stand to lose badly from the imposition of the new funding arrangements. This
outcome would have been much more widespread if the RFM had not, by and large,
provided the basis for the new prices.
However, since the new CGS funding will be allocated on the basis of
actual enrolments by discipline (instead of, as now, on a historical base
within which institutions enjoy considerable flexibility), the real effects of
the prices set twelve years ago by the RFM will be hit hard, and the rough and
ready nature of some of the accommodations necessitated by the politics
surrounding that process will become apparent.
Use of the RFM as a basis for the CGS price matrix is fraught with
practical difficulties that will only become apparent as the new scheme, if
introduced, actually takes hold of funding allocations. The fact remains that
the prices set as the basis of the CGS do not reflect actual costs, but do
reflect historical anomalies and constraints on the one hand and the
Commonwealth’s sole-purchaser power on the other. The committee fears that the
underpinnings of this funding model are unreliable as a firm base for
university funding, and that unforeseen consequences of this inadequacy will
The committee notes these points reinforced in the Phillips Curran
report to MCEETYA:
Because the Commonwealth contribution rates
have been set to replicate the status quo, they build in the policy anomalies
that have arisen through the accumulation of past decisions, especially the
introduction of differential HECS rates. These anomalies are evident in a
cursory examination of the Commonwealth contribution rates for each discipline
cluster shown in Table 2.1. The Commonwealth contributions vary by a factor of
three between a low of $1,509 for a full-time law student and a high of $16,394
for a full-time student in agriculture... Clearly, there is no link between the
rates and either the costs of the courses or their public benefit. Because the
CGS will fund all eligible load in a discipline cluster at the same rate,
regardless of institution, there will no longer be any over- or under-funding.
This means that currently over-funded institutions will lose Commonwealth
funding and underfunded institutions will gain. The effect of this will be
cushioned by the fact that the balance of each institution’s course funding
derived through HECS will not be affected by this adjustment and will be
determined by the institution itself. The adjustments will also be cushioned by
the foreshadowed increases in the Commonwealth course contribution.
Melbourne’s Victorian College of the Arts is but one casualty of the
changed funding regime. Under the new arrangements the internationally renowned
arts college is facing a $5.4 million funding cut, over 30 per cent of its
A reduction of this magnitude would severely compromise the operation of
the school, and would be a tragic blow to the cultural future of the nation.
That to ensure that the Victorian College of the Arts
retains its current level of funding, without the requirement that the
University of Melbourne cross-subsidise its operations, and while retaining its
affiliation with the University of Melbourne, consider transferring VCA funding
to DCITA, in order to recognize its parity in terms of quality of education and
training with the AFTRS and NIDA in New South Wales.
That the Commonwealth Grants Scheme be rejected while
universities, such as the University of Western Sydney, the Victoria University
of Technology and the University of South Australia, receive less
under it (excluding any potential increases conditional on meeting unreasonable
industrial relations and governance provisions and any transitional funding)
than under existing operating grants.
Changes to the Higher Education
Contribution Scheme (HECS)
With indexation in long-term decline, the funding of universities will
depend much more on the Higher Education Contribution Scheme for its core
funding. HECS is to be the new ‘base funding’ under the Government’s policy:
the means of securing cost shifting from the public account to the individual.
The committee is of the view that this strategy is unsustainable because the
level of debt to be born by individuals and families, on top of current
mortgage and other debt. Nor will the 30 per cent extra HECS payment permitted
under the legislation be the final adjustment. Such imposts always increase
over time. We will rapidly reach the maximum level of HECS debt that economists
are able to justify.
HECS was originally adopted in 1989 as a deferred payment income
contingent option intended to be a way for students to contribute to the cost
of their university education. As a funding arrangement it has been generally
well accepted. In the 1996-97 budget, changes were made to HECS which have
proven in hindsight to have been an evolution toward the proposals in this
bill. They were that charges were increased; a three level charge system
replaced the uniform charge; and, universities were allowed to charge fees for
undergraduates not accepted under HECS, up to 25 per cent of the HECS
numbers in a course.
The changes proposed in the Higher Education Support Bill, involving a
further 30 per cent increase in HECS has emerged as a serious concern of many
submissions and witnesses. These concerns relate mainly to issues of access and
equity. If equity is one of the four cornerstones on which Backing
Australia’s Future is based, the Government has failed the test in the key
elements of its so-called reform. Indeed, equity is seen as a core principle on
which reform should be based. The committee endorses this view and shares the
fears of many that the Backing Australia’s Future package will produce
an outcome that makes access to university education even more difficult for
people of working class backgrounds, and for people who are disadvantaged.
Worthwhile and genuine reform should make university education more accessible
to these groups, not more difficult.
The Stage 2 Report Phillips Curran report commissioned by the
Ministerial Council on Education, Employment, Training and Youth Affairs
(MCEETYA), concluded that the Backing Australia’s Future package could
have a number of effects on access and equity for Australians in general and
particularly for disadvantaged Australians. The Phillips Curran report found
that the package offered little increase in access or participation. It listed
other possible negative consequences First, the package might serve to restrict
some students’ access to the institution and course of their choice because of
differential fee levels operating across universities and courses; second, it
may lead to an increase in the HECS deferral rate due to the potential 30 per
cent increase in fees; third, it would constrain access for some students due
to the time limit within the Learning Entitlement; and, fourth, would have some
regressive effects as a consequence of certain aspects of the new undergraduate
After the proposed introduction of the new Commonwealth Grants Scheme in
2005, the average student’s contributions will be somewhere between 44 per cent
and 56 per cent of the cost of their education, depending on the extent to
which universities increase fees above current HECS rates. Assuming all
universities charge the equivalent of HECS, students’ contributions will vary
from 81 per cent for a law student to 25 per cent for a student enrolled in
agriculture. Even students enrolled in education and nursing, which have been
identified as national priority areas and therefore receive additional funding,
will still pay 35 per cent and 28 per cent of their course costs respectively.
Table 1 shows the estimated HECS charge in 2005 and the maximum fee a
university will be allowed to levy on students.
Student contributions under
Accounting, Administration, Economics, Commerce
Behavioural Science, Social Studies
Computing, Built Environment, Health
Foreign Languages, Visual and Performing Arts
Engineering, Science, Surveying
Dentistry, Medicine, Veterinary Science
Weighted Average for all students
Under the new Commonwealth Grants Scheme, the Commonwealth will make a
set contribution to the cost of educating students in various discipline
clusters. In addition to the basic Commonwealth contributions, each university
has the right to charge its own fees. The level of fees that a university is
allowed to charge can vary from $0 to a maximum of 30 per cent above the
equivalent HECS charge in any given course.
The revised HECS scheme is the main instrument for raising additional
funds for universities. The committee does not believe that other sources of
revenue will be nearly as reliable as the revised HECS, and any of the ‘jam’
that comes from full-feeing paying domestic students will go mainly to Group of
Eight universities. In Chapter One the committee discussed the issues of public
benefit and private benefit in relation to university fees, and this bears
mainly on the issue of HECS. The committee heard an interesting perspective on
this issue from the NTEU submission from the University of New England:
Both because there are some people who are
genuine in their belief that graduates should make a financial contribution to
the cost of their education, and for the sake of the argument, let us accept
that the significant private benefit accruing to individuals should be
recognised by a higher financial contribution made by those graduates who earn
higher incomes. The problem is—and always has been—that the attempt to extract
a higher contribution from graduates is a highly selective aspect of public finance
over the past fifteen or twenty years. Certainly, there have been other
categories of citizens subjected to user-pays principles in this period;
however, in the bigger picture at least, the requirement on graduates to pay a
higher contribution because they earn a higher income and therefore have a
greater ability to pay, is a stark contradiction of the more general argument
that successive governments have advanced in the last two decades: not only is
the HECS requirement on graduates contradictory of the more general
de-emphasis, since the mid 1980s, on the principle of ‘ability to pay’; the
fact of the matter is that this higher contribution has been required at a time
when the actual tax system has become considerably less progressive.
