Election 2016: Higher Education

This election has been notably devoid of Federal frontbenchers getting assaulted on university campuses (there is, of course, still a day to go). That notable omission notwithstanding, Higher Education is as much an issue in 2016 as it has ever been. What follows is a summary of the policy positions of the Coalition, Labor and the Greens.

First, though, some context.

At present, most Australian students who attend Australian universities use the HECS-HELP system. Anybody who has used HECS-HELP will be familiar with the mechanics: instead of paying upfront for degrees, students take on an interest-bearing loan from the government. Once their annual income hits $54,000, they start to repay that loan, in instalments.

While this mechanism might be what most people think of when they talk about HECS, it’s actually only one part of the system. The government covers a certain portion of the cost of a degree out of its own pocket (in other words, not subject to repayment by the student). The HECS-HELP debt the student pays back is only the remainder, the portion not covered outright by the government. Although contributions vary from course to course, the government currently contributes about 60% of the cost of degrees, and HECS-HELP accounts for the remaining 40%.

There are also government-imposed limits on how much universities can charge local students. Again, these caps vary by course. The caps do not apply to international students, and as such universities can and do charge higher international student fees.

In its 2014-15 budget, the Coalition sought to change this last fact. They proposed that fees for local students be deregulated; that is, that universities be allowed to charge local students whatever they saw fit. The Coalition expected to receive about $18bn in savings from this change (partly as a result of the simultaneous 20% funding cut they intended to introduce). The reaction to the policy, however, was strongly negative (cue frontbencher assault), and, having failed to pass it through the Senate, the government abandoned it.

Crucially, though, it didn’t abandon the $18bn in savings. That money, which had been expected just beyond the budget’s four-year horizon, was left there, even though the policy that was generating it no longer existed. As the date where that $18bn was supposed to kick in draws closer, parties devising higher education policies face a dilemma: either they will have to write off the $18bn, which will make the budget deficits they promise look even worse, or they will have to come up with some way to get the same savings without pursuing electorally-unpopular deregulation.

Quite the quandary! Let’s see what they came up with.

Coalition

The Coalition doesn’t have an official higher education policy. The 2016-17 budget made little mention of the subject. Instead, the Education Minister Simon Birmingham released an Options Paper canvassing a range of potential policies for consideration for after the election.

Although nominally non-committal, the Options Paper gave clear indication of the government’s priorities in the sector. This, in conjunction with several public statements from Senator Birmingham and Prime Minister Malcolm Turnbull, gives substantial credence to the following conclusions about the Coalition’s policy:

• The 20% funding cut to universities will remain.
• The portion the government pays upfront in HECS may be lowered from 60% to 50%.
• The income threshold for HECS repayment will be lowered from $54,000 to something close to $42,000, as recommended by the Grattan Institute’s Andrew Norton to combat insufficient HECS repayment.
• An alternative solution to insufficient HECS repayments, that of collecting HECS based on household, not individual, income (so that those from wealthy families who choose to work part time and so earn little will still have to repay), will be considered by the Coalition, but is not understood to be a priority.
• The exemption on HECS repayment from the estates of deceased graduates will be removed.
• Interest on HECS debt will be marginally increased.
• An upfront fee of something close to 20% will be imposed on those wishing to take out a HECS loan (this would replace the previous 20% discount for those who chose to pay HECS upfront, a discount which was recently removed).
• Caps on domestic fees might in some cases be raised.
• Deregulation will be allowed for designated ‘flagship’ courses, which will be determined by as-yet unclear criteria, but will have to be deemed ‘innovative’. The Prime Minister confirmed this policy in the third Leaders’ Debate.

Labor

Although the 20% funding cut included in the Coalition’s deregulation policy was actually originated under Labor (Julia Gillard introduced it to pay for Gonski schools funding), Labor announced in September of last year that it would now oppose the cut, and instead promises to increase funding to universities by $14bn.

Labor is also opposed to fee deregulation, arguing that it will result in a substantial increase in the cost of higher education for students (the slogan ‘$100k degrees has been a feature of the campaign). Bill Shorten went as far as to categorically rule out any form of deregulation.

However, faced with an impending $18bn blowout, Labor has been forced to acknowledge that it will match the Coalition’s plan to increase the interest on HECS debts and will also lower the HECS repayment threshold from $54,000 to $50,000.

Of course, although that will generate some savings, it doesn’t amount to $18bn. Labor’s Higher Education policy is accordingly part of the reason it been forced to admit that its budget deficits in the short- to medium-term will be larger than the Coalition’s.

Greens

The Greens have made no attempt to reconcile the $18bn dollars, nor do they have a fully-costed policy for universities. Nevertheless, they share Labor’s opposition to fee deregulation and to the other cuts and savings measures proposed by the Coalition, and they support a 10% funding increase student contributions.

The key point of difference between the Greens and the major parties is over Student Start-Up scholarships. Start-Up Scholarships, which allow students from low-income backgrounds to purchase textbooks and other study resources, were changed under the Coalition government from a scholarship grant to a HECS-style loan, such that low-income students will now have to pay back the money they spend on textbooks and study resources once they earn enough income. Labor supported this change, but the Greens opposed it, arguing that it puts financial pressure on lower-income students. The Greens promise to reverse the change, from a loan back to a grant.