Should students pay different fees for university courses?

Vice-chancellors in Australia are calling for the government to reform how student fees and funding rates are set for different courses.

University heads say the current system is outdated, too complicated and filled with anomalies.

Students currently pay higher fees for courses that lead to jobs with typically higher wages. But not all students find, or want, a job that’s within the same area in which they studied. So is this fair? Should all students instead pay the same amount for their university degree? Two education experts debate.

Students should pay different amounts for different courses

Andrew Norton says:

Since 1997, Higher Education Contribution Scheme (HECS) fees or student contributions have differed between disciplines.

There are three different annual student contribution levels – A$6,256, $8,917 and $10,440.

Which disciplines are allocated to each rate depends mainly on assumed future earnings, with the cost of the course playing a minor role.

So law and medicine, which typically lead to relatively well-paid careers, are priced at $10,440 a year. Nursing, education and arts, with lower likely future earnings, are charged at $6,256 a year. And in the middle we have disciplines such as computing, allied health and architecture at $8,917 a year.

The rates were changed from the previous flat HECS charge, of about $4,000 a year in today’s money, to raise revenue for the government.

It reduced its public subsidies by an amount equivalent to the additional student revenue, leaving universities in the same financial position as before.

The government’s savings target could have been achieved by continuing with a flat fee, which would have meant that nursing, education and arts students paid more and law and medical students paid less.

But within a generally progressive system of government revenue-raising, it’s not clear that flat fees would be better.

Fees that differ according to discipline create a rough relationship with capacity to pay – a doctor can afford higher fees than a nurse, for example, because usually a doctor earns much more over his or her career.

Differential fees are also more egalitarian in terms of the effort required to repay. Because hourly rates of pay vary between occupations, a flat fee would take someone on $30 an hour twice as much time at work to repay as someone on $60 an hour.

The current system helps even out total HECS-HELP repayment times to a median of about 10 years.

Current differences between the disciplines do need revising.

Engineering graduates on average earn more than business graduates, but business students pay more for their courses than engineering students.

A careful examination would probably reveal more anomalies like this.

A proposal to link Australian Taxation Office and Department of Education data could give us a much better understanding of how earnings differ between degrees.

We have had more than three rates of student contributions in the past and perhaps we should again, if patterns of graduate earnings show this is justified.

Problems with the detail of current student contributions do not mean their broad conceptual basis is mistaken.

Charging HECS by discipline from 1997 shared the financial pain of reduced public funding more fairly than a flat fee system.

If we need to reduce per student funding again, getting some graduates to pay more than others will continue as the more equitable option.

Students should pay the same fees for university courses

Conor King says:

Student payments should primarily reflect the value of acquiring a degree, with the government payment ensuring university revenue reflects significant differences in the costs of delivery by discipline.

The case is put on the basis of student charges continuing to be limited to set amount(s) by government.

A single charge need not be set at the highest current point. It just has to be sufficiently high that, when combined with the government’s subsidy, universities can provide the education students require.

As it happens, the English system has a single common maximum (£9,000), which most universities apply to all students. The US public systems generally do not vary the charge by discipline. For example, California has a system-wide tuition and fee charge of US$12,240.

What Australia, or any modern society needs, is people with a wide mix of capabilities and knowledge. We want people to fulfil their potential, in a world where future employment is expected to change constantly, with the detail of the degree rapidly losing relevance.

The funding and charging structure should encourage people to do so, through supporting each discipline neutrally, letting individual choice drive course selection.

Various arguments are made for why some subjects should cost more than others. Mostly, these build on rationales put forward in 1997 to justify the fee increase.

One argument is that if a course costs more, then students should pay more for it. Why is that? We are not talking about the difference between a Mercedes and a Toyota, where the Mercedes performs much better than the Toyota on most measures of a car, and presumably costs a bit more to produce.

An agricultural science degree is not better than an engineering degree, and an engineering degree is not better than a business degree. They simply represent different areas of learning, each intended to give their graduates a solid foundation to apply in employment and in their future lives.

We should not reward or punish a particular preference by charging more or less for pursuing it.

The reality of the current fee schedule bands is that there is little connection between the cost of the course and the charge.

Business and law are moderately low cost to provide, but students pay the same as the high-cost health disciplines of medicine, dentistry and veterinary science. Nursing and arts lie together in the lowest band.

The second argument is that cost should reflect future earnings.

The initial disciplines in the highest band – lawyers and doctors, dentists and vets – were there because the government knew few would care if those students complained.

In reverse, nurses and school teachers were in the lowest band to avoid opposition to setting different rates, even though both provide good starting salaries but with limited options for progression. Future earnings were a diversionary tactic.

What rationale there was reduced considerably when business and accounting were moved to the top band in 2008, charging many more students the highest amount.

We know that within any professions, some people will work in legal aid or public health while others will be the high flyers in the corporate world. More prosaically, the majority will be suburban solicitors, accountants or GPs.

Assumptions about what jobs there will be or who will be the big earners may or may not hold true in the future.

What is more certain is that income tax will continue to be weighted to higher earnings. The tax system and the protection of HECS-HELP repayments being tied to income are the response to differences in future earnings, charging people based on what they achieve rather than their initial choice.