higher education policy

The case for a fixed 15% fee on all student loans

This article was written by Bruce Chapman

The Grattan Institute has proposed that a 15% surcharge should be added to the Higher Education Loan Program (HELP) debt of undergraduate and college students.

The surcharge is not an up front fee. It is a fee that is added to the existing debt and paid later, depending on a graduate’s future income. Repayments are only made if a graduate’s income exceeds about A$56,000 per annum.

This flat rate means that, while a graduate’s loan would initially increase by 15%, that figure would not get bigger over time.

Currently full-fee undergraduates pay a 25% fee on their loans, vocational education students a 20% fee, while postgraduate and government-supported students pay no loan fee. There is no obvious reason for these disparities and they seem to have evolved through a lack of policy attention by many governments.

So for administrative simplicity and coherence it would seem a good idea that all HELP loans are treated in the same way.

Not a radical idea

The 15% surcharge might seem like a radical reform idea, but the notion of a surcharge actually fits comfortably with the underlying economics of the HELP system, and was part of the original HECS design of 1989.

Benefits to low income earners

While an increase in the size of the loan may raise the ire of prospective students, it is important to remember that this does not leave those who go on to earn a lower income any worse off relative to their wealthier counterparts.

In fact they would be better off under this reform, because there would be no financial advantage to paying off the loan quickly. This is not currently the case.

The lower income earners who take longer to pay off their loans as the system is now are also penalised with having to pay back more interest over time.

In this sense, the change will act as a kind of subsidy on the loans of lower income earners, negating some of the cost and keeping loans from spiralling out of control.

Benefits to the government

A starting point is that the government already passes a considerable discount to students by indexing the loans by the CPI instead of the government’s own cost of borrowing.

While in the past the suggestion of imposing a real, and much higher rate of interest on the loans has been floated, it has been demonstrated that this is not the most equitable solution.

While a 15% spike in underlying cost may understandably attract headlines, this isn’t out of the blue. Having a surcharge on HELP debts for normal undergraduates was part of the original HECS design, but it took the form of a 20% discount for those who chose to pay up front.

This is just the other side of the coin of a surcharge, and was part of the original policy to cover the interest rate issue explained above.

Also, there are already surcharges on other HELP debts, and these are currently (and strangely) different depending on the nature of the tertiary education that people are undertaking.

Why 15% fee?

However, these points in favour of a surcharge should not be conflated with a judgement concerning what is the “correct” level of HELP charges in total.

This means that simply adding a 15% surcharge is an implicit recognition that the debts for graduates are too low at the moment, and should be increased.

The case for a surcharge should be made independently from the issue of what the correct overall level of a charge should be.

The economic case of the Grattan argument for a surcharge stands without reference to any budgetary concerns related to the level of HECS debts, which is a considerably more complicated (and ultimately political) judgement.

The Conversation

Bruce Chapman, Director, Policy Impact, Crawford School of Economics and Government, Australian National University

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

Making university admissions process more transparent is important, but won’t help improve equity

This article was written by Shane Duggan

Universities are being urged to make their admission process more transparent following the release of a report by the Higher Education Standards Panel, which was set up by the government to help with reforming areas of higher education.

The rapid expansion of the university sector has led to a disparity of admissions practices, with equivalent courses at different institutions potentially having wildly different admissions requirements.

Earlier this year, a Fairfax media investigation revealed up to 63.5% of students at some universities were being admitted to courses of study below the advertised Australian Tertiary Admission Rank (ATAR) “cut off” scores.

However, subsequent disclosure by a number of prestigious universities has illustrated that this practice tends to be isolated to particular institutions, and courses of study.

The review was careful to point out that offers to students with an ATAR of “50 or less” made up slightly over 2% of all offers in 2016 – and more than half of these students rejected their offer.

Across the sector, universities have been accused of being non-transparent about how they deploy “bonus point” schemes. The review found that almost all providers offer bonus points of some kind. These points are commonly allocated for:

  • high academic achievement in particular subjects;
  • participation in elite sport or arts;
  • students facing social, geographic, or economic disadvantage.

