Higher education in policy paralysis after Budget 2016 – what now?

Higher education is in policy paralysis. This year’s budget set us back to 2014.

In the 2014 budget, the government announced that fees would be deregulated. While this was a toxic political move, it wasn’t toxic enough to be dumped from the 2015 budget, which was another lost year for higher education.

While, this year, the government finally ruled out full fee deregulation, it is still contemplating uncapped fees for some courses in its higher education consultation paper. It has also dropped all the worthwhile proposals from 2014, such as extending the demand-driven system to sub-baccalaureate programs.

Cuts and government values

As expected, the government added cuts of A$152.2 million over four years, or 22%, from the Higher Education Participation Program – which funds universities to bring in students from low socioeconomic backgrounds. It also cut $20.9 million over four years by closing the Office for Learning and Teaching, which supported scholarship on major improvements to teaching and learning.

All that remains is $4.5 million a year for good teaching awards. As valuable as these are, they recognise individual performance rather than disseminate good practice throughout the sector.

While the government has relegated the improvement of teaching and learning to universities, it has increased funding for co-operative research centres by $46 million, or 32%, by 2020.

This reinforces the view that while teaching and learning is universities’ most important role, in national policy, it is very much a second priority to research.

Running, jumping, standing still

Rather than announcing any changes, the government released a consultation paper on proposals for tackling many of higher education’s unresolved issues.

While the sector generally welcomes the belated consultation, as the government is moving the election forward to July 2, it doesn’t have any time before the election to progress any of the options it canvasses.

The government, from Tony Abbott to Malcolm Turnbull, has spent a whole term in higher education policy paralysis.

The reform options being discussed – deregulating fees for some courses

Nonetheless, the Coalition is still contemplating uncapped fees, initially for only some courses that would be proposed by universities.

The government’s consultation paper states that it is:

… committed to providing universities with additional flexibility to innovate, differentiate themselves and offer students more choice and higher quality offerings.

The paper suggests that giving:

… universities flexibility to attract additional revenue in courses where they have developed particular expertise would enable them to innovate and differentiate themselves and pursue their individual vision for higher education excellence.

While the government adopts from the 2011 higher education base funding review the term “flagship courses” for programs with uncapped fees, its proposals are markedly different from those recommended by that review.

It recommended that funding for flagship programs be increased by up to 50%, with the additional funding “met through a matched increase in both government and student contributions”.

In contrast, the consultation paper proposes that government funding for flagship programs be cut and that fees be uncapped and monitored by the Australian Competition and Consumer Commission, or be approved by an independent body.

If they don’t cause too many problems, the flagships will become a fleet of deregulated fees. The government will expose itself to similar problems that arose from 2009 when the then-Labor government relaxed conditions for the loan program for vocational diplomas, called VET FEE-HELP.

As successive governments found in trying to curb the runaway explosion of VET FEE-HELP loans, doubtful debt and scams, withdrawing concessions is much harder than granting them.

If a re-elected Coalition government manages to uncap fees for some programs from 2018 there should be a simple but strong mechanism for returning fees to their caps should the experiment go as badly wrong as many fear.

Ideas for how to reduced student loan debt

The higher education consultation paper has several proposals to reduce the cost to government of the Higher Education Loan Program (HELP):

• introduce a loan fee for all HELP loans;

• lower the repayment threshold from $54,126 to around $40,000–45,000;

• introduce a higher contribution rate for high-income earners;

• index repayment thresholds to a lower index;

• introduce a household income test for HELP repayments;

• restrict the availability of HELP loans or Commonwealth subsidies to those who have left the workforce permanently;

• recover outstanding loan amounts from deceased estates; and

• remove the HECS-HELP benefit, which reduces HELP repayments for education, nursing and other graduates working in a related occupation.

Before the budget, the government released a discussion paper on redesigning VET FEE-HELP, which proposes several measures to end the scamming of the program.

As a result of these measures, and the withdrawal of the decision to uncap fees, the government estimates that the proportion of new debt not expected to be repaid in 2017 is 18%. This is markedly down from the 21% estimated in last year’s budget and the 23% in the 2014 budget.

Gavin will be on hand for an Author Q&A between 11am and noon AEST on Thursday May 4, 2016. Post any questions you have in the comment section below.