Politics

Budget 2017: University students to pay more as government looks to make $2.8 billion in savings

The Conversation /

Simon Birmingham

Education Minister Simon Birmingham. Source: AAP/Mick Tsikas

By Michelle Grattan, University of Canberra

The Coalition government is seeking savings of $2.8 billion from higher education over the budget period, in another attempt at a major shake-up of Australia’s university sector. The Conversation

The cost burden on students will be increased and the income threshold for repaying their debt lowered. An efficiency dividend will be imposed on universities, in the package announced by Education Minister Simon Birmingham on Monday.

The average student share of fees will increase from 42% to 46%, with the average share paid by the government consequently falling from 58% to 54%.

The increase will be phased in, with a 1.8% rise each year from 2018 to 2021, cumulating to a 7.5% increase. Birmingham describes the extra impost on students as “marginal”.

This will mean increases in student fees over a four-year course ranging from $2,000 to $3,600.

The most a student will pay for a four-year Commonwealth-supported course will be $50,000. The maximum student fee for a six-year medical degree will be $75,000.

From July next year people will have to start paying back HELP loans when their income reaches $42,000. The current threshold is just under $55,000. Under last year’s Omnibus Act, it was set to go down to about $52,000 in 2018-19.

Birmingham said outstanding taxpayer-funded student loans had tripled since 2009 to more than $52 billion, and without changes one quarter of that was expected to be unpaid.

A 2.5% efficiency dividend will be imposed on Commonwealth Grant Scheme payments to universities in each of 2018 and 2019.

Read more: Four things to expect in the 2017 federal budget

The Coalition’s higher education policy has been in limbo since the Abbott government’s 2014 plan, containing a 20% funding cut for universities and fee deregulation, could not be passed through the Senate. That plan was announced in the budget — in contrast, the government this time is unveiling its changes before the budget, hoping that will make for a better sales job.

Birmingham is using a Deloitte report commissioned by the government to argue the sector is in a good financial position to bear the changes, saying it showed that between 2010 and 2015 the average costs per student increased by 9.5%, while funding to universities grew by 15%.

But Universities Australia said the report’s authors themselves cautioned that it could not be used to compare costs over time.

Speaking to an audience of university, business and student representatives, Birmingham said the reforms were “fair, reasonable and necessary”. The government gave “a guarantee that no student will pay a cent upfront for their higher education, students will no longer face fee deregulation and universities will not face a 20% cut to their funding”.

“When considered against total Commonwealth government payments of $74 billion to universities over the next four years, the impact of this $2.8 billion reform package is less than four per cent of the revenues to universities from taxpayers and students,” Birmingham said.

Loan repayments at the $42,000 threshold would be at a 1% rate; a new maximum threshold of $119,882 would have a 10% repayment rate. From July 2019, the thresholds would be indexed to the CPI, rather than average weekly earnings.

Birmingham said the new minimum repayment threshold was 20% above the full-time minimum wage. “At a repayment rate of just 1% an employee will pay back just $8 per week of the student loan.” The proposal was “fair, measured and modest”, he said.

The government will make part of university funding contingent on performance in certain areas. From January, 7.5% of a university’s Commonwealth Grant Scheme funding will depend on meeting requirements on admissions and financial transparency. From 2019 there will be requirements on student retention and success.

Birmingham also said the present system, with Commonwealth funding for sub-bachelor and post-graduate places had acted as a handbrake on innovation in courses.

From January, “public universities will be able to enrol students in a demand-driven, Commonwealth-supported place in sub-bachelor level diplomas, advanced diplomas and associate degree courses.

“This reform recognises the flexibility that shorter sub-bachelor courses have in meeting workforce demand. It will also allow more industry input to curriculum design to improve the job readiness of graduates.”

There will be funds towards “work experience in industry” units that are credited towards a Commonwealth-supported qualification.

“Study which is integrated with industry has significant benefits for the job readiness of graduates,” Birmingham said.

Michelle Grattan is a professorial fellow at the University of Canberra

This article was originally published on The Conversation. Read the original article.

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  • Jarrah3

    When will any government finally have the guts to start repayments 6 months or a 1 year (at the most) after the degree completes or a student doesn’t enroll for the following year (‘drops out’)? Even if the requirement is $10 per week automatically deducted from their bank account or auto charged to their credit card, it still makes the important point that this is a LOAN from taxpayers that MUST BE REPAID. The amount owed per week increases by $10 per year until they hit the current set thresholds when it increase to normal repayment amounts.

    Not working? If someone is living off their neighbours (e.g. on the dole or some other type of Commonwealth payment), the minimum amount will be deducted from their fortnightly payments.

    And no perpetual students allowed – if you want to take another degree after finishing or dropping the first, then you still have to start paying off the first one at the minimum $10 per week while you pursue further courses.

    Leaving the country? As you pass through immigration (EACH TIME), the IMMI computers should spit out a notice of your outstanding amounts owed to the Commonwealth whether student loans or outstanding tax debts and the person has to sign they will (a) keep paying the required monthly amounts, (b) notify bank details for automatic debits within 60 days of leaving and not reentering Australia, (c) notify embassy or online of current address and (d) they understand if they fail to do any of these conditions that (1) interest will be charged on missed payment amounts at the average rate charged by Australian-based CREDIT CARDS and (2) their passport will be suspended if payments are not made for any 12 month period and will be forfeit if payments are not made for any 5 year period.

    Annually, the Commonwealth should make public online a searchable database of all debtors who are behind in loan repayments and the total amounts owed. Employers and the public should have a right to know who owes them money.

    After all, it’s not the faceless government who paid for the education, it is the people down the street and the people who work away from their families and the people who hold down menial work to pay the bills and then honestly pay their taxes.

    NO STUDENT LOAN should be permitted to remain unpaid more than 10 years after the academic year to which the fees pertained.

    Not repaying Other People’s Money is theft. Let’s not sugar coat the issue.