The committee was ‘on the road’ with this inquiry when the Government
announced a $7 billion surplus on the current account, a news item which
interested a number of cash-strapped vice-chancellors at the time. While
accepting the central argument of this submission, the committee makes the
point that even without an effective progressive income tax rate, sufficient
revenue is raised to cover the demands of important national expenditure. The
main weakness lies in the distribution policy.
The National Union of Students told the committee that the new HECS
arrangements were among its core concerns. The central objection was that the
partial deregulation of HECS created another variable funding mechanism to
allow universities to compete in an education market.
The committee shares the skepticism of the NUS about the Minister’s claims that
some universities might drop their HECS rates. Deregulation theory may allow
for this possibility but no commentator has given credence to the likelihood of
it occurring. The NUS submission commented:
However, it is almost certain that many
universities will opt for the full 30% increase in high demand courses. NUS
predicted that some of the high status universities would be entirely shameless
about moving rapidly to apply the full 30% increase across the board (apart
from the protected areas of nursing and education). A recent Sydney University
Senate meeting considering this proposal was shutdown by student protesters.
However, a secret meeting scheduled early the following morning voted 9-8 to go
for the 30% fee increase across the board. Even more disturbing was that the
fee hike was justified on the basis of maintaining ‘brand image’ rather than
improving quality. So the logic goes that universities will increase their fees
to appear as first rate institutions.
NUS also offered the view that there would be pressure on other
universities to follow the benchmark set by the ‘elite sandstones.’ It quoted
the comment in The Age on 15 July 2003, by the Chancellor of RMIT, Professor
Dennis Gibson, that Sydney University's decision to increase HECS by 30 per
cent had put pressure on other institutions to charge students more for their
education. ‘It's going to be a very hard decision, Professor Gibson said, ‘Can
we afford to have our big brothers charging lots of fees and us having low
fees?’ Professor Gibson said the fact that there was a marketing position that
goes with price was an important factor in considering fees.
Vice-chancellors had different ways of telling the committee about the
hard choice they would have to make. If Professor Gibson of RMIT appeared
unperturbed about HECS increases, this view was not shared by some others. Professor
Janice Reid, Vice-Chancellor of the University of Western Sydney had this to
The most worrying possibility for us is that
if any of those [campus closures and other stringencies] outcomes were to be
avoided we would have to look at raising HECS. Five years ago our board of
governors set its face against charging full fees for undergraduate places. It
has not revisited that position. I expect it will examine it but I do not
expect there will be any sympathy on the board of trustees to introduce full
fee paying places. As 20 per cent of our places are in nursing and education,
which are protected in terms of HECS increases, we would have to raise HECS
very substantially for other courses—possibly to the full 30 per cent—if we
were to avoid staff losses, campus closures or course closures.
The committee also heard evidence of another pressure bearing on
universities, particularly in rural and regional areas which takes a different
point of view to the NUS perspective, but which also sees serious disadvantages
in increased HECS charges:
We are concerned that the partial
deregulation of HECS will put pressures on institutions that will force them to
discount their HECS rates. There are already indications that at least one of
the major universities in Victoria will raise its HECS fees by the full 30 per
cent across the board. Professor Gilbert indicated that the University of Melbourne
is thinking about doing it on a large scale. We are concerned that there are
one or two institutions in Victoria at least, both within the city, in the
metropolitan area, and outside of it, which will be forced to discount their
HECS rate either to maintain their student load or to keep the quality of their
student load up to acceptable levels. In the case of regional institutions, the
level of discount would have to be only a very small way below the standard
HECS rates for it to eliminate completely the regional loading that those
campuses and universities are going to get. So the second major point I want to
emphasise is that a number of the measures proposed in this package create the
danger of the development of a seriously inequitable system.
It is evidence such as this which causes the committee to reflect on the
legislation as ‘a leap into the unknown’. The consequences of the policy
implementation cannot be confidently predicted except in the sense that they
are highly unlikely to go the way the Government intends.
The committee has followed with some interest the Government’s attempts
to suppress internal DEST research, produced in 2002, and regarded by
independent academic researchers as methodologically sound, which concluded
that while the higher education opportunities for low socioeconomic status
(SES) have increased over the years, their participation rates remain
unchanged. A small sampling also showed a decline in the number of male SES
students. The report concludes that any future changes to HECS arrangements
will need to be carefully designed to minimize their effects on groups more
sensitive to student charges.
This DEST research was never formally released, possibly because it is
very cautious advice about the care needed with HECS policy was to be
disregarded in almost spectacular fashion in Backing Australia’s Future.
Attempts have been made to discredit the research. The committee does not
believe the conclusions drawn in the paper to be other than cautiously
indicative. DEST’s suppression tells us more about the nervousness of the
Government in selling its radical policy than the unanticipated consequences
that will occur as a result of it. Furthermore, the committee found that others
were coming to less equivocal conclusions than the DEST researchers.
The committee heard evidence of research done in western Sydney which
suggests that DEST research is both conservative and timely.
When we surveyed a lot of our families and
students in relation to HECS to see whether that was having any impact on
decisions to go to university, the general theme was, ‘We don’t like to go into
debt. We like to pay fees up-front if we can.’ Extrapolating from that and from
a number of conversations I have had with community members, local government,
students and parents over the last few months, I think there is enormous
anxiety and a degree of bewilderment about what this means for them. The kind
of comment you get is: ‘Child 1 and child 2 went to university and we are so proud
of them. They were the first in our family ever to go to university. We came
out from Vietnam as boat people. It is just wonderful to think that we can have
these opportunities, but we are not sure about child 3 now. We don’t know
whether we can support them to the same extent, and we don’t know whether it
wouldn’t be better for them to go out into the work force straight from
school.’ If that becomes a trend and if those are the kinds of assumptions that
underpin people’s decisions, it will be tragic if we see students who are very
able and very keen to go to university being discouraged from doing so by
either the prospect of debt or their family’s reaction to the prospect of debt.
The committee heard a great deal about debt aversion, and it was a frequently
recurring theme in student union submissions. For instance, the RMIT Student
Union submission stated that fees are the single greatest barrier to equal
participation of women in higher education. Differential HECS ties a woman’s
decision to study in a particular discipline on an assessment of her ability to
repay higher fee levels. The submission argued that some women will be deterred
from expensive courses like law and vet science. As they already take three
times longer, on average, to pay of their HECS as do men, some women will still
be paying student loans beyond middle age. Questions about breaks in study, for
family reasons, occur more frequently for women, and this makes repayment of
loans more expensive.
The committee heard almost unanimous opinion on one matter to do with
the HECS changes, and that concerned the minimum repayment income threshold,
currently set at $30 000. The commonly held view is that the threshold should
be increased to $35 000. Although the Greens and Democrats note that this still
falls short of average weekly earnings, the point at which graduates could
reasonably be understood to accrue significant private benefit from their
education. However, this figure is closer to average weekly earnings and would
ease the repayment burden for those on less than average earnings.
The objection to increased HECS centres most on its inequity. Some
submissions claimed that the current HECS is inequitable, and increases make it
worse. The committee is concerned that HECS may over time be further increased.
When or if that occurs, there will be serious questioning of the affordability
of higher education for the large majority of those who would normally be
admitted to university. The committee has already received evidence of the burden
on students with years of indebtedness ahead of them. Debt aversion is not only
a characteristic working class attitude, as the committee is told: it is the
hard-headed attitude of those whose financial commitments are directed to other
ends, like houses and families, motor vehicles and other investment
opportunities. Universities which like to see themselves in competition will
come to see that the competition is not only other universities, but products
other than higher education. Thus universities may price themselves out of the
That the maximum HECS fee not be increased by 30 per cent
and that ministerial discretion to increase HECS fees be removed from clause
The committee notes that: the Democrats and Australian Greens
support this recommendation but have added an additional recommendation that
HECS fees should be abolished.
That the HECS repayment income threshold be increased to
$35,000 in 2004-05.
No growth in places and
reallocation of marginally funded places
Each year tens of thousands of Australians are denied a HECS place at
university simply because the Government will not fund enough places to meet
the demand of people who universities recognise as qualified. This year unmet
demand was reported by the Australian Vice-Chancellors’ Committee to be in the
range of 18,700 to 25,700. This is a shocking waste of talent that is ignored
by the Howard Government’s proposals.
