How should student contributions be set? Part 2: Letting universities set their own prices

In the first post in this series on the conceptual and philosophical thinking behind student contributions, I argued that successive governments have primarily used them to limit system-level public expenditure.

Once the public spending constraint is achieved, this approach leaves room for other methods of setting student contributions. This post looks at giving universities a role in deciding what level of student contribution to charge.

Liberal plans for fee deregulation

The idea that universities should set their own fees on top of a government subsidy has a long Liberal lineage. Plans to lift controls on fees were in the 1991 Fightback! package, David Kemp’s 1999 leaked Cabinet submission, and in Christopher Pyne’s unsuccessful 2014 higher education reform proposal.

For fiscally-constrained governments, part of fee deregulation’s attraction is its scope to further reduce public expenditure. Universities can compensate for public spending cuts with increased student charges. But fee deregulation also has a more positive agenda.

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Notes on the Job-ready Graduates bill, as introduced

The Job-ready-Graduates bill was introduced in the House of Representatives this morning. A couple of points on the funding floor and the social work/mental health deal with the National Party:

Funding floor

One unpleasant surprise in the draft Job-ready Graduates bill of earlier this month was that, with each funding agreement, the minister could reduce a university’s funding without parliamentary scrutiny or approval.

The bill as introduced has a clear fix of this problem – but from 2025: amending section 30-27(3)(b) of the Higher Education Support Act 2003 (HESA 2003). From then, the minister cannot reduce the university’s maximum basic Commonwealth Grant Scheme funding for higher education courses below what it was the previous year.

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How should student contributions be set? Part 1: Should student charges contribute to system costs or the student’s course costs?

This is the first of a series of posts looking at the conceptual and philosophical issues underlying debates about student contributions since the late 1980s.

The series is prompted by Dan Tehan’s proposed changes to student charges, but not limited to them.

This first post looks at the student contribution’s relationship to overall public funding, and whether it is intended to offset total government expenditure on higher education, or the cost of the student’s own course.

Course cost student contributions have been considered, but not implemented

The Whitlam experiment with free higher education ended in the late 1980s because the Hawke government wasn’t willing to pay the full cost of expanding enrolments. But then and since people have disagreed about whether students should contribute to their own costs or more broadly to the system’s costs.

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Universities should have a Commonwealth funding floor

Update 27/8/20: A funding floor has now been inserted in the Job-ready Graduates bill, albeit with some remaining issues.

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As expected, the legislation for Dan Tehan’s higher education policy would formally repeal the Higher Education Support Acts bachelor-degree demand driven funding provisions, with a small exception for regional Indigenous students.

Funding for Commonwealth supported bachelor degree students has been capped since the end of 2017, so this might seem like just a formality. But in reality the repeal involves a major structural change, one that could undermine important higher education policy objectives.

Even though section 30-27(1) of HESA 2003 created a power to cap, section 30-27(3) required that the capped amount be at least the previous year’s funding level. The only way that a university could get less money than the previous year was by enrolling too few students, reducing their payment under the demand driven funding formula (section 33-5(5)). In effect, the link to previous Commonwealth payments created a funding floor that the government could only lower with parliamentary approval.

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Should students lose Commonwealth support for failing too many subjects?

My previous post explained various measures proposed in new government legislation to reduce how many students fail subjects. These include restrictions on marketing to students who may not be serious, a new Departmental power to not pay universities for subjects if the student is deemed not ‘genuine’, a requirement that universities refund student contributions or fees where the student is not genuine, a new obligation to check the student’s academic suitability at the subject as well as the course level, and restrictions on students taking more subjects in a year than they can manage.

Most of yesterday’s media attention, however, focused on a different part of the legislation, restricting Commonwealth Grant Scheme and HELP entitlements for students who fail too many subjects.

In explaining this change I am, as with the previous post, going to cite legislative provisions to help people who are working on providing feedback on the bill. HESA 2003 means the Higher Education Support Act 2003. As before, please feel free to point out errors or alternative interpretations in comments or via email.

General rule – failing more than half of subjects leads to loss of funding entitlements

The general rule is that students who fail more than half their subjects in a course will lose their entitlement to Commonwealth support: new section 36-13 of HESA 2003 for Commonwealth supported students, for FEE-HELP students existing section 104-1A activated by schedule 5 part 2 of the draft legislation. At public universities, FEE-HELP borrowers are mainly postgraduates, as they cannot offer undergraduate full-fee places except in narrow circumstances.

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Checking that students are on track to pass – the government’s proposal

My previous post argued that some university students needlessly incur HELP debts and fails on their academic record. This post looks in more detail at several measures proposed in new legislation to alleviate this problem.

Although these measures arrived without warning they have a history. With some amendment and addition, they extend to public universities rules applying to non-university higher education institutions since the 2017 provider integrity legislation. In turn the 2017 non-university provider legislation imported vocational sector rules intended to avoid a repeat of the VET-FEE HELP debacle.

Provider marketing and student motivations

The issues in VET FEE-HELP and higher education are, however, quite different. The offering of inducements, misleading statements about HELP, and cold calling that would be restricted or banned for public universities by the new legislation never or rarely happen in higher education.*

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Disengaged and failing students are an issue worth policy attention

The draft legislation for the Tehan higher education package, released on Tuesday, includes several previously unannounced measures. These include new – or least new for public universities – rules for managing under-performing students.

Among the measures are greater monitoring of student progress, restrictions on study load, and as the media has been reporting today students losing Commonwealth funding if they fail more than half the subjects they have taken. The minister’s media release is here.

I will get to the sometimes arcane detail in a subsequent post (or posts, there is a lot). I am not convinced that the government is going about this in the best way. But I don’t want complaints about the details to obscure the point that this is an area worth policy attention.

In the Grattan Institute Dropping Out report we argued that disengaged students are needlessly incurring HELP debt and blemished academic records. With demand likely to exceed supply for higher education next year, disengaged students are also using Commonwealth supported places that would benefit other people more.

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Are early offers turning into a problem?

A wide variety of universities have early offer programs for 2021. These have been the subject several recent newspaper articles, especially on early offers to Year 12 students.

Letting students apply for university courses and receive offers prior to the main selection process after Year 12 results isn’t new. Andrew Harvey documented many examples in 2014.

But the anxiety many Year 12 students feel about a disrupted final year of school, and their very uncertain prospects, might fuel greater interest than usual in locking in at least one part of their future.

While Year 12 students seeking an early offer is very understandable, as a university practice early offers now raise issues they did not previously.

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