Has abolishing the discount for upfront payment of student contributions made a difference to upfront payment rates?

An article in The Conversation on incentives around student contribution payments made me wonder what difference the 2017 abolition of the 10 per cent discount for paying upfront was having.

The discount had a cost to taxpayers, since universities were compensated by the Department for upfront payment discounts. If students pay upfront, the risk of the remaining debt not being repaid is removed, as is the interest subsidy for the time that repaid debt is outstanding. The discount is only worthwhile from a taxpayer perspective if it induces upfront payments on a sufficient scale to reduce doubtful debt and interest subsidies by more than the cost of the compensation to universities.

At the time, I supported the decision to abolish the discount, because I doubted that it was generating a net financial benefit for taxpayers.

One reason for this is that various sources of evidence over the years suggested that upfront payments were coming from sources unlikely to be very sensitive to discounts. These include parents wanting their kids to be free of debt, employers, and scholarships. In the 2012 student finances survey, for example, 9 per cent of undergraduates reported receiving money to pay tuition fees. Read More »

The uses of ATAR

In the last few weeks, the Australian Tertiary Admission Rank (ATAR) has come under renewed criticism. A paper from the Mitchell Institute started this, and Swinburne University VC Linda Kristjanson followed up with an op-ed on one of their alternative entry systems.

These critiques have a history. More than 20 years ago, then education minister Amanda Vanstone gave a speech attacking the ‘tyranny of the TER’, an ATAR predecessor called the Tertiary Entrance Rank. ATAR’s decline has long been championed. But despite what the Mitchell paper suggests, ATAR is still used in the vast majority of school leaver university admissions (Mitchell’s numbers are due more to the rise of other academic results, such as past higher or vocational education, than non-ATAR school leaver admissions, although these are also increasing).

Some form of ranked school results has been used for university admissions since the 1960s. Previously it was enough to ‘matriculate’ (complete Year 12), but demand for higher education was exceeding the places available, and so school results were used to allocate places to applicants. But this history shows that there is an alternative – admit everyone who meets some basic threshold, and then cull them. University policy reviews from the 1950s and 1960s report fail rates that are very high by today’s standards.

There is something to be said for this admit-and-attrit approach to selection – let applicants try university and see how they do. It avoids proxies based on an imperfectly-analogous environment such as school, or admissions tests that can potentially be gamed or only measure some attributes needed for success at university. To a substantial extent, as a forthcoming Grattan report will show, trial-and-error selection after enrolment is still a major way of deciding who gets a longer-term university place.

But issues of fairness, efficiency, and student protection work in favour of retaining an active role for universities in selecting students. Read More »

Higher education inequality: do graduate outcomes differ by socioeconomic status?

In earlier posts in this series on inequality and higher education, I have suggested that the SES participation differences are largely driven by prior academic performance and that different SES groups seem to experience higher education in much the same way, but low SES students are less likely to complete their degrees. In this post, I will look at outcomes for the students who do complete their degrees.

First, are there differences in rates of getting a job? The 2017 Graduate Outcomes Survey finds that there are small differences. About four months after completing their bachelor degree, 73.6 per cent of high SES graduates who were looking for full-time work had found it, compared to 70.3 per cent of low SES graduates. However, of those who were working full time low SES students were slightly less likely to report not fully using their skills at work than high SES graduates (27.1 per cent compared to 28.9 per cent). It is difficult to say whether there is any direct SES effect in these results, as employment outcomes differ substantially by field of education, and SES differences in discipline choices could explain the results.

The Graduate Outcomes Survey also looks at starting salaries in the first full-time job after completing an undergraduate degree. Again, we find a small SES difference: the median starting salary for high-SES graduates in 2017 was $61,000, and for low SES graduates it was $60,000. This does not tell us whether there is any direct SES effect (such as not being able to access social networks to find professional jobs) or whether other factors such as discipline explain the result. A study using an earlier first year out survey had a limited control for discipline, as well as controls for weighted average marks, gender, and various other factors. It found no negative salary effect for low SES students, using a geographic measure of SES.

One possible cause of SES differences is that low SES students tend to attend the less prestigious universities, reflecting the school results issues reported in an earlier post. For example, 7.5 per cent of the University of Sydney’s students are low SES on a geographic measure, compared to 26.2 per cent of Western Sydney University students.

In theory, university attended should affect starting salaries. There are well-known differences in entry requirements between universities, which employers may take as a more reliable measure of ability than university marks, and employers may assume that the more prestigious universities have better teaching (can attract better staff, have more to spend – although student satisfaction surveys don’t support this conclusion). The first full-time job is when employers have to make greatest use of proxy indicators of potential, since most new graduates lack a track record in full-time skilled employment. Consistent with this, nearly 40 per cent of graduate employers say they have preferred institutions, mostly Group of Eight universities.

In practice, however, many studies have found no or small starting salary differences by university or university grouping (eg here, here, here, here and here). What course you take matters much more to your income than what university you attend. Read More »

Higher education inequality: how much does performance at university differ by socioeconomic status?