Between 1995 and 2001, Australia had the second worst growth in
university participation in the OECD, ranking 18th out of 19.
The Howard Government’s appalling record on providing opportunities to
undertake further study is going to get even worse under these bills. Phillips Curran
warn that the Government’s proposals on student places:
...will not keep pace with projected population growth.
Without further growth the number of Commonwealth subsidised places per 1,000
people aged 15 and over will fall from 27.2 in 2002 to 24.8 in 2011 and 22.6 in
The net change resulting solely from Backing
Australia’s Future is a reduction in HECS-liable places of 1175
EFTSU in 2008 compared with 2002.
The Howard Government’s ‘vision’ is a future in which a smaller
proportion of Australians have the opportunity to study in our universities.
This is unsustainable at a time when more than ever our international
competitiveness will be determined by the skills and knowledge of our people.
Rather than reducing opportunities, the committee believes that creating
more publicly funded places to meet existing unmet demand and ensure that
participation more than keeps pace with demographic growth.
In order to meet current levels of unmet demand for a
university place from qualified applicants, it is recommended that an
additional 20,000 full and part time commencing university places be created.
The committee notes that: the Australian Greens call for
50,000 new places.
The Government has announced that it will fund at a cost of $347.4
million over four years commencing in 2005, the conversion of 25,000 marginally
funded places into full HECS places. This measure is intended to bring the
current provision for over-enrolment to an end. The committee majority notes
that while vice-chancellors have generally welcomed the conversion of
marginally funded places into full HECS places, there are some serious
implications that flow from this.
The committee makes two points in relation to this policy, which appears
not to be reflected in the legislation before the Senate. The first is that
there are currently about 33,000 over-enrolled students in universities around
the country. With over-enrolments stopped from 2005, this will result in 8,000
fewer places on offer. The Government’s proposal is therefore less generous
than would first appear. The enthusiasm of the vice-chancellor may have
something to do with additional funding, but many students are likely to be
less happy with the arrangement.
The second point is that the Government’s proposal is likely to be
contentious once in operation. The Curran Phillips report notes that the
phasing in of the converted places will not necessarily mean that universities
currently over-enrolling students will gain the benefit of the conversions. The
fully subsidised places will be reallocated across the whole sector according
to Commonwealth priorities, taking into account the labour market needs of
states and territories.
The committee anticipates that the scramble for the reallocated places will be
the cause of much dispute as arguments about demographic influences, labour
market requirements, state rivalries and university rivalries come into play.
There is no indication of how the Government intends to deal with this
challenge. The committee presumes that the allocation formulas are being worked
on in the appropriate Guidelines, which as this report is tabled, have yet to
see the light of day.
There is already evidence of apprehension. Several submissions warn of
the dangers ahead for both universities and the Government. The University of Western
Australia has pointed to difficulties arising for that state
...we emphasise that it would be necessary to
change significantly the allocation of these places from their current
distribution to one based on proper measures of demand and equity. In this
context we note particularly the serious under-provision of places to WA and to
this University, and seek some assurance that a redistribution of places will
recognise the fundamental principle that equally-able students should have
equal opportunity of access to higher education irrespective of their state of
residence. The use of appropriate demographic analysis to guide place
reallocation is therefore an important issue to this state and this University.
The strongest reservations about the Government’s proposals came from
the University of Adelaide. The submission from the university stated that it
was over-enrolled to the extent of 9.8 per cent (against the national average
of 7.9 per cent) and this was due to excess demand from highly qualified students
who had missed out on the university HECS quota. The university defended its
over-enrolment policy, claiming that quality was being fully maintained and
that the university had an obligation to serve the South Australian community.
Even so, there was a net loss of 4,700 eligible students from South Australia
to other states.
The submission went on to explain the consequences of the university losing a
high proportion of HECS converted places.
A further reduction in the number of fully
funded higher education places available to students will result in even more
eligible South Australians moving interstate in order to obtain a fully funded
place in their chosen degree, with the very real risk that these students will
not return to South Australia at the conclusion of their studies. This in turn
will have a deleterious effect on the South Australian economy and labour
market, unnecessarily perpetuating the rationale for removing these places in
the first place.
The submission described the possible flow-on effects of the removal of
Should South Australian universities be
forced to reduce the level of overload without being compensated with fully
funded places, cut-off scores for programs will inevitably rise. Preliminary
data analysis conducted by the University of Adelaide has shown that with a
reduction in the number of offers in more popular programs of between 10-20%,
cut-off scores will rise substantially. This will create a domino effect, as
unsuccessful eligible students will then be forced to accept places into their
lower preferences, which will in turn result in the increase of cut-offs for
many other programs. Some students may miss out on a place altogether, or be
forced to move interstate. None of these outcomes is beneficial to South
South Australian universities, Adelaide University in particular,
cautioned strongly against the use of demographic data alone in determining the
allocation of funded places.
If you looked at Victoria 10 years ago,
the demographic projection was for a substantial reduction over the 10-year
period. Looking at Victoria now, we see that it is, in fact, one of the growth
states. We believe that it is a responsibility of government to ensure that
states have the opportunity to develop and that we do not simply follow
demographic projections without giving serious thought to how to build the
country, to build the nation, to ensure that our states have some sort of
There was also strong objection to the use of labour market projections
in determining the re-allocation of funded places. South Australians had some
support from the University of Western Australia in this regard.
We also caution against the use of labour
market planning to drive the allocation of places. While we would support some
additional places for teaching and nursing, it is a matter of public record
that the use of Commonwealth priorities based on labour market 'needs' has
rarely succeeded and should not be used to make highly specific forward
allocations of places.
This submission was reinforced at the Perth hearing with Deputy Vice-Chancellor
Alan Robson declaring that the university was very much against the use of
labour market planning to drive the allocation of places. ‘Labour market
planning is notoriously inefficient as a device for allocating places.’
While the committee does not commit itself on which factors should be
taken into account in the allocation of funded places, it does make the strong
point that Governments which intend to administer programs have an obligation
to stakeholders to inform them of the processes that will be involved in making
decisions, and the basis on which decisions will be made.
Underlying this omission is the ‘schizoid’ nature of the policy and the
legislation which reflects it.
The Government wants to make universities ‘free’, in accordance with market
theory and supposedly liberal management theory, but it also wants to use the
universities as agents of economic and social policy. Universities are thus
freed up to the extent that their binding chains allow.
The phase out of overenrolled places should not result in a
reduced number of places for Australians nationally or regionally.
HECS – HELP
From 2005, higher education institutions in receipt of Commonwealth
funded places will be able to determine the student contribution level for each
course they offer within a range set by the government. HECS-HELP will be the
mechanism through which students in Commonwealth supported places can pay
universities for study. The program will be indexed by Consumer Price Index
(CPI) movement to maintain its real value and will be interest free. A deferred
income contingency repayments arrangement will be available. Student
contributions will vary depending on the subject chosen and the fee charged by
The minimum repayment threshold under this program will be $24,265 in
the 2002-03 rising to $30,000 in 2005-06. The maximum repayment amount will
increase 8 per cent where income exceeds $64,999.
The discount for up front payments will be 20 per cent (reduced from 25
per cent under the current HECS scheme) and the bonus for voluntary repayments
will be 10 per cent (reduced from the current HECS level of 15 per cent). These
new changes will apply to existing HECS debts from 2005.
All student payments will be paid to universities.
Professor Chapman, in his submission, notes:
In summary, it would seem that HECS-HELP is
likely to have two effects, the most obvious being that universities would have
more revenue which would be supplied through higher imposts on students.
Second, so long as most of the additional revenue is delivered directly to the
university departments (this is in fact how HECS-HELP is proposed to operate)
there is some potential to promote economically propitious outcomes, such as
relative changes in academic salaries to more accurately reflect outside
In relation to price competition, Professor Chapman states there are
reasons to be concerned:
...First, the extent to which institutions will
be able to benefit from price discretion will be a result of their location and
history...this gives them significant commercial advantage. The fact that
universities do not pay rent means that the playing field is not level.
