Many graduates will repay less per year, and maybe less in total, under the new HELP thresholds

The Government had a rare higher education Senate victory this week, passing various amendments to the HELP loan scheme.

These include a series of changes to HELP repayment thresholds. Most of the political attention went to the initial repayment threshold, below which no repayment is required. It will drop from the current $52,000 to just under $46,000 in 2019-20. At that point, debtors will have to repay 1 per cent of their entire income.

In principle, I support this step in the direction of better aligning HELP with other government income support thresholds. This 2016 Grattan report supported a lower initial threshold.

Unfortunately, another key recommendation of that report, of consistent percentage increases between each threshold at which the repayment rate increases, was not strictly followed.

For most of the higher thresholds, each is 6 per cent higher than the one before it. But there is a 15 per cent gap between the first and second thresholds.

Combined with starting the repayment percentage at just 1 per cent,  this radically changes the nature of the threshold reform. It is not now something that we can assume will significantly alter HELP doubtful debt.

One intention of the original Grattan proposal was to move debtors more quickly through the repayment rates.  This was partly to recover more HELP debt before female full-time labour force participation drops from their late 20s, as shown in chart 1 below.

Chart 1: Female bachelor degree graduate labour force status, 2016

female labour

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Is government spending on tertiary education getting more progressive?

One long-made argument against tertiary education subsidies is that they are regressive. University students tend to come from more privileged backgrounds, and therefore high-income households receive a disproportionate share of government spending on higher education.

Based on gross household income, ABS data on the distribution of government benefits released today confirms that this is still true, as the chart below shows, although the ratio between the highest and lowest income quintiles is lower now than in the past.

Slide2

On an equivalised income basis, which takes into account household size, the distribution of spending is more even. This reflects the fact that although students tend to come from relatively affluent households, these also tend to be relatively large households containing a couple and their children. Making it disposable income makes it more even still, given progressive taxation. Read More »

Does ATAR measure more than SES?

One reason ATAR is criticised is that it tends to reproduce socioeconomic status.

One of ATAR’s critics complains that it is

“…more likely to measure the relative wealth of schools, more than a student’s abilities. In fact, using a students’ postcode might work just as well.”

Similarly, another critic says that “ATAR scores align more closely to postcode than they do to human potential…”.

While ATAR is not this deterministic – there are a range of abilities in every part of the SES spectrum – it’s true that ATAR correlates with family background, student home location and school attended (the scale of school effects after controlling for SES  is contested).

But that the ATAR achieved is influenced by a student’s social background does not mean it isn’t measuring something real about likely academic performance.

As the chart below shows, fail rates increase as ATARs go down across the socioeconomic spectrum. For a given ATAR, there is very little difference by SES.Grattan ATAR_chartdeck

Similarly, attrition after first year is more closely associated with ATAR than SES, as seen in the chart below. attrit_atar_ses

Although differing slightly in some of the detail, this is consistent with my posts earlier this year arguing that SES has most of its effects prior to post-school education, with  university access, performance and outcomes being similar for low SES students as other students: the same results, or small positive or negatives. It is also consistent with our recent Grattan report on dropping out, which found more narrowly, but also with more statistical rigour, that low SES in itself only had a small negative effect on completion rate.

 

 

 

 

Is ATAR still widely used?

The recent Mitchell Institute report on ATAR created an impression that ATAR is no longer widely used as a basis of admission to university. Based on figure 3 in their report, it said that only a quarter of students are admitted to undergraduate courses based on their ATAR.

That figure is correct in itself, but easily misinterpreted.The standard university practice is to admit students based on their most recent relevant academic results. For many applicants, their most recent relevant academic result is not Year 12, but previous university studies or vocational education. These applicants have been trending up as a share of all newly admitted students.

For school leavers, their Year 12 results are generally still their most recent relevant academic results. For them, ATAR is used not in one-quarter of cases, but three-quarters, as the chart below shows.

For other commencing students using previous higher education as their basis of admission, their ATAR is no longer their most recent relevant academic result. But often it was used to admit them to the university in the first place.

The chart below shows that when we take 2016 commencing students back to their original admission to university, 46 per cent were first enrolled based on school education with a recorded ATAR. For the under-25 year olds, 56 per cent were admitted based on their school education with an ATAR.

So while it is true, and increasingly true, that low-ATAR students can find other routes into university, ATAR is still the major selection tool for young people.

admitted_atar

Source: Department of Education and Training, Higher education data collection

 

How predictive is ATAR of university results?

In response to my Grattan Institute colleague Ittima Cherastidtham’s op-ed supporting ATAR, Victoria University VC Peter Dawkins and Professor Yong Zhao argue in The Australian that

“The focus on maximising the ATAR through Year 12 exams, however, tends to lead to coaching of exam technique, so students memorise answers to questions that are designed to promote critical thinking.”

Coaching can boost student results. I suspect it is one reason that students from private and selective government schools tend to slightly under-perform at university relative to students with the same ATARs from non-selective government schools.

If it was just coaching that explained ATARs, they would not have any predictive value for future academic performance at university, which does not offer school-level hand-holding, and at which students take sometimes quite different subjects. But ATAR does have predictive value.

As the chart below shows, as ATARs go down students become more likely to fail half or more of their subjects in first semester – a fail rate that will send them to the unsatisfactory progress committee unless improved.

low ATAR fail rate

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How big an obstacle is low ATAR to university admission?

In response to my Grattan Institute colleague Ittima Cherastidtham’s op-ed supporting ATAR, Victoria University VC Peter Dawkins and Professor Yong Zhao say in The Australian that

“…good universities should be able to reduce the impact of ATAR on students’ futures by providing education opportunities to those who, for all sorts of reasons, did not achieve high ATARs in school. When universities simply continue the trajectory set by ATAR, they fail their mission to change lives, to alleviate the impact of inequity and to lift people out of the conditions they are born into.”

There is no doubt that people with high ATARs are much more likely to be at university than those with low ATARs. To a substantial extent, this is because they are more likely to apply, as the chart below shows.

application levels

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Is ATAR bad for school education?

The ATAR wars entered another round yesterday, with Victoria University VC Peter Dawkins and Professor Yong Zhao responding in The Australian to my Grattan Institute colleague Ittima Cherastidtham’s op-ed supporting ATAR.

This debate can get confusing, because semi-related arguments are blurred together.

The most impassioned opposition to ATAR seems to be about its claimed effects on schools. As Dawkins and Zhao say,

“…it is a sad indictment of our education system that maximising ATAR is the primary focus for far too many students, rather than following passions and preparing for the future by developing their talents…”.

Even though they later question whether ATAR is a good predictor of success, they could  accept that ATAR is useful in university admissions and still oppose it, on the grounds that the cost of ATAR to school education exceeds the value of its benefits to higher education.

I am sceptical of the idea that abolishing ATAR would let more students follow their passions (‘passions’ perhaps; but I prefer ‘interests’ as encompassing a wider variety of emotional  commitments), or prepare them better for the future.

ATAR meets a university need that will not go away. Some kind of selection rank system is needed for distributing student places when demand exceeds supply for a particular course. So the question is not whether ATAR  has flaws or some undesired consequences, but how ATAR compares to its likely alternatives. Read More »