Sting in the tale of a magic formula

June 28, 1996

Student loans injected a dose of financial reality into Australian universities. Linda Christmas look at the results.

Most people in Australia remember the fuss. There were protests and placards and end-of-the-world-as-we-know-it speeches. That was six years ago. In January 1989, the Higher Education Contribution Scheme was introduced and all undergraduates now have to pay 20 per cent of their course cost. Most students now have to fund their living expenses as well.

It was not the first time. Tuition fees had existed before - 20 years ago but under a Liberal government. But Labor had signalled the end of its commitment to free education two years before by introducing a Pounds 125 so-called administration enrolment levy. The government needed money to expand higher education and HECS was the source.

The pill was made palatable by offering students a reasonable payback deal. The loan would not be repaid until students were employed and earning national average, currently around Pounds 14,000 (Pounds 7,000). Only 3 per cent of earnings would be deducted, rising to a maximum of 6 per cent. The debt was tax free but index linked. Those who wished to pay yearly in advance were offered an attractive 25 per cent discount. Means-tested grants up to a maximum of only Pounds 60 a week are available for the less well-off (whose parents' joint income is less than Pounds 25,000). Some 45 per cent of students are eligible for Austudy payments and part of the maintenance grant can be traded in for a loan worth twice as much, but which has to be repaid later - via taxation.

The initial fuss soon subsided, and with surprising speed Australians convinced themselves that system was the fairest and the best, a model for the rest of the world. During a recent visit by Eric Forth, the British higher education minister, an article in The Australian newspaper announced: "UK looks to HECS solution in funds crisis."

But behind the hype there are doubts and there are critics. HECS was designed to do three things: improve access; improve equity and fund expansion. Opinions vary on its success at this.

A sample of undergraduates at the University of Queensland, a wealthy campus in Brisbane and postgraduates at Wollongong, a working-class city south of Sydney, said that they wished that tuition was free. Access, they felt, was no longer a problem; the university door was wide open - too open. First-year lecturers sometimes had 400 students and the drop-out rate was 25 to 30 per cent.

If students have accepted HECS, the National Union of Students has not. Education research coordinator Simon Kent said: "The system was introduced to improve access and equity. I am not convinced that we have solved the equity problem. The low income group is still under-represented.

"Access has improved. Between 1980 and 1994 there has been a 65 per cent increase in student numbers, but this has devalued the first degree. It is no longer seen as a passport to a job. Students now feel that they need postgraduate qualification to ensure a job," he said.

Undergraduate numbers have been increasing steadily since the early 1980s when they stood at around 200,000. For the first three years after HECS was introduced, the numbers leapt by around 35,000 a year. The increase continues each year but at pre-HECS levels. There are around half a million undergraduates. Postgraduate enrolments have also increased steadily between 1989 and 1994. Enrolments for higher degrees (course work) has risen from 9,000 to 37,000; for higher degrees (research) from 12,000 to 31,000; and for postgraduate diplomas from 25,000 to 48,000.

But only 15 per cent of those commencing university courses come from familes of low socioeconomic status and the percentage has remained static - indeed it dropped during the height of the recession.

Mark Harrison, from the department of economics at the Australian National University in Canberra, argues that to find the money to help disadvantaged groups, the general subsidy to the rest should be curtailed. The HECS loan should not be interest-free, but charged as the same rate as mortgage repayments. He believes maintenance grants should be converted to loans.

Did HECS fund expansion? Only partly. Unpublished research by Simon Marginson, of the University of Melbourne's Centre for the Study of Higher Education, shows that ten years ago 90 per cent of institutional funds came from government. Now it funds only 60 per cent, HECS provides just 13 per cent leaving a gap.

No one denies that HECS has helped. It adds Aus$1.2 billion to the government's Aus$5 billion contribution and means Aus$65 million for Sydney University, for example. But there is still a funding gap, which has largely been filled by fees from postgraduate and international students. Together they contribute around 12 per cent to the total. The growth in foreign student numbers is staggering: in 1987 there were a mere 1,000 fee-paying international students in higher education. Today there are about 50,000 and nearly half are postgraduates.

HECS decidedly marked the moment in Australian higher education when the government started remodelling the funding system along the lines of the United States. It also marks the moment when universities were forced to become more efficient and entrepreneurial.

In future HECS may well increase to 30 per cent of tuition costs; some attempt may be made to layer fees so that students pay more towards the more expensive courses. The cheapest undergraduate courses cost around Pounds 3,000 and year and the most expensive Pounds 7,000. There may also be attempts to speed up repayment: it now takes on average 15 years for students to repay loans. It is estimated that some 11 per cent of male and 47 per cent of female borrowers never fully repay their debts. HECS without the hype shows that magic formula for funding remains as elusive as ever.

Linda Christmas is senior lecturer in journalism at the City University. She visited Australia on a fellowship awarded by the Robert Menzies Centre for Australian Studies.

For those repaying HECS, the biggest complaint was that at first the amount was calculated at the end of the tax year and had to be paid in a lump sum. It is now deducted weekly along with tax.

However, they realised that for the moment at least, they were paying a small part of the whole. Contributions are now entrenched, a part of life, like income tax itself.

So HECS alone has not funded the expansion of higher education, nor has it improved equity. Access at undergraduate level has improved, but the goalposts have been moved so that many now feel they need postgraduate qualifications in order to secure jobs.

They were confused by the loan being indexed for inflation. Most thought they paid interest on the average Pounds 1,200 they pay annually Although all students pay the same each year, around Pounds 1,200 no matter what course they are studying, some felt certain that the science students paid more because they required more credits. Those whose parents were paying the bills emphasised how lucky they were; those paying for themselves made a virtue out of it by saying that they could not stand the pressure that parental involvement would entail. Suggestions that the contribution might increase to 30 per cent brought silence.

"Universities are now allowed to charge up front fees for postgraduates. Some subjects such as law and medicine are now being pushed into postgraduate arena. Why now after 100 years do you think this is happening? It is so that the universities can charge. All this is certainly a deterrent to the less well off. Improved access has done little more than redefine the elite band."

In fact some said the door was to too open and that many courses accepted students with low marks (access to courses is determined by the marks achieved at the end of secondary schooling) and that some students opted for university because they did not know what else to do, or because their friends were going. This affected . .

This is now considered not to be a problem of access, but of cultural change which needs to be tackled at secondary level with financial and social support. The government already gives means-tested grants to encourage students to remain at school until year 12 (17 years old).

The views of ex-students who had started paying back their loan, current students, union representatives, vice chancellors and academics vary about how it has met these aims. Some were wholehearted, most were resigned, and those evaluating the impact of the scheme were among the most critical.

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