Second, an important part of universities’
relative standing is the result of many years of public sector subsidy...the
alleged benefits of competition could be undermined without close attention to
these issues of both geography and history.
Unfettered price competition could also place burdens on students. Professor
Chapman states in his submission:
...it is difficult to believe that the current
HECS levels are markedly below what they should be. In some cases currently,
Law for example, it is very likely that students are paying as much as the
teaching costs involved. Full price discretion would suggest that such examples
are likely to become commonplace. This rests uneasily with the economic
rationale for public sector financial support, which suggest that activities
associated with spill-over social benefits should be subsidies by taxpayers; in
other words, that students should pay less.
Finally, there will be some level of HECS
above which it is not feasible to collect debt...
Professor Chapman indicates that it is difficult to estimate the effect
of HECS-HELP on the majority of students, given that it depends largely on the
student’s future income and employability. But it is likely that debt levels
will increase for certain demographics:
...for male graduates expected to work
full-time, an increase in the HECS charge results in a true financial increase
which is very close to what the apparent charge implies. That is, if there are
no changes to HECS levels in 2005 typical male graduates will experience no
important effective benefits from the new first income threshold...
For women the story is different...relatively
poor women graduates working full-time, and those in and out of the labour
force...the HECS-HELP arrangements will deliver important financial benefits if
the HECS charges does not increase...benefit will be of the order of 15 per cent
of the present value of HECS. However, the situation will be changed
substantially if the charge increases by 30 per cent.
...compared to current arrangements,
relatively poor female graduates working full-time will experience no financial
advantage (or disadvantage)...Female graduates who leave the labour force for a
short period after which they work part-time will face about a 25 per cent
higher true debt if the charge increases by 30 per cent.
The committee majority notes that HECS-HELP will increase the cost to
students of obtaining an education. It is will particularly affect groups that
enter and leave the workforce who may in some ways be considered disadvantaged.
The Fee Paying Higher Education Loan Program (FEE–HELP) will provide
eligible students with an income contingent loan facility to pay for
undergraduate or postgraduate fees in courses in public or eligible private
institutions. Students will be able to access a loan capped at $50,000.
The debts accrued under FEE-HELP will be indexed to the consumer price
index (CPI) plus 3.5 percent each year for a maximum of 10 years, before
returning to indexation by CPI. If a student has an existing HECS or HECS-HELP
debt and a FEE-HELP debt, compulsory repayment will be directed to the HECS or
HEC-HELP debt first.
Unlike with HECS-HELP there will be no bonus for voluntary repayments.
FEE-HELP will start in 2005. It will replace the Postgraduate Education
Loans Scheme (PELS), Open Learning Deferred Payment Scheme (OLDPS) and the
Bridging for Overseas-Training Professional Loans Scheme (BOTPLS).
Positive aspects of this scheme were noted in the Phillips Curran
...go some way towards addressing the
anomalies in the current system, whereby income-contingent loan facilities are
available to domestic postgraduate students but not to domestic undergraduate
students. It will also help to reduce inequities since students will no longer
be required to pay their fees up front.....anticipate that the number of
fee-paying places will rise significantly as a result of the Backing
Australia’s Future changes, creating additional higher education
opportunities (although with a limited impact on overall participation rates).
Phillips Curran highlighted four concerns in its submission, including
limiting the debt level cap to $50,000. As the report noted:
Fees for some courses are already in excess
of this amount. There is a real possibility that some students will have
exhausted their loan limit before graduation, and will face the possibility of
paying for the completion of their courses with up-front fees. This will be
particularly relevant to postgraduate students who may already have a FEE-HELP
debt for their first degree. The private capital market will not provide loans
to cover this situation, and students may consequently be forced to discontinue
their courses, or delay graduation while they work part-time to cover fees.
The second contentious aspect relates to the
application of the real rate of interest on the FEE-HELP loan. This means that
those who take the longest to repay will repay the highest amounts. In general,
this will be those graduates who enter lower paid work, experience
unemployment, illness or other separation from the workforce. This regressive
aspect of the new policy is in contrast to the current HECS arrangements under
which no real interest rate applies to the debt. Instead, a discount is offered
for up-front payment, so that students who defer are effectively contracting to
pay back a higher amount than those who pay up-front. While this effective
surcharge is similar to a real interest rate, it does not have the regressive
characteristic of growing in real terms. For this reason, a surcharge on the
debt is a better mechanism than a real interest rate.
The third contentious aspect relates to the
degree of price flexibility and restrictions on competition. Because there are
a limited number of providers in the market and because the number of
fee-paying places is limited....the price asked of students will not reflect the
free operation of market forces. Instead it is likely that universities,
especially those in the strongest demand position, will have the capacity to
set fees that substantially exceed the costs of provision and the fees that
would be set in the open market.
This provides a case to consider capping the
fees for all students....
The Council of Australian Postgraduate Associations (CAPA), in its
submission, disputes the user pays system in education, noting that Australians
already pay a higher proportion of education costs than most OECD countries.
Further, CAPA notes that:
...if the individual does not go on to derive
a financial benefit from their education, they will be forced to carry a
long-term debt burden. Thus those who do go on to benefit financially from
their eduction will pay for that benefit through the tax system....while those
who do not derive a financial benefit from their education will be unfairly
punished with a debt.
In relation to the interest rate proposed on FEE-HELP, CAPA argued that
placing an interest rate on an income contingent loans scheme is inconsistent
with such a policy, noting that:
...Under the proposed FEE-HELP scheme, the
cost of education incurred by the student increases as long as they remain
unable to pay. Such a system represents a significant turning point in
Australian higher education policy and should be rejected by the Senate.
Professor Chapman expanded on the concerns with the real interest rate
and suggested amending it with a surcharge:
...FEE-HELP’s rate of interest regime is more
likely to hurt the disadvantaged. Current HECS arrangements do the opposite,
since those who pay back their debts quickly as a result of experience high
incomes will be paying more in true financial terms. That is, HECS is more
progressive than FEE-HELP, although it should be recognised that having a
relatively low real rate of interest, and one reverting to zero after 10 years,
limits importantly the extent of the difference.
CAPA was also concerned that students will not pay off their FEE-HELP
debt until other debt, such as that incurred under HECS or PELS, have been paid
in full. CAPA also noted:
If FEE-HELP is introduced as a replacement
for PELS the loans will attract 3.5% interest, as well as CPI, totalling around
6.5% or effective market interest rates.
CAPA also expressed concern about the arbitrary powers of universities
to set fees that have no relationship to course costs, noting that the University
of Sydney has already indicated it will increase its course fees if the
legislation is approved.
The committee considers it inappropriate to apply a real rate of
interest on student debts given that students already have substantial debt
That full fee paying domestic undergraduate places be
abolished and accordingly, FEE-HELP loans be limited to postgraduate students.
That the real rate of interest on FEE-HELP loans be
abolished by removing the 3.5 per cent interest rate in excess of CPI from
New Commonwealth Scholarships:
far inferior to the old
The Government has made much of the policy package’s new ‘scholarship’
programs as concrete evidence of its good intentions. This is the best light in
which Commonwealth Learning Scholarships – the Commonwealth Education Costs
Scholarships (CECS) and the Commonwealth Accommodation Scholarships (CAS) –
could possibly be seen. Unfortunately, these programs are cynically tokenistic:
they offer benefits which are far too meager, either in scope or financial level,
to be effective in assisting the students towards whom they are targeted.
The CECS is aimed at helping full-time undergraduates from low
socio-economic levels and those with Indigenous backgrounds. There will be
2,500 scholarships awarded in 2004, rising to more than 5075 by 2007. They are
valued at $2000 per year for up to 4 years. Commonwealth Accommodation
Scholarships are intended to assist full-time undergraduates from rural and
regional areas who have to move from home to undertake higher education. These
scholarships are also for full-time Commonwealth supported students. 1500
scholarships will be offered in 2004, rising to 2030 by 2007. According to the
National Union of Students (NUS) these scholarships will cover about half the
average cost of rental in an inner city suburb.NUS
also point out that it is likely that student mobility will increase as a
result of reduced course offerings at many universities, due to the
Government’s new role in approving an institution’s course profile in detail.
