The university funding challenge: competition vs the public good

Vice-Chancellor of Southern Cross University Peter Lee says universities have to consider their social obligations when looking to raise student fees. Supplied

In tackling the challenge of funding universities, we constantly confront a particular conundrum. Universities are hybrid organisations, straddling the public and private spheres. We are creatures of (mainly) state legislation, substantially (but not wholly) supported by Commonwealth funding, often engaging in competitive behaviour.

We compete with one another (and globally) for the best students, for excellence in research, for the most qualified staff and, ultimately, for status. Nevertheless, when eyeing off one another’s TV adverts, or pondering a fresh branding exercise, we mustn’t undervalue our more traditional “public good” role.

Southern Cross University, for example, is legislatively required to provide “facilities for education and research of university standard, having particular regard to the needs of the north coast” (of NSW). This is more than a mere legalism - we take these teaching and research obligations seriously. Moreover, serving smaller, regional campuses is neither cheap nor easy.

In turn, there has been public investment in SCU’s activities; we’ve had two decades of this support, other universities many more. The point remains: when debating funding options for universities, this contribution by Australians – in recognition of universities as a “public good” - should not be ignored.

Who should pay, and how much?

Of course, students (or their families) contribute substantially to their degrees. Bachelor students pay between $6000 and $10,000 a year for their government-supported place. Depending on the degree, universities get around a third to just over three-quarters of their funding for each place from the student themselves.

Those pointing to the United States as an exemplar in flexible funding and diversity do not mention that Australia is ranked just behind the US in terms of the share of private expenditure on tertiary institutions. According to 2013 OECD figures, the US was ranked fifth and Australia sixth (out of 30).

Students clearly get a private benefit from their degrees so it remains appropriate that they make a personal contribution. And there is a case for looking at the mix of funding for particular disciplines. Maybe Australian students can even pay “more” for their studies across the board. But how much “more” is contentious.

Students’ pockets aren’t limitless and modern economies such as Australia’s need well-qualified graduates, with bachelor and increasingly, post-graduate qualifications, not burdened with debt. We don’t want to live in a society where individuals dismiss their personal capacity to do a university degree because of cost or background - because they are Indigenous, mature-aged, or from a small rural town, or because no-one in their family has ever gone to university before. University is not for everyone: but an individual’s background and their capacity to pay should never be a reason why not.

So, if government wants to go down the path to “deregulate” (read “increase”) student fees, we must be cognisant of the impact on those who are more price-sensitive. A glib reliance on “scholarships” does not really suffice: how many? To whom? How much?

Student loans still need to be repaid

It is noticeable that since the release of the Kemp-Norton review, much of the commentary about fee deregulation is being debated almost as a given: as government can’t (won’t) provide, we have to turn to students themselves. And as they can rely on the HELP loan scheme, then, somehow, it’s not a “real” impost. But this is illusionary.

Indeed, it might be arguable that if a university wants to charge whatever fee it chooses for a sub- and bachelor degree, it should be able to do so. (Although it remains to be seen whether this just means that fewer students then opt for fee-paying post-graduate level studies, to avoid adding to their university debt). My issue is the presumption that there can also be a continued call on public funds to subsidise this fee, either through the receipt of the Commonwealth contribution or even via a HELP loan.

If you want to drive diversity through competition on fees, fine, but let’s make sure we’re not just creating a greater burden for taxpayers through excessive growth of HELP debt. Putting an annual or total cap on loans is one option, as is giving universities the capacity to charge above the loan cap. Getting these policy levers right, so that they act to both drive diversity and give universities a more sustainable funding footing, is no easy task.

A loan cap set too high will see the HELP debt balloon out. Too low, and universities will continue to be financially strangled, bunkering down just to survive. This does not help diversity, nor does it augur well for any ambitions to improve Australia’s international rankings.

A loan cap that is “mid-way” may work – but who could say what this mid-way mark might be? Experience shows that most (all?) universities will raise their fee to the maximum amount as soon as they can.

We shouldn’t assume the HELP loan scheme is set in stone. Fifteen years ago, former minister Kemp wanted to replace the then-HECS scheme with a universal loan scheme, coupled with a real rate of interest. Assurances about maintaining the HELP scheme might alleviate some of the disquiet about deregulating the fees themselves.

Another option is to consider a completely different tack. For most universities, the focus on student fees is largely driven by inadequate research funding: neither the research component of the Commonwealth-supported teaching place nor the amount funded via a successful competitive research grant fully funds the actual research activity. One possibility is to think about fully funding research, so that the more predatory behaviour for student enrolments is minimised.

Frame policy for Australian conditions

A lot more policy work needs to happen before these decisions can be made.

In so doing, rather than fixate on the purported advantages of the US or the UK, we should be mindful of the resilience of the Australian system. We have a system of universities servicing national and local interests across a relatively small and dispersed population and, in different ways, successfully reaching out globally. Importantly, our system brings a real research presence to many communities beyond capital cities. We must protect this legacy.

I want all Australian students - and indeed, international students - to have a quality higher education experience, reflecting Australia’s world-class education system. A first-in-family student embarking on a nursing degree, intending to live and work in a country town after graduation, is as deserving of a quality learning experience as a highly gifted undergraduate student who intends to pursue a PhD and an international research career.

Australia needs to be smarter in the way we use our public resources and assets. But in being smarter, we also need to be mindful of the impact of policy decisions on individuals and the way they exercise choice in the opportunities they see before them. Most of all, we need to avoid subsidising elitism at the expense of a “fair go”.