Month: April 2020

Some universities might still get JobKeeper, despite a planned second change of the rules to stop them being eligible

Andrew Norton3 Comments

Update 2/5/20: The government has further changed the rules so that university income must be assessed over the six months from 1 January 2020.

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When I first wrote about universities and JobKeeper, at the end of March, I concluded that although they were included they were unlikely to meet the required revenue falls. Especially for the universities with $1 billion plus annual revenue, the required 50 per cent fall in revenue seemed like a financial disaster beyond what COVID-19 issues could trigger.

Since then, the universities and JobKeeper story has had many twists and turns. In early April, universities briefly hoped that they would only have to meet the 15 per cent decline in revenue required of charities (they are educational charities). But the JobKeeper legislative instrument specifically excludes institutions listed in Tables A and B of the Higher Education Support Act 2003, which cover all public and private universities.

This flips the normal funding biases of higher education. Generally, educational organisations that were publicly-funded before 1989 have privileged access to government subsidies. Now, for a brief time, the educational charities that are not in the pre-1989 group have easier access to public funding. They only have to show a 15 per cent decline in revenue, instead of 30 or 50 per cent for Table A and B institutions, depending on their revenue. In 2018, 41 non-university higher education providers were registered educational charities.*Read More »

Government benefits for domestic students during the COVID-19 crisis

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At least temporarily, some domestic students are financially better off due to the government’s COVID-19 measures. This is due to increased income support payments and JobKeeper exceeding their likely pay if they had been working.

JobKeeper

Eligibility for JobKeeper is a two-stage process. First the employer has to be eligible, with a 30 per cent reduction in revenue for businesses with revenues below $1 billion, and a 50 per cent reduction for business with revenue above $50 billion. Most charities have a lower threshold of a 15 per cent reduction in revenue.

I have no direct data on how many students are employed in eligible firms, but student employment is concentrated in industries that we know have been hit hard by COVID-19 shutdowns.

Second, the student has to be an eligible employee. In the ABS Characteristics of Employment Survey for August 2019, about two-thirds of employed students aged 17-30 years who are studying full-time meet the criteria. They have either on-going employment (using the entitlement to paid sick leave proxy) or are casuals who have been with their current employer for 12 months or more. This analysis includes all students, not just higher education students.

[Update 25/4/20: The Treasurer has announced that full-time students aged 16 and 17 years will not be eligible for JobKeeper, adding an age condition that slightly affects my analysis.]

If these tests are satisfied, there is a flat payment from the government, but paid by their employer, of $1,500 a fortnight. This is likely to be much more than full-time students usually earn. According to the Characteristics of Employment Survey, their median earnings are $320 a week, or $640 a fortnight. JobKeeper is likely to more than double earnings for eligible students until it expires on 27 September 2020. Read More »

How much is the 2020 higher education assistance package worth?

Andrew Norton1 Comment

Update 28/04/20: It now seems likely that there won’t be additional higher education places beyond 1000 places for non-university higher education providers. This would revise down the potential value of the package by about $100 million, to around $500 million – but noting the substantial uncertainty in the original post.

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In today’s media, there are some very large estimates of likely international student fee losses. The federal government is not compensating universities directly for falling international student revenues, but as outlined in my blog post on Wednesday they have announced measures focused on domestic students.

Calculating the financial impact of these measures is not easy. We don’t know what impact COVID-19 has had on domestic student numbers, although some universities had soft demand before COVID-19 disrupted on-campus classes. The University of Sydney has reported that its domestic numbers are down nearly 5 per cent on expectations, but that could be due to a tough NSW market.

Many universities have delayed the census date at which Commonwealth and student contributions are triggered, and so they won’t know for sure what their first semester situation is until that day has been reached. Nor do we know what will happen in later semesters. It may depend on whether campuses can re-open. Read More »

The first COVID-19 higher education support package – a revised, less speculative post

Andrew Norton5 Comments

The government now has a first support plan for higher education. Its key elements are letting universities keep student-related grants and loans for 2020 even if they enrol too few students, funding short courses, and regulatory fee relief.

An earlier post was my inference and guesswork from fragmentary Easter Sunday announcements. This post uses material from FAQs issued by the Department of Education on Tuesday.  For readers who do not need to be across the technical detail of higher education funding I recommend my article for The Conversation rather than this post.

Commonwealth Grant Scheme

The government’s biggest higher education funding program is the Commonwealth Grant Scheme, which pays tuition subsidies of over $7 billion a year. Under the Higher Education Support Act 2003 total payments for the year cannot exceed equivalent full-time student numbers multiplied by the relevant Commonwealth contribution.

Universities are paid fortnightly based on estimates of their CGS entitlement for the year. A few days ago the University of Sydney announced that it was down 5 per cent on its domestic student target. Whether this is due to COVID-19 or tough NSW market conditions is not clear. A number of other universities were struggling before COVID-19 due to demographic factors.

Whatever the reason, universities will now be paid their original estimated funding rather than their legal entitlement. This also suspends the need to meet performance funding criteria, which is sensible. Read More »

The first COVID-19 support package for higher education

Andrew Norton2 Comments

Update 15/4/20: This post contains material that has been revised and republished to take into account later information.

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The government now has a support plan for higher education. The key elements are letting universities keep student-related grants and loans in 2020 even if they enrol too few students, funding short courses, and regulatory fee relief.

