Australia’s demand-driven reforms need extending

David Kemp and Andrew Norton call for state cash for all institutions and pre-bachelor’s courses

May 1, 2014

Source: Elly Walton

The present system creates a financial incentive to proceed straight to a bachelor’s degree, a high-risk option for students with weaker school results

A few years ago, Australia boldly went where England is now planning to go, and removed most controls on university student numbers. It was a logical step given that most of the country’s population is now expected to continue their education after completing school. But as with any major reform, it is important to get the details right.

Late last year a new education minister, Christopher Pyne, appointed us to see how this demand-driven system was going and to make suggestions for improvements. We found it was meeting its key aims of increasing participation in higher education, especially for students from disadvantaged backgrounds, and responding to skills needs in the economy.

But in a few respects, the demand-driven system departed from the original vision of a fully open system. Diploma and sub-bachelor’s courses remained centrally allocated by the national government, whereas public universities could accept as many students on to bachelor’s degree programmes as they could recruit. Private colleges, along with state government-run vocational education providers, were excluded from the demand-driven system.

Together, these omissions limit the success of a mass higher education system.

In Australia, secondary school students are ranked in their age cohort according to their level of academic achievement. There is a clear relationship between these ranks and the time students take to complete a bachelor’s degree. Only half of lower-ranked students entering bachelor’s degree study complete their degrees within six years, compared with nearly 90 per cent of the most academically able students.

We found, however, that weaker school leavers could improve their academic performance by first taking a diploma course, often in a specialised “pathway college”. These colleges (most of which are private) focus on building students’ academic skills to the level needed for independent study on a bachelor’s-level course at a university.

Australia’s pathway colleges are a good example of how an open higher education system can innovate. They were established to help international students, whose numbers grew dramatically in Australia in the 1990s, but in recent years such colleges have increasingly been used by home students, too.

Unfortunately, the demand-driven system as it stands creates a financial incentive for students to proceed straight to a bachelor’s degree at a public university, a high-risk option for weaker students. Government tuition subsidies mean public universities often charge just half as much per year as private colleges.

So in our report, Review of the Demand Driven Funding System, we recommend opening up the system to private colleges and the state government-run vocational education providers.

To our surprise, the main university interest group, Universities Australia, has come out strongly against this proposal, arguing that there are quality concerns around non-university higher education providers.

Yet when the demand-driven system was introduced, Australia also created its first national higher education regulator, the Tertiary Education Quality and Standards Agency. In order to offer higher education qualifications, every higher education provider, public and private, must meet an extensive list of standards covering staff qualifications, facilities, governance, finances and many other things. These are high barriers to entering the system, and Teqsa has rejected a third of those that wanted to register as higher education providers in its first two years. Non-university higher education providers must also have courses individually approved by Teqsa.

This is a robust evidence- and standards-based approach that allows scope for innovation while minimising risks to students or the international standing of Australian higher education. Australia already has 135 higher education institutions outside the public university sector, including three private universities and overseas campuses of University College London and Carnegie Mellon University. These institutions have a large and growing body of higher education expertise.

Many universities have close relationships with pathway colleges, providing them with curriculum materials and premises, and guaranteeing successful pathway students entry to bachelor’s degree programmes. Other universities have established franchise arrangements, where the university provides curriculum and credentials but the non-university provider does the teaching.

The non-university higher education sector already has a track record of success, and has more expertise in running pathway colleges than most public universities.

Given all this evidence, should we continue to require students outside the public university sector to pay full fees, or should they receive the same entitlements as other higher education students? Our conclusion is clear. The current arrangements are unfair to students paying full fees and inefficient for the higher education sector as a whole, because they encourage students to embark on bachelor’s degrees prematurely.

If the demand-driven system is to meet the needs of a wider range of students, it must be extended to cover diploma courses and all types of higher education provider.

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