Therefore these scholarships, meager as they are, will be much sought after.
About 26,000 full-time students from low socio-economic backgrounds and
about 2,500 full-time Indigenous students commence university studies each
year: only 18 per cent will receive CECS scholarships. Around 10,000 students
come from rural and isolated areas and have to move away from home to study:
only 20 per cent will receive CAS.
The number of those obliged to move away due to new limits on course
availability will, if NUS is correct, actually increase significantly and so
the number of CAS scholarships available will prove even less adequate in
meeting students’ needs for financial assistance.
The Phillips Curran report raised several problems with the new
scholarships. First, why do they last for only four years when the Learning
Entitlement is for five years? On top of this anomaly, it is clearly in
no-one’s interests for a student to confront a double impost of losing a
scholarship after four years and then, a year later, having to switch to full
fees because they have consumed their Learning Entitlement.
The second and most important failing of the new scholarships relates to the
number on offer. As the figures provided in the previous paragraph indicate,
the scholarship programs will provide far from universal assistance to these
categories of needy students.
There is also concern with the fact that the scholarships will be
awarded on academic merit. This policy will work against equity objectives if
it neglects student potential, as opposed to past performance, and also is
blind to financial need. Finally, part-time students have no access to the
scholarships. There is an equity issue here, as single parents and sole care
providers find it very difficult to study full-time.
Increased assistance to students through existing income support schemes is a
more effective means of delivering assistance to students by avoiding perverse
trade offs between scholarships, and youth allowance, Austudy and Abstudy.
On Commonwealth Learning Scholarships, Phillips Curran concludes that:
students may face a growing set of pressures that will act to bring
deficiencies in student income support schemes into sharper relief: higher HECS
debts, restricted access through Learning Entitlements, continuing pressures to
work while studying and/or borrowing money to cover living expenses.
The committee regards the new Commonwealth Scholarships as tokenism.
They will be of very limited assistance to needy students. This remains true
despite the recent announcement by the Government that just one of the
breathtaking anomalies contained in the measure – the fact that the
scholarships were to be counted as income for social security purposes – was to
be partially corrected by excluding only the HECS exempt scholarships from
The need for accommodation and
The committee has noted above that the accommodation scholarships to be
offered are inadequate in both number and in the benefit conferred. Yet the student
accommodation issue will become more prominent under the new regime as
universities attempt to attract students from interstate and when mobility of
study becomes more common. This will happen if universities attempt to
diversify their course structures and undertake more specialisation, or, as
noted, where the Commonwealth, under its proposed new powers, seeks to
rationalise course provision between institutions. The University of New South
Wales Student Guild argues that these trends will increase the pressure to
provide more realistic income support measures. Its submission explains that
rent assistance is an essential element of student income support, and urges
that it be introduces in a way similar to the scheme operating in New Zealand,
where the benefit is not taxable and the subsidy payments based on the relative
rental costs in particular locations. As the submission explains:
The cost of living in cities such as Sydney
and Melbourne is much higher than the costs of living in cities such as Adelaide
or Perth, and to compensate for this, the Rent Assistance scheme should be
restructured in such a way that Rent Assistance provides recognition that the
cost of living in these centres is more expensive. The 1997-1998 mean housing
costs in Sydney or Melbourne ($138 and $117 per week respectively) are
significantly greater than costs in Perth or Adelaide ($106 and $98 per week
respectively), with costs significantly rising since that data was produced.
It is increasingly difficult to find a two bedroom flat in any of the suburbs
adjoining UNSW for under $300 per week (and this is at the very bottom end of
The committee acknowledges that for many students the primary barrier
for entry to university is their inability to support themselves while studying
at university. It notes that Austudy and Youth Allowance recipients are
currently ineligible for rent assistance, and that many students are forced to
work excessive hours to pay their living expenses. This also affects the
quality of the educational experience of students whose hours of study are
limited by their need to earn a living.
The committee agrees in general terms with arguments put in the UNSW
Student Guild submission that living expenses for students ought to be regarded
in budgetary terms as educational benefits rather than as welfare payments. It
finds some merit in the suggestion that consideration be given to having
student allowance policy and administration returned to the Department of
Education, Science and Training.
That the anomaly whereby students under 25 are eligible
for Rent Assistance while those over 25 are ineligible be removed by extending
Rent Assistance to AUSTUDY recipients.
International cost comparisons
Some commentators, over the last few years, have made much of world
ratings of universities, the relationship between funding and comparative
quality, and where Australia might be situated in global league tables. The
Vice-Chancellor of Melbourne University, as part of a campaign to reposition
that institution, has claimed that there are no Australian universities in the
top 100 universities in the world. The committee has no particular view on
these comments, beyond questioning why this is considered important. To begin
with, there is no global top 100 universities. Higher education quality is
measured on a department by department, or discipline by discipline basis, and Australia
does well on this criteria. As one higher education scholar noted:
Australia commands 2 per cent of world GDP and 2 per cent of research
output. It is not the dominant world power. It is a developed nation with areas
of global strength. Australian universities can be global players. But unlike
American universities, if Australian universities want to be world class they
need first class public funding. In our system private money helps, but public
investment is decisive.
Australia’s minimum costs of tuition in higher education are already
high in comparison to international institutions. With a 30 per cent increase in
fees, Australians in Bands 1 and 2 HECS categories will pay more for low-cost
and medium-cost courses than students in Britain, France, Singapore, the United
States and New Zealand. 
The following chart shows that, if the potential 30 per cent increase in fees
as part of the Commonwealth Grants Scheme is allowed for, Australian students
could be paying the equivalent of the highest fees in the world to attend a
Comparative level of
tuition, other fees and other educational expenses in public universities for a
medium cost course
The relatively high fees payable for a university education in Australia,
compared to other countries, is directly related to the comparatively low level
of public funding – again, compared to other similar countries. In 2000, Australia
spent a total of 1.6 per cent of GDP on higher education, a figure which
compares favourably with the OECD average of 1.3 per cent. However, this figure
includes both public and private funding: Australia relies more heavily than
all but three OECD countries on private sources of funding. Australia ranked 6th
last out of 29 OECD countries on public investment in university education as a
proportion of GDP.
Figure Government Expenditures as % of GDP Australia
1974-75 to 2000-01
While the Phillips Curran report acknowledged that the Backing
Australia’s Future package offers ‘substantial enhancements’ to targeted
equity programs it observed, crucially, that these were counterbalanced by measures
in the package which could reduce or inhibit student access and participation.
These counterbalancing factors include: (i) Fewer HECS-liable places per head
of population; (ii) increased levels of debt aversion among disadvantaged
groups because of increased fees; (iii) potential reduction in access due to
the limits imposed on Learning Entitlements; (iv) highly competitive access to
Commonwealth Scholarships, adverse interaction with income support schemes; and
(v) no improvements in student income support schemes, despite widespread
evidence of their deficiencies. 
Until the 1950s, Australia’s higher education system was clearly an
elite system, in which a tiny proportion of the population participated. Since
that time, various Liberal and Labor Government initiatives have taken it
gradually along the path towards to a mass system – usually defined as a higher
education system in which over 40 per cent of adults participate at some time
in their lives. Most recent figures indicate that almost half of all
Australians can now expect to study at university during their lifetime.
However, this evolutionary but profound shift has not led to equally improved
opportunities for all sections of the population: the share of university
enrolments for disadvantaged Australians has not improved since the 1990
release of A Fair Chance for All, which was the Commonwealth’s
Government’s initial higher education equity strategy. On a per capita basis,
significantly fewer people from lower socio-economic backgrounds gain entry to
university than those from medium or higher socio-economic backgrounds. The
Government might claim to have endowed its policy package with crucial measures
designed to enhance equity. Unfortunately, though, the overall direction of
changes to be wrought under the proposed legislation may lead to a gradual
return to elitism, and to greatly increased stratification of higher education.
