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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2021 will be a competitive year for university applicants

Whether the Tehan reforms pass the Senate or not, in 2021 universities face a recession-induced spike in demand. This post looks at the system’s capacity to respond under each policy scenario.

Commonwealth Grant Scheme

Based on last year’s portfolio budget statement, which requires some averaging of years, under status quo policies the Commonwealth Grant scheme will increase by about the rate of inflation. As Commonwealth contributions are indexed to inflation, and universities are already delivering more student places than needed to get their maximum grant, the 2021 CGS funding increment would not require any additional student places.

Under the Tehan reform scenario, starting in 2021 the government will add ‘growth places’ that are partially linked to population increases in the 15-29 age cohort. But these places will not increase Commonwealth Grant Scheme funding compared to 2020. Rather, the maximum CGS payment is first reduced and then slightly increased by the growth places. The lost funding would be recycled in a proposed industry linkage fund, but this puts new constraints on university spending rather the freeing up funds for new student places.

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How will the number of student places increase under the Tehan reforms?

Although I don’t support the Tehan plan to steer student demand to ‘national priority’ fields, from day one I have supported increasing the number of student places.

According to the Department’s discussion paper on the reforms, they will ‘support an additional 39,000 university places by 2023 and almost 100,000 places by 2030’. These additional places are needed to meet previously unexpected demand due to the COVID-19 recession and, from the mid-2020s, the ‘Costello baby boom’ cohort (although the former Treasurer perhaps should not get too much credit for them).

This post examines how student places for undergraduates might increase under the Tehan reforms. For general readers, the first section on major sources of additional places includes the key policy changes. Read on after that part if you need to know the detail of higher education policy.

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The legal paperwork for undergraduate certificates

Update 24/07/20: The Commonwealth Grant Scheme Guidelines discussed below have now been amended, including 16 NUHEPs that did not previously receive Commonwealth supported places.

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Back in May, I posted on concerns about the legal issues surrounding the new ‘undergraduate certificates’, the half-diplomas announced as part of the Easter Sunday COVID-19 measures. One issue, listing on the Australian Qualifications Framework, was being remedied as I wrote.

Earlier this month, the government ‘designated’ the undergraduate certificates under secton 30-12 the Higher Education Support Act 2003. This has two practical implications.

First, it means that the source of Commonwealth Grant Scheme funding (if any, more soon) for undergraduate certificates moves from the bachelor degree to the sub-bachelor and enabling fund.

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Commonwealth and student contribution reforms create a harder cap on ‘priority’ than ‘non-priority’ courses

My previous post examined how, for many disciplines, price signals to students and universities contradict each other under the Tehan reforms. Without demand and supply incentives lined up, enrolment patterns by discipline may not match the government’s ‘national priorities’.

The overall price signal for the university, the total per student funding rate for each full-time equivalent enrolment, is made up of two components. These are a Commonwealth contribution, paid out of the Commonwealth Grant Scheme, and a student contribution, a university charge paid by students up to a legislated maximum amount. Most students use HECS-HELP loans to pay their student contributions.

This post looks at what separate effects the Commonwealth and student contributions might have on university behaviour, independently of how they combine to form a total funding rate.

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