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.

The 1988 Wran report, which recommended HECS, proposed a three-tiered pricing system linked to the student’s own course costs, so that students taking cheap-to-teach costs paid the lowest charges.

The Hawke government rejected the Wran report’s course cost link in favour of a flat charge, but the course-cost idea recurs. The Howard government considered it in the deliberations that led to differential HECS, the setting of different HECS charges according to field of education, and the idea played a small part in the final public justification. The 2011 base funding review recommended that students pay a fixed proportion of their course costs.

The politics of course-related costs

But in practice course-level costs have not influenced student contributions very much. The 1996 Cabinet documents show one reason why. When they were still thinking about a cost basis, a talk-and-chalk course like law ended up in the cheapest band, while a clinical field like nursing ended up in a middle band.

Nurses paying more than lawyers was never going to work politically. In the announced version of Howard’s policy, lawyers were in the most expensive differential HECS band and nurses in the cheapest band. The main rationale for allocating disciplines to different HECS bands was their expected future private financial benefits, discussed further in a later post. However, some higher-cost fields, such as science and agriculture, were put in a higher HECS band than might have been the case on earnings prospects alone.

Similar political problems helped sink the 2011 base funding review, since its proposal that all students pay 40 per cent of course costs would have increased student contributions for nursing students while cutting them for law and business students.

The politically unpalatable conclusions of course cost-based student contributions helped lock in a policy of primarily charging students on system cost recovery basis. Total student payments offset the required total level of Commonwealth expenditure.

The Tehan reforms are consistent with this historical pattern. Indeed, they would lead to the largest disconnect yet seen between student contributions and course costs. The system as a whole would move from 42 per cent to 48 per cent cost recovery, but the course-level cost recovery range would widen from the current 28 per cent to 84 per cent to 18 per cent to 93 per cent.

Creating policy space on the student contribution side

High contributions for large workforces held in high esteem, such as nurses and teachers, provided a strong political reason for policymakers to avoid course-cost based student contributions.

But other policy reasons also support this choice. A system cost recovery basis creates flexibility in using the student contribution for other policy purposes.

Student contributions can be fully or partly deregulated, because the Commonwealth is only liable for what it is willing to pay, not course costs inflated by university decisions.

Student contributions can be used by policymakers to try to influence student behaviour, as the Tehan package is attempting to do.

And student contributions can be set based on social policy considerations, such as the likely financial position of students or graduates.

These are explored in subsequent posts.


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

  1. A fascinating analysis Andrew – time soon to bring these pieces together as a book.

    Regards,

    Glyn

    From: Andrew Norton
    Reply to: Andrew Norton
    Date: Sunday, 23 August 2020 at 2:46 pm
    To: Glyn Davis
    Subject: [New post] How should student contributions be set? Part 1: Should student charges contribute to system costs or the student’s course costs?

    Andrew Norton posted: ” 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 “

    Like

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