Higher tuition fees are, in fact, the centre-piece of the package. These
will deter people from lower socio-economic backgrounds and from otherwise
disadvantaged groups from seeking university education. Even in the more
favourable environment of the current regulatory and financing regime, people
from such groups are significantly less likely to go to university. There will
be a point, at the individual and family level, where the price of higher
education will be considered to exceed any likely private benefit, and this
point will come sooner for certain kinds of individuals and families, than it
will for others. As a result, much potential talent will be wasted.
Studies by the Australian Vice-Chancellors’ Committee
and the Commonwealth Department of Education, Science and Training
have found that annual student expenditure exceeds income by about 21 per cent
and that seven in ten students are now in paid employment (an increase of about
50 per cent since 1984).
The average number of hours worked (14.5 to 15) has trebled since 1984.
Further, one in ten students take out a loan to support their studies. The loan
take-up rate is higher for Indigenous students (21 per cent), sole care givers
(20 per cent) and other disadvantaged groups.
While it is true that HECS repayments are income-contingent and do not
bear a real interest rate, it is also true that ‘debt aversion’ influences the
thinking of people from lower socio-economic groups more so than of middle and
high socio-economic groups. The following submissions from students at the University
of Sydney, the first studying law, and the second enrolled in medicine, both
the children of low-income parents, brings to life the dilemma:
the budget came out, I didn't really think about how much my degrees would cost
me, but with all this attention drawn to the issue, it frightens me to think
about the huge debt I will have before I have even commenced full-time work.
While the fees would never discourage me from attending university, they have
certainly discouraged me from lower wage
occupations requiring a law degree. ...While I get Youth Allowance, and while I
also work about 25 hrs a week in addition to my studies, I will not be able to
move out of home until I finish my degree, which will be when I am 25 at the
earliest. Not only is this difficult for my parents, it seems absurd to me that
I should have to live at home for so long just because I choose to study rather
than commence full-time work.
the proposed reform already been in place last year, I would have not enrolled
in medicine because I simply would not be able to afford it. This is true for
the vast majority of students. ...And how will this impact on the growing class
differences in Australia? To limit education to the upper class means yet
another privilege to breed discontent; and can the government really afford to
lose so much popularity? The lay are numerous, and they vote. My course is
going to continue for three more years and with the pittance I receive from
Centrelink, the stresses placed on my family (this being [a] single mother) are
slowly leading to its collapse. A degree as demanding as this requires all of
my time, and I have no opportunity to earn extra money. Several of my friends
are in a similar situation, and some are considering dropping out because their
financial situation is in decline.
Disadvantaged groups rely on adequate student income support and
scholarships but since 1996 the Commonwealth Government, has tightened access
to such financial assistance. It has increased the age at which a student is
eligible to receive payment as an independent and introduced an assets test on students’
family of origin, while at the same time maintaining a family income test that
excludes all but very low-income families. It has also announced the cessation
of the Student Financial Supplement Scheme. The SFSS allowed students to borrow
money for study expenses. The fact that so many students wrote to the Committee
to lobby for the retention of such a flawed scheme is more an indication of the
acute need for financial support, than an endorsement of this flawed lending
scheme. Before such life-lines are removed, replacement support must be found.
Youth Allowance and Austudy are the most common forms of student
financial assistance and the AVCC study by Long and Hayden found that both
forms of support encourage students to enroll and remain at university.
However, the study also reported criticisms of the schemes, mainly relating to
their inadequate coverage of living and educational costs.
Other complaints related to the in-built disincentive in these schemes for the
recipient to work more than one day a week and the lack of rent assistance for
That the unreasonable burden on families of supporting
children well into adulthood be recognised and that the age of independence for
students on Youth Allowance be reduced to 23.
The committee notes that the Australian Greens and
Democrats support the age of independence being 18.
There is no doubt that some students face many financial and practical
life challenges in pursuit of a university degree. The committee received many
submissions from individuals describing what life as a student is like for
them. For example, Sam Orr, of Brisbane, submitted that;
...throughout my degree I have had to take on additional
work to supplement my income just to survive. This has without a doubt affected
my capacity to concentrate on my studies. I am making a submission because I
feel that I have been one of the many students that have genuinely struggled
under the current system of deferred HECS and Youth Allowance. Further I feel
that if HECS payments are increased and scholarships are to effect the capacity
to receive other government assistance then there will be many genuinely worthy
students turned away from university. What particularly bothers me is the
capacity of someone with money to enter into a course on lower academic
levels....I can genuinely say that if HECS payment were increased at the
institution I am studying I probably would not have chosen to study. (I would
have probably ended up at the meat works)....I do not pretend to be hard done by
nor argue that I am a special case. I know many others within university who
have had to struggle in the same way.
Other submissions provide insights into the attitudes of many potential
students, who might well be deterred from higher education by the prospect of
several years of perceived or real ‘poverty’, when their incomes will be
significantly lower than those of their friends who have decided instead to
enter the paid workforce. Community expectations about the level of income
essential to a decent life have changed over time and students are no different
from anyone else. Real incomes of students who rely on Commonwealth financial
support have dropped significantly since the introduction of the predecessor to
current schemes, Tertiary Education Allowance Scheme (TEAS), in 1974. The
committee believes that, in that the Government’s policy package fails to
address this issue, the lack of adequate financial assistance for students
could result in a decline in university enrolments over time.
While the committee does not believe these bills deserve
a second reading, should the Senate consent to give the bill a second reading,
then substantial amendment would be required to meet even the stated policy
objectives of the Government. The committee stage of the bill should be
deferred until 2004, to allow sufficient time for appropriate consideration of
an extensively redrafted bill.
A student at Charles Sturt University in Wagga Wagga described how he
lived on a $200 a fortnight allowance from his parents, being ineligible for
Youth Allowance. A part-time job was a risky proposition as he needed all his
time to study. His allowance paid for accommodation and food, but nothing else.
Hard as this was, he believed there was worse to come.
these reforms are allowed to be passed through the channels of parliament,
students will finish their degrees and continue in this fashion of living.
Workers will be lumped with debt that will render them unable to acquire
property (which is just great for a country). The restrictions placed on
graduates due to their increased debt will remove the choices associated with
financial freedom such as having children or building a house.
The adverse social consequences of debt, such as deferment of decisions
relating to having children or purchasing homes, and postponing further higher
education, is raised in the Phillips Curran report and several submissions to
the committee. Ben Spies-Butcher of Darlington, NSW submits that:
I received a small scholarship during my undergraduate
degree. I initially used this to pay for my HECS fees (which took up the whole
scholarship), but later deferred my fees so I could use the money for living
expenses (I have a debt of about $15,000). I am now exempt from HECS fees
unless my PhD requires more than 4 full time years to complete. However, I have
concerns about the possibility of my own further study, and particularly that
of my friends and cousins who are about to commence university. My partner
currently has a debt of $30,000 and many of my friends will shortly have a debt
of that size, having completed one undergraduate degree before studying
graduate law. Other friends have insisted on paying their fees up front,
usually preventing them from leaving home. Even with the current level of fees,
some of my friends are now reconsidering undertaking further study. I am
particularly concerned about the dynamic created by offering students a
discount for paying upfront. Firstly, this means many people do pay upfront, preventing
them from leaving home or saving for their own home. Secondly, many, including
myself, have saved money in order to be able to pay off their loan, so that we
can get the lesser discount. That means we save enough for a car or even a
house deposit and lose it all on repaying debt. This
will mean I will stay in the private rental market for another five years.
The committee notes in passing that this extract illustrates the
reluctant attitude of many students – regarded as ‘irrational’ by economists –
toward the idea of incurring a HECS debt. Under current HECS arrangements it is
generally advantageous, from a strictly economic perspective, for a student to
defer payment of the HECS charge and to pay gradually, through the taxation
system. This is not, however, how a significant proportion of non-economists
perceive their options. If students’ projected debts become higher, as the
Government would have it, this ‘debt-avoidance’ effect will worsen.
There are six equity groups recognized as disadvantaged in their access
to higher education. These are: (i) Indigenous Australians, (ii) people from
non-English speaking backgrounds, (iii) people with disabilities, (iv) people
from rural and isolated areas, (v) women in non-traditional areas of study and
(vi) people from socio-economically disadvantaged backgrounds. The following
table reveals that there has been some improvement in the position of
Indigenous students and women. The latter, however, are still a long way from
their ‘reference value’. Students from non-English-speaking backgrounds,
students of low socio-economic status, and students from rural and isolated
areas are declining as a proportion of all domestic students.