The review suggests that the opacity is at least in part the result of successive waves of expansion and diversification of the sector that have gone relatively unchecked since the 2008 Review of Australian Higher Education (the Bradley Review).

Report recommendations

The review highlights five key issues around the use of ATARs for admissions that it sought to address:

  • a lack of common language used between universities
  • unable to compare course admissions criteria between states and territories
  • availability of information from admissions centres
  • overemphasis on the ATAR as an admission requirement
  • potential inflation of “cut-offs”.

In response, the panel makes fourteen recommendations focusing on four priorities: transparency, accessibility, comparability, and accountability.

Combined, the recommendations seek to improve clarity of information for young people and their families in the selection of courses of study, as well as for providers in assessing prospective student applications.

As was anticipated, a number of recommendations concern the publication of accurate minimum ATARs and clearer articulation of non-ATAR requirements.

The review calls also for the adoption of a common language around admissions processes across all higher education providers.

In a diverse system of relatively autonomous providers and discrete state and territory admissions centres (TACs), this will be difficult.

Third, the review calls for the development of a national higher education admissions information platform.

This aligns broadly with the Turnbull government’s advocacy of the Quality Indicators for Learning and Teaching (QILT) website and was a key feature of the terms of reference for the panel to consider.

However, substantial research has shown that simply making information available does not necessarily address the challenges many young people face in completing secondary education and choosing higher education courses.

Too often, students from disadvantaged backgrounds are unaware of the options available to them. Commonly, they come from backgrounds with no history of higher education.

These students tend to have lower completion rates and report a poorer experience of higher education. Many do not feel that higher education is for “people like them”.

Is the ATAR still useful?

Four in ten students admitted to a course with an ATAR lower than 60 do not complete. from www.shutterstock.com

For many senior leaders, the ATAR remains an efficient and convenient tool for allocating Commonwealth supported higher education places.

However, researchers have suggested that the current policies contribute to “gaming” practices at some of the country’s most elite schools.

Research has shown how academic success concentrates in elite public and independent schools through subject and curriculum selection, intensive test preparation, and academic tutoring.

While debate continues regarding the effectiveness of the ATAR for predicting success for young people once they enter university, data does support the predictive power of the ATAR at a group level.

Data shows that four in ten students admitted to a course with an ATAR lower than 60 do not complete it.

Scholars have been at pains to point out, however, that ATAR performance and retention rates both correlate strongly with factors of disadvantage such as Indigenous, remote, part-time, and socio-economic status.

Transparency won’t necessarily help to improve equity

Equity of access to higher education remains an area of broad agreement between political parties.

Diversity schemes such as the Higher Education Participation and Partnerships Program (HEPPP) are currently being reviewed in line with the government’s intended shake up of the higher education sector.

Over the next three years, HEPPP is marked for a A$152 million cut. Along with the shift to a demand-driven system, targeted HEPPP programs are thought to be partly responsible for the over 50% growth in low-SES participation in higher education since 2010.

More information needed for school leavers

The panel’s recommendations represent an opportunity to ensure young people have accurate information for making decisions about their intended courses of study.

They will not, however, address continued concerns about Year 12 completion rates. It is too late to begin the careers counselling process at the point of applying for courses, no matter how clear and accurate the information provided.

Helping students make an informed choice about higher education is critical. However, information about the admissions process itself is not enough.

Greater attention must also be given to ensuring that students are provided with the skills to navigate higher education.

It is increasingly likely that for the majority of young people, this engagement will be a lifelong activity.

Beyond this, helping students to develop a sense of belonging is key for boosting engagement and retention.

A successful reform must also include a more comprehensive approach to working with young people to identify a diversity of pathways and opportunities.

It must actively challenge and seek to redress the prioritising of university over technical and trade options.

It must be inclusive of broader questions of the benefits of having young people engage in education beyond school without reducing that discussion to one of “budget constraints”.

Despite recent concerns about the economic value of degrees, post-school qualifications are more important than ever.

These reforms must enshrine principles of student equity both in how young people are supported to access higher education, and in their experiences in those institutions once they arrive.

 

Shane Duggan, Lecturer in Youth Studies and Education Policy, University of Melbourne

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