In an earlier post, I argued that the Australian higher education system probably deserved about a 7/10 for equity of access. In line with some theory, the middle-class meritocracy continues to reproduce itself successfully, but the universities are open to talent: for a given ATAR, university participation rates are very similar across SES groups. But what happens when students arrive at university?

Intriguingly, many studies have found that low SES students or students from non-selective government schools do not do worse and indeed tend to get slightly higher marks, for a given ATAR starting point (eg here, here, and here and the literature cited within).

Various theories for this finding have been offered, but I suspect it is because the schools higher-SES students attend maximise ATARs through intense coaching and social pressure, but their less motivated and organised students don’t do as well in the much less structured university environment. By contrast, a lower-SES student who has done well in Year 12, quite possibly with much less school and social support than higher-SES students, is a motivated and resourceful person, and that pays off at university as well.

Student satisfaction is not reported directly by SES, but recent surveys differentiate between people who are first in family and those who are not. This gives much less nuance than I would like, but low SES students are much more likely to be first in family than high SES students. The Student Experience Survey finds first in family students are often slightly more satisfied with their educational experience than students who are not first in family. Maybe first in family student expectations are different, but generally they seem to be experiencing university in much the same ways as other students.

However, on actually completing a degree we do find some negative differences. Using a geographic measure, 69 per cent of commencing low SES undergraduates complete a degree within the nine years to 2015, compared to 78 per cent of high SES students. Read More »

Higher education inequality: how well has Australia limited differential access levels by socioeconomic status?

In an earlier post, I argued that higher education has substantial inequality-generating features. This post is the first in a series looking at how well Australia’s higher education system does in this context, starting with access to higher education. Essentially, this is about how well the higher education system can foster social mobility.

The potential of the Australia’s higher education system is constrained by the potential pool of students, which largely comes from people who have successfully completed school. Before the 1980s, that was a minority of the population. Don Anderson and A.E Vervoorn’s interesting book Access to privilege reports that in 1980 overall school retention to Year 12 was only 34.5 per cent, and 28.4 per cent at government schools. It was already a massive 88 per cent at the non-Catholic private schools, favoured by many higher SES families. They were setting up the basis for the next generation’s educational success.

In the 1980s, school completion rates increased, so that about half of low SES students finished school by the end of the decade. Low SES Year 12 completion is now at 73 per cent, compared to 80 per cent for high SES students (with the caveat that dividing the population into three groups misses likely much larger difference in the lowest and highest deciles).

ATAR results by SES are rarely published, but some Victorian data I published in a book chapter a few years ago shows the highest SES quartile by postcode substantially over-represented in the 90+ group, and the lowest SES quartile substantially over-represented in the below 50 group. The annual NAPLAN reports show that, again, the high SES students, whether measured by parental occupation or parental education, do significantly better across all the literacy and numeracy tests, although consistent with meritocratic hopes there are also small numbers of high achievers from disadvantaged backgrounds. So even though Year 12 completion has improved, we still have substantial issues with inequality of school-level academic achievement.

I don’t feel competent to judge to what extent university education faculties are to blame for this situation – although the early childhood research suggests that schools, also, are working within the constraints of the student pool. I will assess universities and higher education policy on how they deal with this academic achievement situation as they find it.

From the earliest days, universities and higher education policy (which was originally a State responsibility) have been concerned with access, offering students subsidies and scholarships. But that really only mattered in the post-WW2 era, since very few people before then went to university and it was not needed for most jobs. Hannah Forsyth has written about university admission policies in the post-war era. The Commonwealth government offered merit-based scholarships.Read More »

Was higher education ever likely to reduce inequality?

Next week I am a panelist in a discussion on whether Australia has an equitable tertiary education system. The promotional blurb says:

Australians believe we live in a fair and egalitarian country. We believe in a fair go: in equality of opportunity. We also believe that accessible education and training is a fundamental right and it facilitates prosperity, social mobility and a richer and more engaged economy.

Are these beliefs about who we are based in fact? While access to higher education has increased dramatically over the past 30 years, income and wealth inequality is also on the rise. This seeming contradiction challenges our most fundamental beliefs about intergenerational mobility. Is the education system a cure or a curse? …

When I accepted the invitation to be on the panel I told the organisers that I did not know the answers to their questions, but I could offer some observations. I am going to try a few of them out on this blog.

Starting theoretically, I think social mobility and income inequality are distinct issues. It was always more plausible that education would promote mobility in personal status than that it would reduce snapshot-in-time income inequality figures. Indeed, there are reasons for thinking that higher education is more likely to increase than decrease income inequality.

Higher education can increase individual income inequality by facilitating a more unequal labour market. Higher education provides the training to support an increasing number of highly-skilled and highly-paid professionals. In a 2017 paper, Jeff Borland and Michael Coelli have some interesting charts showing growth in demand for the kinds of cognitive skills that a university education aspires to teach. Consistent with this, numerous papers have shown substantial financial ‘returns’ to higher education. This Deloitte report from last year summarises some of the local literature and adds its own estimates. Read More »