Economist warns of overpriced study

May 28, 2004

Australian universities cannot be trusted with the freedom to set their own tuition fees, according to the economist who designed the Higher Education Contribution Scheme 15 years ago.

Bruce Chapman, director of the Centre for Economic Policy Research at the Australian National University, says in his report into Australian higher education funding that allowing higher education institutions to fix fees will have a profound impact on poor students seeking access to university.

He says that students who enrol may end up paying more for their degrees than it costs the universities to deliver them.

Professor Chapman is particularly critical of the government's move to allow universities to add top-up fees to the charges imposed under Hecs next year, and to set their own fees for students willing to pay the full tuition cost.

He also questions the introduction of a Hecs-type loans system that will offer a maximum of A$50,000 (£19,600) to those prepared to pay full fees.

Professor Chapman says some students will exhaust the loan limit before graduating and might be forced to drop out.

Yet current indications point to a rapid rise in the charges universities impose and a substantial increase in the number of students taking out loans. The proportion of costs then borne by students will be very large, Professor Chapman predicts.

"There is no case for allowing universities complete price flexibility," he says. "Over time, it will result in a significant minority of students accumulating a large and arguably inequitable debt reflecting prices set in a way that is unrelated to the fostering of competition."

Although providing loans is an improvement over current arrangements, where full-fee students have to pay upfront, he says universities should not be allowed this level of price discretion.

Professor Chapman says there are compelling reasons to scrap the system before its introduction. He proposes instead that the government set a limit on the fees universities can charge while giving institutions greater flexibility in deciding the number of places to be offered.

The fees limit should be set at the same level as Hecs so all students taking the same course would pay the same charge. This way there would be far less "rent-seeking" behaviour by institutions.

Under current plans, universities will be able to charge full-fee students whatever they chose.

Professor Chapman doubts that universities will be influenced by the cap on loans. He implies that vice-chancellors will not be concerned about the debt students incur because they will have no idea how much the students already owe.


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