Andrew Norton is the Higher Education Program Director at the Grattan Institute.
Before joining Grattan, he was a higher education policy adviser to three University of Melbourne vice-chancellors between 2000 and 2011. In the late 1990s, he was higher education adviser to the then Minister for Education, the Hon Dr David Kemp. In his career as a higher education policy analyst and adviser, he has been involved in all the major higher education funding reviews of the last fifteen years. This year, he and Dr Kemp conducted a review of the demand-driven system of higher education funding for the Federal Government. The recently released Federal Budget adopted a number of the reviewers’ recommendations, including the extension of Commonwealth-supported places to private universities and non-university higher education providers. Other key changes announced in the Budget include removing the FEE-HELP cap, allowing universities to set their own tuition fees, lowering the repayment threshold from $53,345 to $50,638, and increasing the indexation rate of HELP debt by linking it to the yield on ten-year government bonds (capped at 6%) rather than CPI. De Minimis spoke with Mr Norton about the proposed changes to the higher education system.
What is the benefit of extending funding to private colleges and what can be done to prevent the funding of low quality courses that are of little educational or vocational value?
There are several reasons for extending funding to private colleges. The first is a fairness argument, that the current system creates inequities between students that have no good justification. Some students pay full fees while others receive large subsidies, even when from similar backgrounds and doing similar courses. The demand driven review found that 14pc of domestic full fee undergraduates are from low socioeconomic status backgrounds, compared to 17pc of undergraduates in the public universities.
The second argument is that the private colleges, and the TAFEs offering degrees, are often better placed than the public universities to meet the needs of the students now seeking higher education. This is especially the case with “pathway” programs, often diploma courses that articulate into a bachelor’s degree. They are aimed at building the study skills of students who are not yet ready for a bachelor’s degree program in a public university, where students are expected to do self-directed study. Because private providers dominate the pathway market, their students have to pay full fees. This creates a financial incentive for under-prepared students to go straight into a bachelor’s degree. But unfortunately this sets them up for failure, with only a 50pc completion rate after six years. By contrast, former pathway college students often do much better than we would expect given their original school results.
The third reason is that we want a more diverse and competitive higher education system overall. Most of the private colleges are teaching-focused, compared to the research-focused universities. We want to put both performance and price pressure on the public universities. That will benefit students whether or not they are personally interested in the private alternative.
Non-university higher education providers have always been more regulated than universities, and that it still true today. They need a licence to operate from the Tertiary Education Quality and Standards Agency (TEQSA), which also approves each course. All higher education providers must meet government standards. While public universities often imply that they are better quality than other higher education providers, this is not a view they are able to support with evidence. The available survey data suggests that students are less satisfied with teaching in public universities than in TAFEs and private providers.
As a condition of entering the demand driven system, non-university higher education providers will have to participate in a range of teaching and employment surveys, which will go on a new website for students.
With this combination of better information, regulation and market pressures, I doubt there will be systemic failure to meet standards in either the public or private sectors. There are plenty of pressures to fix any problems that emerge.
From 2016 onwards, universities will be able to set their own tuition fees and the FEE-HELP limit will be removed, which will result in higher course costs. Given the distortionary effect of income-contingent loans on price signals, do you anticipate there will be price inflation?
As student contributions have historically been set well below their market value, I believe it is inevitable that average fees will increase. It will require prospective students to ask questions about value for money – will higher fees reflect genuine improvements in value to students, or poor cost control and profits to fund research? Unfortunately, it is very difficult to distinguish what HELP is supposed to do, which is allow students to invest more than they could otherwise in their education, from inflation fostered by the same reduced price sensitivity.
Students have expressed the view that the uncapping of tuition fees, combined with the increased indexation rate of HELP debt and reduced repayment threshold, will impede equitable access to education. Do you believe this is the case?
Despite predictions about reduced low socioeconomic status access with every increase in student charges, empirical research has consistently found that socioeconomic status has negligible influence on higher education participation rates once school results are taken into account. The negative effects of socioeconomic status are on school results. After Year 12, low socioeconomic status students seem to have essentially the same decision-making process as other students, and academically tend to do a little better than higher socioeconomic status students who enter on the same ATARs.
The reform package clearly improves equity in two respects: ending low socioeconomic status students paying full fees, and encouraging the colleges that deal with the biggest barrier to low socioeconomic status participation, which is their weak school results.
The government has also tried to deal with perceptions around this issue with a scholarship fund. Universities charging more than historic student contribution amounts will have to put 20¢ on the dollar of additional fee income into a scholarship fund to be spent on disadvantaged students. Prestigious universities could have so much money in this fund relative to the small number of disadvantaged students who meet their academic entry criteria that higher education will be cheaper than now for these students. However, given the weak evidence for a real problem to be solved here, I have my doubts about whether it is fair to ask some students to subsidise other students who, over their careers, are unlikely to be disadvantaged.
The demand-driven funding system and the proliferation of law schools have resulted in an oversupply of law graduates, made worse by tough market conditions. Is it reasonable for law students to expect that they will one day work as lawyers, or does a legal education merely provide them with general, transferrable skills?
The 2011 census found that by their late 20s about half of law graduates were working in law-related jobs. As the question suggests, increased numbers of law graduates and low recruitment in the legal profession mean that this proportion will go down. Prospective students need to take this into account when choosing a course. That said, the key thing is to consider your realistic options. If your academic strengths are on the humanities side, law graduates have much better chances of getting a professional or managerial job by their late 20s than do arts graduates.