Increased fees deserve a second look

What’s making the rounds of student activism recently? The notion that Australia’s Group of Eight (Go8) universities have abandoned students’s interests in a submission to the current federal government higher education review. The National Day of Action, concurrently organised in March by the National Union of Students across Australian universities, will target this, among other cuts in the university system.

But are students mistaking good policy for ideology? The notion that students enrolled in lucrative degrees should pay more for their degrees deserves greater scrutiny and sympathy.

It is useful to examine the submission from the Go8 to the Kemp & Norton review to understand its actual recommendations, instead of a garbled version filtered through Facebook. The facts are: The Go8, their hand forced by lean financial situations, have proposed that students in degrees with high projected private financial returns should pay more for their education. Their proposal is to deregulate the cost of such degrees, from the set $11,725 at present. Greater money would allow these courses to be taught with more resources and a higher level of quality. Considering these degrees are only federally funded at a level of 16.5 per cent, this would not be as large a change in the repayments for these students.

The facts remain that around 50 per cent of university students come from the top 10 per cent  of wealthiest households (measured by the socioeconomic status formula) in Australia. The bottom quarter of students represent only 14.8 per cent of undergraduate students. Demand-driven funding has done little to improve this situation. By contrast, it has increased numbers of students from high-SES backgrounds, but with ATARs below 60. The concentration of university entrants from wealthy backgrounds is even more notable in “prestige” degrees like law, commerce and accounting.

It is untrue that the Go8 proposal will lead to low-income students being shut out of these degrees. An original architect of the HECS scheme, Professor Bruce Chapman’s research shows that under the HECS model, intending students of such degrees are not statistically affected by a rise in fees. Provided that prospective students receive price signals of their future income, indicating that they expect to more than recoup the money they spent in obtaining their degree, they will continue to enter these careers in droves. And they do – we are seeing massive surpluses in law and commerce graduates that do not necessarily match the demand for such professionals.

The average male law graduate can expect to earn nearly $1.2 million more in their lifetime compared to the median male school-leaver. Considering the cost of an individual law degree amounts to just over $30,000, it is a lucrative investment a student makes in their future earning capacity. In the (statistically unlikely) event that such a student did not earn more than the repayment threshold ($51,309 p/a in 2014), they would not be required to repay their loan. It seems unjustifiable to hand out money to students who will soon be relatively very wealthy compared to the general population – at the expense of the very taxpayers who now find themselves, by comparison, impoverished. As the Go8 submission puts it, “The policy is socially regressive…and requires a larger relative contribution from those in the taxpaying community who are less able to pay.”

Even if economics comes out to show the enrichment of these graduates, does there remain questions of intergenerational equity? After all, in the days that our political leaders went to university, university was a negligible or lesser cost. While our principles of equity may be intuitively offended, this is only because, in the past, there were much more greater inequities of opportunity.

Excluding the economically unsustainable period of free university education, historically, higher education in Australia has been limited to the very wealthy, or a very narrow tranche of the extremely talented, with negative impacts for the intellectual and economic richness of our society. Most of us would conclude it is preferable that more of our young people are given the opportunity to invest in their own futures and to share in the benefits of higher education.

Ultimately, it is the government’s responsibility to extract the greatest possible benefit for the public from the investment of public money. This outcome is not achieved through subsidising investment – beyond what is necessary to incentivise courses of public benefit – in the employability of students who will end up being handsomely remunerated. Such costs merely come at the expense of those who couldn’t or didn’t seek higher education.

 Linda Ma [twitname]@lindicator[/twitname]