In this era of government by tweet, media report, media release and media conference the details of how this might work are lacking as of today. I will revise this post as more detail comes to hand. For now, I will focus on the broad outline and pursue my pedantic interest in the legal basis of government policy.

Commonwealth Grant Scheme

The government’s biggest higher education funding program is the Commonwealth Grant Scheme, which pays tuition subsidies of over $7 billion a year. Under the Higher Education Support Act 2003 total payments for the year cannot exceed equivalent full-time student numbers multiplied by the relevant Commonwealth contribution.

Universities are paid fortnightly based on estimates of their CGS entitlement for the year. A few days ago the University of Sydney announced that it was down 5 per cent on its domestic student target (which could include full-fee students, which I will come to below). Whether this is due to COVID-19 or because it was just losing out in a tough NSW market is not clear. A number of other universities were struggling before COVID-19 due to demographic factors.

Whatever the reason, the minister now says that universities will be paid their original estimated funding rather than their legal entitlement. This also suspends the need to meet performance funding criteria, which is sensible. Read More »

COVID-19 could have a high fatality rate in the private higher education sector

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If things look bad for public universities in the COVID-19 era, they look much worse for many providers in the private higher education sector.*  Not all are likely to survive a significant downturn in the international student market.

Although there are some commercially very successful players in private higher education, that is not the universal experience. When TEQSA reported on financial risk last year, it rated 12 per cent of for-profit providers as high risk, and 44 per cent as moderate risk. For not-for-profits, the corresponding risk ratings were 5 per cent and 40 per cent. This equates to more than 60 providers at high or moderate risk. As of April 2020, there are 134 non-university higher education providers.

The private higher education sector is diverse, with 37 providers having no international students in 2018 (based on not having a CRICOS registration). Generally speaking, however, the private higher education sector is more exposed to the international student market than public universities. About half of private sector students are internationals, compared to 31 per cent in the public universities. The true number is likely to be higher, as the statistics only include providers that have signed up for FEE-HELP, a domestic student loan program.  Providers aimed exclusively at the international market have no need for FEE-HELP.Read More »

Low SES students in a capped higher education system

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A reader of this COVID-19 series of posts asked me about its implications for low socio-economic status (SES) students in higher education.

I doubt the COVID-19 recession will reduce demand for post-school education from potential low SES students. The same economic logic applies for everyone who might consider further study: education is more attractive than unemployment.  Local vocational education policies and opportunities may affect the regional higher education-vocational education divide, but interest in study should increase.

While low SES demand should hold or increase, I nevertheless think that low SES enrolments will probably decline without policy change. Increased total demand for university places in 2021 will intensify academic competition for entry if funding caps remain. And that, in turn, will disadvantage low SES applicants.

Read More »

International students and the COVID-19 recession

Andrew Norton4 Comments

For Australian higher education the situation of international students in the COVID-19 crisis is especially concerning. They lack the local family and social security back-ups of domestic students. It leaves them particularly vulnerable as large parts of the student labour market collapse.

And if international students have to go home or cannot pay their fees, that is the most likely trigger for a broader higher education sector crisis. At best, thousands of higher education workers will lose their jobs. At worst, many universities will need government intervention to survive.

This morning the government issued a summary statement on the situation of international students during the COVID-19 disruption.

International students working in nursing and aged care have had their 40 hour per fortnight cap on working eased, as have students working in supermarkets until 1 May. While that is helpful for some students, as of 2016 the majority work in other occupations, as the chart below shows. Read More »

What could the government do to stabilise university finances?

Andrew Norton1 Comment

There are some pretty high figures circulating about possible university losses due to COVID-19. I have seen no supporting evidence to justify the estimates, and the top-of-the-range numbers are implausible. Nevertheless, 2018 financial data shows many institutions with thin operating margins. We have grounds for concern about how they would manage a major hit to their finances.

On the revenue side, we have actual or potential losses from international students who never arrived, international students who may have gone home, domestic students withdrawing prior to the census date, and domestic students claiming student contribution refunds and HELP remissions because their course delivery methods changed.

On the cost side, universities have had to finance quick transitions to online education for students and working at home for staff, as well as some universities offering students financial support.

This post summarises things that the government can do within existing or announced legislation to stabilise university finances. I have blogged about some of them before and will note them concisely here. Of course, other policies supported by new legislation are also possible. Read More »

COVID-19 means that universities should not be held to performance funding targets

Andrew NortonLeave a comment

Update 6/4/20: Since this post was written, the minister has indicated that performance funding is being reconsidered due to COVID-19.

The government’s university performance funding scheme was always based on  questionable assumptions. Among them is the belief that we can reliably distinguish a university’s contribution to various outcome indicators from the other influences on those same numbers.

I’m sceptical enough of this in normal times. But COVID-19 means that, despite the extraordinary efforts of academics and other university staff to provide continuity of education and student support, three of the four performance indicators – graduate employment, student satisfaction, and equity group enrolment share – will or are likely to worsen compared to recent years. The fourth – attrition – will probably show a positive trend that also has little to do with university performance.

Due to the total amount of performance funding being linked to population growth, COVID-19 driven changes to migration levels will also reduce how much performance money is on offer.

Graduate employment

Let’s start with graduate employment, which has a 40 per cent weighting in the performance funding formula. As I argued in a blog post on Monday, previous record-bad employment results in 2014 will be significantly exceeded. Read More »