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Two steps forward, one step back: price flexibility with rigid quotas

By Andrew Norton - posted Wednesday, 25 June 2003


The total number of places funded is less than total demand from eligible applicants, creating "unmet demand". Since 1998, universities have been able to offer full-fee paying places to Australian undergraduates when they have filled all their HECS-liable places. Such students may not exceed 25 per cent of domestic enrolments in any course. However, there are no limits on the number of overseas students.

For students: Since 1989 Australian undergraduates have had to pay part of their education costs under HECS, and most have always paid a union or amenities fee.

Current HECS charges range from $3,680 to $6,136 a year, depending on degree, and amenities fees range from $100 to $559, depending on university and enrolment status. HECS charges are set by the government and go to the government. Students can pay up-front and get a 25 per cent discount; about one in five take this option. All the others defer payment, and their debt is indexed to inflation.

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They must begin repaying when their earnings reach $24,635 per annum, paying at that point 3 per cent of their total income. Repayment rates reach 6 per cent of income for those earning $43,859 or more. Undergraduates taking full-fee positions receive no loans from the Commonwealth. However, postgraduates taking full-fee positions can get a loan under the Postgraduate Education Loans Scheme, known as PELS. PELS debts are merged into HECS debts, and indexed to inflation.

Dr Nelson's proposed funding system

For universities: The number of public universities would remain a matter for government, but other accredited higher-education institutions could access a student loan scheme. All institutions must comply with quality tests.

The number of students in non-full-fee places (HECS-HELP students) is more strictly controlled than before. The government will "negotiate" a discipline mix with each public university, and set a target total number of students. For HECSHELP students, the government will pay universities a subsidy per student based on discipline.

Regional campuses will receive additional subsidies, as will universities which meet governance, productivity, and teaching quality criteria. The university can then charge a fee in excess of whatever subsidies they receive, ranging from $0 to 30 per cent above existing HECS levels. The university will receive this money, either directly from the student or via the government, which will pay on behalf of the student, with the money to be recovered through the tax system. However, universities will no longer be able to charge compulsory fees for costs "not directly related to course provision".

If universities exceed their quota number of students by more than 2 per cent they will be penalised instead of receiving $2,700 a student. However, once universities meet their target number of HECS-HELP students, they can enrol full-fee paying (FEES-HELP) Australian undergraduates. The numerical limit on these students will be extended from 25 per cent of all domestic enrolments to 50 per cent. Fees for these students will be set by the market, but a $50,000 loan ceiling may serve as a de facto price cap. As before, there will be no upper limit on numbers or fees for overseas universities.

For students: Students will pay a fee set by the university. In the case of students within the university's HECS-HELP quota, they will benefit financially from a subsidy of between $1,509 and $16,934, based on discipline. However, most students can benefit from subsidies for only five academic years in a new "learning entitlement" restriction.

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HECS-HELP places also have a price cap of 30 per cent higher then existing HECS levels. In courses with high subsidies, prices may go down at some universities. Given cost pressures on universities, average fees will almost certainly be higher.

The new restriction on non-course related charges could reduce costs, but also services. Students who pay tuition fees up front will get a discount of 20 per cent. Students who defer and take out a loan from the Commonwealth will effectively pay a surcharge of 25 per cent, plus their debt will be indexed to inflation, as happens now.

The strict quotas mean that the number of HECS-HELP places may be lower than the number of HECS places currently available. However, the number of full-fee places available under FEES-HELP will increase to a maximum of 50 per cent of domestic students in the course.

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This is an edited extract from an Issues Brief published by the Centre for Independent Studies. Click here to download the full text (pdf, 132kb)



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About the Author

Andrew Norton is a research fellow at the Centre for Independent Studies and Director of the CIS' Liberalising Learning research programme.

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