University students to pay more as government looks to $2.8 billion saving

The Coalition government is seeking savings of A$2.8 billion from higher education over the budget period, in another attempt at a major shake-up of Australia’s university sector.

The cost burden on students will be increased and the income threshold for repaying their debt lowered. An efficiency dividend will be imposed on universities, in the package announced by Education Minister Simon Birmingham on Monday.

The average student share of fees will increase from 42% to 46%, with the average share paid by the government consequently falling from 58% to 54%.

The increase will be phased in, with a 1.8% rise each year from 2018 to 2021, cumulating to a 7.5% increase. Birmingham describes the extra impost on students as “marginal”.

This will mean increases in student fees over a four-year course ranging from $2,000 to $3,600.

The most a student will pay for a four-year Commonwealth-supported course will be $50,000. The maximum student fee for a six-year medical degree will be $75,000.

From July next year people will have to start paying back HELP loans when their income reaches $42,000. The current threshold is just under $55,000. Under last year’s Omnibus Act, it was set to go down to about $52,000 in 2018-19.

Birmingham said outstanding taxpayer-funded student loans had tripled since 2009 to more than $52 billion, and without changes one-quarter of that was expected to be unpaid.

A 2.5% efficiency dividend will be imposed on Commonwealth Grant Scheme payments to universities in each of 2018 and 2019.

The Coalition’s higher education policy has been in limbo since the Abbott government’s 2014 plan, containing a 20% funding cut for universities and fee deregulation, could not be passed through the Senate. That plan was announced in the budget – in contrast, the government this time is unveiling its changes before the budget, hoping that will make for a better sales job.

Birmingham is using a Deloitte report commissioned by the government to argue the sector is in a good financial position to bear the changes, saying it showed that between 2010 and 2015 the average costs per student increased by 9.5%, while funding to universities grew by 15%.

But Universities Australia said the report’s authors themselves cautioned that it could not be used to compare costs over time.

Speaking to an audience of university, business and student representatives, Birmingham said the reforms were “fair, reasonable and necessary”. The government gave “a guarantee that no student will pay a cent upfront for their higher education, students will no longer face fee deregulation and universities will not face a 20% cut to their funding”.

“When considered against total Commonwealth government payments of $74 billion to universities over the next four years, the impact of this $2.8 billion reform package is less than four per cent of the revenues to universities from taxpayers and students,” Birmingham said.

Loan repayments at the $42,000 threshold would be at a 1% rate; a new maximum threshold of $119,882 would have a 10% repayment rate. From July 2019, the thresholds would be indexed to the CPI, rather than average weekly earnings.

Birmingham said the new minimum repayment threshold was 20% above the full-time minimum wage. “At a repayment rate of just 1% an employee will pay back just $8 per week of the student loan.” The proposal was “fair, measured and modest”, he said.

The government will make part of university funding contingent on performance in certain areas. From January, 7.5% of a university’s Commonwealth Grant Scheme funding will depend on meeting requirements on admissions and financial transparency. From 2019 there will be requirements on student retention and success.

Birmingham also said the present system, with Commonwealth funding for sub-bachelor and post-graduate places had acted as a handbrake on innovation in courses.

From January, “public universities will be able to enrol students in a demand-driven, Commonwealth-supported place in sub-bachelor level diplomas, advanced diplomas and associate degree courses.

"This reform recognises the flexibility that shorter sub-bachelor courses have in meeting workforce demand. It will also allow more industry input to curriculum design to improve the job readiness of graduates.”

There will be funds towards “work experience in industry” units that are credited towards a Commonwealth-supported qualification.

“Study which is integrated with industry has significant benefits for the job readiness of graduates,” Birmingham said.