High-brow benefits in allowing fee free-for-all

March 24, 2000

Can Australia pick the best of the US university funding system and avoid the worst? asks Simon Marginson

In Australia, debate over the deregulation of undergraduate tuition fees has continued for a decade. The issue stays on the agenda because public funding is falling, strong universities stand to gain and there have already been a number of full-fee places since 1986.

Non-government funding plays a big role in Australia but is a complex mix of commercial funds and subsidies. Only 52 per cent of revenue came from government in 1998. One student in six pays university-set tuition fees. Twelve per cent (83,047 in 1999) are full-fee paying internationals, generating 8.3 per cent of all income. Half of postgraduates pay fees as do professionals upgrading skills.

Home undergraduates are protected from market forces. Undergraduates contribute an average Pounds 1,683 per full-time year (Pounds 1,336-Pounds 2,226 depending on course) in the form of deferred payments under the Higher Education Contribution Scheme.

This is not a fee but a charge paid to government. The HECS debt accumulates, and is indexed to inflation. Repayment is through the tax system according to income, commencing only when income reaches Pounds 8,359 per year. In effect the HECS functions as a low-interest loan, with minimum repayment pressure.

The HECS is a politically painless method of raising private spending. It is higher than the standard British fee, but below the average four-year course fee in American state universities (Pounds 2,087).

It is the only charge so far devised that does not significantly discriminate against students from poor backgrounds when they enter higher education. Poor students know that if they are still poor after graduation they will not have to repay HECS.

Though tampering with HECS-based financing is politically risky, many in the LiberalNational Party government support deregulation, as do some vice-chancellors. The most vocal are Alan Gilbert of the University of Melbourne and Gavin Brown from the University of Sydney, the two institutions that stand to gain the most.

Since 1996 universities have been allowed to charge fees to domestic undergraduates provided the number of fee payers does not exceed 25 per cent of all domestic students on the course. In 1998, 11 of the 36 public universities provided such places, but on a small scale and mostly in elite courses such as law. The following year there were 2,000 such students, 0.4 per cent of undergraduates. Fee-based places earned less than Pounds 4 million in 1998, half at the University of Melbourne.

However, the scale of the experiment is too small to test deregulation. No doubt most students unable to enter the course of their choice and able to afford fees, opt instead for their second preference, on a HECS basis.

The unknown is how far a high fee regime could be extended. It is not just a question of "breaking dependence on the state" but of private capacity. If private contributions fell short of expectations, deregulation could trigger the impoverishment of the system. Supporters argue that on present trends that is going to happen anyway, and a few world-class universities are better than none.

Most middle-ranking and post-binary universities fear that deregulation and high fees in elite institutions would be followed by further declines in public funding; and a new division between high-fee and low-fee courses.

This would crystallise into a binary divide of high-fee and low-fee universities. High fee might come to mean high value, that is, high returns on investment and high quality. Ditto low. In the United States, the low-fee state universities are a relatively strong sector. They are erecting new buildings and their libraries still receive the latest books and periodicals. This suggests that in a deregulated system, low fee does not have to mean low quality.

However, all US universities benefit from phenomenal levels of support from foundations, alumni and corporate donors. In high-fee universities, this generates the scholarships needed to offset the tuition costs of many students, extending the territory of the high-fee market further than would be the case in Australia. In state universities, private income is less spectacular, but it is still important. Also, US public funding per student is higher than in Australia and the UK, a crucial part of the equation.

To go down the path of tuition deregulation means a more differentiated higher education market exhibiting extremes of quality. But the extent of additional private monies, the future of public funding and the net effect on total university income is unknown. The worst case scenario would be to gain the defects of the American system without the compensating mechanisms. 'High fee might come to mean high value, that is, a high return on investment and high quality. Ditto low' Simon Marginson is director of the Monash Centre for Research in

International Education.

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