Table: Proportion of
Domestic Students by Equity Group, 1991-2001
Reference Value (a)
Students from non English-
Students with a disability
Women in non-traditional area
Low socio-economic status
Students from rural areas
Students from isolated areas
Source: Higher Education
at the Crossroads.
(a) The percentage of the general
population who are in each of the equity groups. Note these data are from 1991
(rural and isolated) and 1996 not 2001. Preliminary assessment of 2001 census
data suggests that the reference point for students from rural and isolated
areas and from a non-English-speaking background has reduced since 1991 and
Indigenous Australians remain the most disadvantaged section of the
Australian population. Evidence of this incontestable assertion is found in
statistical data relating to unemployment, income levels, life expectancy and
morbidity. Addressing the problems of Indigenous education generally raises
serious equity issues, and the aspirations of Indigenous people wanting access
to higher education present a special challenge. The submission received from
Batchelor Institute of Indigenous Tertiary Education explains the specific
nature of program needs for Indigenous students in higher education.
To be effective, not only the programs but
associated support provisions such as Abstudy must provide realistically for
the fact that, for the most part, more is required of this target student group
than ‘mainstream’ students to succeed in education and training programs. They
must not only acquire the required underpinning knowledge of the program, but
the broad technical context within which that knowledge is embedded, the
English language with which that know-ledge is articulated and the broad social
context within which the language and the knowledge is framed—in fact, they
must engage and learn within a completely different value system. Additional
accomplishments require additional resources, including time and money.
The Backing Australia’s Future package increases the Indigenous
Support Fund (ISF), creates an Indigenous Higher Education Advisory Council,
allocates five scholarships per year for Aboriginal and Torres Strait Islander
academic and general staff, and provides for new Commonwealth Learning
Scholarships for full-time undergraduates from low socio-economic backgrounds and/or
Indigenous backgrounds. However, as the National Indigenous Postgraduate
Association Aboriginal Corporation (NIPAAC) points out, this targeted financial
assistance is ‘minimal’ and disappointing. Most witnesses when questioned about
it regard this initiative as ‘tokenism’.
The package has not taken up NIPAAC’s recommendations to the Crossroads’
Review, relating to a more culturally appropriate education system. These
included provision for paid cultural supervisors, and the introduction of
compulsory Aboriginal and Torres Strait Islander studies courses and mentoring
programs. NIPAAC’s ‘bottom line’ is that the additional incentives for
Indigenous education ‘will not compensate for an increase in education costs
brought about by BAF.’
Indigenous students have also not been well served by the government’s changes
to Abstudy since 2000, which has resulted in a drop in participation.
The Government has also discontinued the Merit-based Equity Scholarship
Scheme, which granted HECS exemption to some Indigenous students. Enrolment
levels for Indigenous students increased when the scheme was introduced in 1997
but a notable decline has been evident since its discontinuation.
The proposed five-year Learning Entitlement is criticised by Batchelor
Institute for its ‘one-size-fits-all’ approach. Factors such as poor health and
the lack of infrastructure in many remote communities increase the likelihood
of forced withdrawals. The Learning Entitlement also ignores the fact that many
Indigenous students have to tackle the time-consuming, complex task of bridging
a linguistic and cultural divide when at university. The Batchelor submission
If HECS-HELP is not
to be a mechanism for exclusion of potential students, a more realistic
matching of requirements and target groups is necessary. Living allowances and
other practical incentives – including scholarships and cadetships – which
address the actual deterrents to continuing study would improve the retention
rate of students who, often, are long distances from home in the midst of a
foreign environment. Also needed are appropriate and strong study and pastoral
Educational disadvantage from an early age is the main barrier to the
entry of Indigenous people to university. Failure of the vast majority of
Indigenous young people to achieve university entry is not a matter which
universities can easily address. They are, however, working with schools to
increase Indigenous participation through the National Indigenous Higher
Education Network Committee. The AVCC has argued that the effectiveness of this
program would improve with much more generous funding. It has also called on
the Government to make enabling courses to university HECS free.
The committee endorses proposals to fund programs enabling Indigenous students
to make the transition to university.
The committee recommends the establishment of an
Indigenous Higher Education Advisory committee to develop a strategy for
increasing indigenous participation in higher education.
People from non-English speaking backgrounds (NESB) receive no separate
consideration in this package. Yet their interests are served neither by the
likelihood of higher student fees, nor by the expansion of full-fee paying
places. The five year ‘learning entitlement’ particularly works against their
interests. This point has been well-argued in the submission of the Education
Sub-Committee of the Ethnic Communities’ Council of New South Wales (ECCNSW).
In universities where fees are increased to the maximum 30 per cent allowed,
there will be some NESB students unable to commit to higher education due to
the increased costs. The submission argues that:
imposition of students' costs such as fees, texts and other educational
resources during study periods is already high. Additional accumulation of debt
amassed by students is a massive financial burden after leaving university,
especially for students and families from NESB, who are not guaranteed high
paying jobs after graduation; have other financial commitments later in life
and have family expectations to be "the breakers" of the cycle of
debt and assist financially with other family members.
The expansion of full-fee paying places works against NESB students
because the amount necessary to secure a position in a desired program of study
will be financially far out of reach for many of these students, therefore
restricting their access to higher education.
The ECCNSW opposes the Learning Entitlement because it fails ‘to account
for the differing degrees of educational development and family commitment in
NESB communities’. It says:
students from NESB are likely to have experienced massive upheaval and dramatic
disruption in their lives. Many may have come from a war zone and/or severe
poverty, where educational and employment opportunities have been curtailed,
limited or not available at all. Additionally, on arrival in Australia, people from NESB struggle to
become familiar with a new culture; they may have poor levels of English
language proficiency and educational skills; and they lack family and community
support on arrival and difficulty in accessing services. Students from NESB
communities have broader family and community commitments and responsibilities
than mainstream Australian society. They have individual obligations to ensure
every family member is cared for and supported within an extended family
structure, which includes financial support for all members. At times, other
commitments are secondary in importance, as the priority is ensuring these
duties are met and further accumulation of debt impacts on the whole family
Students with disabilities
The NUS submission addresses the question of the potential impact of the
package upon people with disabilities. It acknowledges the package’s $1.1
million per annum for three years from 2005, for the Students with Disabilities
Program, but it also points to the government’s wider decision to cut the
Pensioner Education Supplement (PES). The PES is an allowance for students in
receipt of a pension, including the Disability Support Pension, and it
recognises the additional costs faced by these students. The 2003-2004
Commonwealth Budget limited the PES payments to periods of actual study rather
than full year funding. The reduction saves the government more than $39
million over four years, as NUS claims, ‘at the direct expense of individual
students with disabilities, [and] in stark contrast to the $3.3 million to
be paid, not to students but to institutions, to encourage participation from
this same group’.
The committee notes that there is no indication in the legislation that
the Government has taken note of this committee’s recommendations in its 2002
report in regard to students with disabilities studying at universities.
Students from low SES
backgrounds and rural and isolated areas
Associate Professor Richard James’ submission to the Crossroads’ Review
presented research evidence that established that students from rural and
isolated backgrounds are under-represented in higher education. He estimated
that ‘for every ten urban people on a per capita basis who attend university,
roughly six rural or isolated Australians will do so’.
Professor James sees dual negative consequences arising from any increases to
HECS fees. He says:
Higher fees would be a significant deterrent for people from lower
socio-economic backgrounds and rural/isolated areas (regardless of whether or
not deferred payment is an option, since there is some evidence of
debt-aversion among these groups). An overall downturn in participation could
be anticipated. 2. The present social polarisation across universities would be
intensified as prospective students from lower socio-economic and rural and
isolated backgrounds are deterred or excluded by the dual effect of highly
competitive entry requirements and the (presumably) higher fees sought by the
universities/courses for which there is high demand.
