The difference between students-as-investors and students-as-clients

I have so far found that the longer a student spends in higher education the lower their returns on investment are likely to be.

This is a far cry from the days of a qualification is a guarantee of a job. It could be in fact that a qualification will come instead of a job. For example, the chart below shows how ex-students currently aged between 20 – 39 who have spent 6 months in a diploma course have almost the same employment outcomes as students who invest 3+ years in higher education. 

Labour force participation status of higher education and diploma & advanced diploma holders, aged 20-39, 2011. Source: Norton, A. & Cherastidtham, I., 2014, Doubtful debt: the rising cost of student loans, Grattan Institute, p.23.

So let’s look then at what an investment-savvy education choice might look like.

For starters it would show the historical performance of a course in delivering returns for its graduates. Where are all of the graduates now (not just the star ones they put on the front of the glossy brochure)? What are they all working in? How did their course provide returns for them in their mobility within the labour market? Have they been able to earn back the money that they invested through spending years and mental effort in their course to develop a meaningful professional life?

Secondly, it would show how the investment managers – in this case the particular teaching and academic staff – are informed of the way that the learning experience that they are providing is giving returns to its investors in the labour marketplace. This means looking at things like student expectations, recruitment, mobility, satisfaction and retention from beyond the confines of the university system with a primary view to delivering returns to the investors. Oh and students aren’t the only investors here.

The Australian government is another investor in the higher education sector, a sector which currently generates around AUD$16 billion a year and is Australia’s fourth largest export earner.

But according to a Grattan Institute report, in 2014 the Commonwealth estimated that by next year the value of unpaid HECS/HELP loans on its books will be over $13 billion. This means that there are a lot of alumni out there that are not earning over the basic threshold of $51,309/year in the Australian tax jurisdiction. While some of these students have either gone to or returned overseas to find a labour market that pays them for their skills, as of the 1 January this year the ATO is now on a mission to hunt those students down and make them pay.

Although it is impossible to ascertain just how many Australian alumni may be attempting to gain returns on their education investment in this way, economists at the ANU estimate that that a third of Australian citizens aged between 20 and 30 (the main HELP repayment years) who left Australia long-term in 2004 were still away after six years.

While the proportion of graduates working overseas according to the Beyond Graduation Survey is estimated to be around 10 per cent of graduates who work overseas for at least one year in the first 3.5 years after graduation, this figure needs to be understood as an estimation made by economists on their somewhat obscure datasets. In my own questioning of students about their future pathways during my time teaching in universities over the last few years, there have been classes where over 80% of my students raised their hands when asked if they were planning on working overseas after graduation.

In the meantime, the government continues to hand out increasing numbers of loans to students, even while knowing that at least 17% of all new loans are unlikely to ever be repaid. Such is the demand-driven system.

So returning to the original question of this post: What’s the difference between a client and an investor in the higher education sector? Satisfied clients are what universities are trying to see. But gainful investors are what students and the government are striving to be.