Piecemeal Australian reforms ‘could cost more than they save’

Lowering of student loan repayment threshold to recoup an extra A$20 million (£11.3 million) but cost A$19 million

January 11, 2019
Source: Getty

Experts have warned that piecemeal reforms to Australian higher education, ostensibly designed to cut spending, may end up costing more than they save.

Government spending plans reveal that the lowering of the student loan repayment threshold, delivering savings of A$20 million (£11.3 million) a year, will come with a price tag of about A$19 million annually.

Ministers also plan to “tax” higher education providers to help meet the expense of administering student loans, in a measure it says will reap about A$3 million a year – arguably not enough to cover the costs of implementing the levy, according to Conor King, executive director of the Innovative Research Universities mission group. “It is hard to believe the whole thing is worthwhile,” he said.

Other measures whose costs could exceed their benefits include the introduction of performance-based funding – involving potentially huge workloads for initial gains averaging less than A$2 million a year per university – and the addition of a “national interest test” to research funding applications.

University of Melbourne policy analyst Gwilym Croucher said that the changes, while motivated by a “reasonable desire” to improve the system, were occurring in the absence of a wider discussion about the underlying challenges of university funding.

“You’ve got to question the wisdom of piecemeal reforms,” Dr Croucher said. “Without a whole-system approach, any change risks being self-defeating, especially if the only goal is saving money.”

The new student loan repayment arrangements, approved by Parliament after months of wrangling, will require graduates to pay off their debts at a rate of 1 per cent a year when their incomes reach about A$46,000 a year – down from a A$52,000 threshold at present.

Former education minister Simon Birmingham said that the move would help the government recoup unpaid student debt. But analysis by the Grattan Institute concluded that, while the measure would recover money from some graduates not currently required to make repayments, others would pay less.

This is because the proposal includes raising the income thresholds for repayment rates ranging between 4 and 7 per cent a year. While the Grattan analysis concluded that the move would still harvest an extra A$20 million a year, higher education programme director Andrew Norton said that estimate was optimistic.

“Very small variations in the data or model could shift that into negative,” he said. “It’s quite possible that the net savings [will be] close to zero.”

Moreover, in a political deal to secure support for the changes, the government eliminated a 25 per cent loan fee for students at private universities – a measure widely regarded as justified, but that will cost the government A$74 million over four years.

Performance funding was also being introduced in the absence of a “big idea or goal”, according to Margaret Sheil, vice-chancellor of Queensland University of Technology. “It’s a lot of work for relatively small gains,” she said.

Colin Stirling, vice-chancellor of Flinders University, said that the “absurd” proposal exemplified the government’s acrimonious relationship with universities. He said institutions risked being penalised for producing graduates who started their own businesses instead of bagging full-time jobs.

“A student who works part-time, to get the company up and going, could be viewed as a failure,” he said. “If that’s a failure, it’s the sort of failure to which we should aspire.

“These performance measures will add another crushing layer of bureaucracy and conformity [and] will absolutely ensure we’re all just doing the same thing.”


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