The committee believes that the Government’s planned regional loading,
for campuses beyond a certain distance outside major cities, as noted elsewhere
in this report, will prove inadequate to provide sufficient support to rural
institutions. The direction taken by the BAF package – rationalising and
reducing course offerings and, effectively, undermining the competitiveness of
regional universities (especially in terms of quality) will worsen, rather than
improve, the situation of students from rural and isolated areas.
That the regional loading be extended to include the
University of Newcastle and universities serving outer metropolitan regions
such as the University of Western Sydney and the Victoria University of
Women also stand to lose from the levels of debt that will increase when
university fees are partially deregulated. The NUS submission draws on research
by Professor Bruce Chapman when it claims that, by the age of 65, 93 per cent
of men will have paid off their HECS debt (under current projections) but only
77 per cent of women will have paid their debts.
From the perspective of economic theory, this means that women will end up
paying less than men, and benefiting from an extended period of
Commonwealth-subsidised implicit interest subsidy. However, these figures are
also indicative of the comparative debt burden borne by women. With lower
lifetime incomes, the HECS debt is more financially significant to women. Women
spend more time outside the paid workforce than men, and the average starting
salary for new female graduates is lower than that of their male counterparts.
Women face extra costs in managing university, employment and family
commitments. As women remain the primary care givers in society, these extra
costs often relate to child care.
The NUS supplementary submission highlights the serious childcare
problems for women who are studying at university. There is a lack of available
childcare places on campuses and childcare is expensive.
The Melbourne University Student Association submission to the Senate Committee
Affairs Committee Inquiry into Poverty and Financial Hardship (January 2003)
revealed how a single parent receiving Youth Allowance or Austudy with one
child receives $395.30 a fortnight, or $331.30 if they are in a relationship,
but can face childcare costs as high as $195 a week. Even with Childcare
Benefit and a maximum rate of other assistance, childcare can cost the student
20 per cent of their weekly income.
The Student Association also pointed to the inadequacy of the capping of
work-related childcare assistance at 50 hours per week, as any combination of
work, lectures, commuting and study time requires more than 50 hours a week.
NUS is right when it concludes that:
Faced with mounting debt and the prospect of a lower
income, women will be forced to make difficult decisions about where and what
they can afford to study.
The package makes it more difficult for women who may wish to pursue
postgraduate studies. The proposed charging of a real interest rate on top of
fully deregulated coursework fees will restrict access to postgraduate courses
for lower socio-economic and other disadvantaged groups. Indeed, it is likely
that the increased rate of take up of postgraduate courses that was apparent
after the introduction of PELS will be slowed for everyone, not just the disadvantaged,
when the new FEE-HELP scheme comes into effect for postgraduate students. Women
will be doubly disadvantaged. Postgraduate qualifications are necessary for
professions in which specialisation is important. Nursing is an example of a
profession where women are concentrated and where various forms of postgraduate
specialisation are typical in the career path. A problem arises when, as in the
case of midwifery, the extra study is not reflected in significantly higher
rates of pay.
On top of this, the starting salaries of women postgraduates tend to be less
than those of male postgraduates. As NUS points out:
woman places herself at an even greater income disadvantage simply by
furthering her qualification with postgraduate work. And she has a postgraduate
loan on top of her HECS debt to show for it, one which will now attract an
interest rate on top of inflation.
The proposed Learning Entitlement has attracted considerable criticism
in a number of submissions, and appears to have found no support in almost any
submission. The core problem identified by its critics is its inflexibility,
which is interesting because ‘flexibility’ is the characteristic virtue that
the Government claims for all its higher education policies. The inflexibility
in this case is the five-year limit to a student’s claim for Commonwealth
For instance, the submission from the University of Sydney described the
learning entitlement as ‘unduly rigid, potentially preventing course
flexibility’ and of particular concern to postgraduate students.
Currently, a large percentage of students commencing university courses
have already spent some time in higher education. In 2002, 22 per cent of
students commencing a course at Bachelor level or below had partially completed
or completed prior higher education courses.
The Phillips Curran report concluded that the scheme might introduce some
inequities into the system. It said:
high performing students who are clear about their career choice and gain
immediate entry to their course of choice, the Learning Entitlement may not have any detrimental impact on access to higher education. However,
for students who take some time to find their niche, have to discontinue
studies for a range of personal reasons, and/or confront challenges in
progressing through their courses, the Learning Entitlement scheme may act to
restrict their access in the longer term.
Such restriction on access ‘will be exaggerated for disadvantaged
Course completion rates are much lower for Indigenous, low socio-economic
students and students living in rural and isolated areas. The committee concurs
with the Phillips Curran report when it concludes that ‘disadvantaged
Australians will be more likely to significantly erode their Learning
Entitlement and build a HECS debt without receiving the potential benefits of a
graduate level income’.
Disadvantaged students will also be more likely to use up their entitlement and
will have to face the burden of fees if they want to continue. It is likely
that the Learning Entitlement will result in a larger proportion of
disadvantaged students dropping out of university.
This view is expanded in evidence to the committee from the Student
Financial Advisors Network, whose submission took up the cause of students
compelled to withdraw from their studies before completion. The submission
There are various reasons why students may
require more than five years to complete their studies. Burdensome family
expectations, poor guidance from career counsellors, insufficient maturity at
school leaving age and any number of personal upheavals for reasons beyond the
control of the individual have, for numerous students, routinely resulted in
deferral or extension of years devoted to tertiary study. These are all typical
occurrences in the lives of modern young people. And yet, under a “Learning
Entitlements Scheme” these people may have “the rug pulled out from under them”
at a crucial time when they are busily devoting themselves to the closing stages
of their courses. The Minister insists that “Learning Entitlement appeal
mechanisms...where circumstances prevent students from completing their studies,
will be the responsibility of institutions.” But can the Minister guarantee
that all institutions, straining under the relentless financial pressure of
contingent funding, will be willing to invest appropriate resources in a
processes that could prove inimical to their fiscal agendas? The unanticipated
imposition of full fees for the final year of a degree would be nothing short
of catastrophic for most students. Conversely, the concept of an “entitlement”
may induce some students to unnecessarily augment their studies so as to
utilize the full five-year time frame. Increased throughput, if achieved at all,
may come at a cost (in terms of short circuited academic paths) that may
outweigh the benefits.
Finally, there are a number of unanswered questions in relation to
learning entitlements, as there are about almost every aspect of the bill
before the Senate. As one submission pointed out, it is unclear how the time
restrictions will be determined, and will the timeframe count from the moment a
student is enrolled regardless of whether or not they are attending classes. It
is not at all clear what exemptions, if any will apply or in what circumstances
exemption may be applied for. The draft guidelines issued on 3 November are
entirely silent on process and criteria for the extension of learning
entitlements. Hopefully these questions will be answered in time in later
drafts of the guidelines. This of no use to stakeholders making an assessment
of the legislation now. As with so many other substantial matters governed by
the legislation it is unacceptable that the detail is not available for
The committee recommends that Part 3-1 of the bill
dealing with learning entitlements be withdrawn on the grounds of hardship to
students and its likely adverse effects on completion rates.
The detailed discussion provided in this chapter is essential to an
understanding of the financial architecture of the package and, crucially, to
highlighting its contradictions and inherent policy tensions. By drawing these
problems out, the committee hopes that it has shown why BAF is unsustainable financially.
Inherent to it are measures that will undermine the financial stability of some
– perhaps many - institutions. By failing to face squarely the real problem –
the absence of an indexation mechanism for Commonwealth grants – the policy
package, and the legislation, turn instead to the only possible source of
funding growth: students themselves. The imperative to find more funds, simply
to cover rising costs and salary increases, will drive student contributions
ever higher. The package itself sets no firm limits on this upward pressure on
fees, either through full-fee arrangements or for ‘Commonwealth supported’
By failing to build in an indexation mechanism, the
Government plans to effectively freeze its own financial contribution to public
universities. This is not only short-sighted policy: it is profoundly
regressive policy. The inevitable outcome will be a higher education system
where the lack of financial sustainability will drive costs too high for the
majority of Australians. The gains of the great policy advances, which have
brought us a mass system of higher education with its social and economic
benefits, will be reversed.
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