Who will get the scholarships in the new, expensive world of higher education?

Universities have to give 20% of their profits to scholarship students…but who should get the scholarships? Shutterstock

The budget proposed that 20% of additional revenues universities receive from fee increases should be made available to low socio-economic status student scholarships. This sounds like a good idea, but how will it be implemented?

Who is defined as “low socio-economic status”?

Potentially, the pool of funding will be massive. Should there be 600,000 students paying an extra $5,000 a year (both figures are at the conservative end of student number and fee growth expectations) then the funding pool would be $3 billion. It may well be much higher – this will not be known until the market sets its new prices.

A key question then becomes: who will be eligible for this support? Answering that question is more complex than one might expect.

How the socio-economic status of students is assessed is an important issue, as the Commonwealth will distribute around $120 million this year through its Higher Education Participation and Partnership Program to improve low socio-economic access to universities.

Currently, allocations are made based on where students live – based on an index developed by the Australian Bureau of Statistics named Socio-Economic Index for Areas.

An analysis undertaken at the National Centre for Vocational Education Research found that judging economic status by area was a useful measure, but it failed in determining the socio-economic status of individuals or individual families. Wealthy families often live in poor areas – urban and rural – and often families of low economic means find themselves in wealthy areas for one reason or another. In Canberra, for example, public housing is sprinkled amid million-dollar homes in areas such as Yarralumla.

This was not an issue under the former system. Universities had a target of 20% of low socio-economic students, so things tended to balance out. If a university drew heavily from a poorer suburb, some of these students might be from wealthy families, but overall the suburb where students lived was a good indicator of socio-economic status across the student population of the institution.

In any case, the students didn’t gain anything directly from their socio-economic status – all funding went to their university. There was no benefit to game the system by, for example, moving house to a poor suburb.

The Gonski proposals used an adapted version of this location-based approach. It also suggested loadings for students with disabilities, remote children, indigenous children and children with poor English skills.

So who gets the money?

In the budget’s proposal, individual students will directly benefit based on the assessment of their socio-economic status. This makes sense, as rewarding universities directly for enrolling low socio-economic students still leaves those low socio-economic students with the bill from uncapped fees. The fee relief needs to get to the low socio-economic students to alleviate the impact of the debt on their educational aspirations.

Garnering a scholarship will be very consequential. In the higher-cost courses like medicine it could be worth hundreds of thousands of dollars in fee exemptions, so it is important it goes to the students with the greatest need.

We can’t judge based on area, as students could move to disadvantaged areas to garner a scholarship, or find ways to lie about their address.

What about parental income? This too has problems. What of a situation where the child of two salary earners with a combined income of $200,000 misses out, while the child of a millionaire property developer with a clever tax accountant and a complex family trust structure is able to declare little taxable income or assets and gets a full fee waiver?

Also, if we look to parental income in determining need, what about the impact of such arrangements at threshold income levels? Say scholarships are provided to the children of parents earning less than $80,000. This would cost families moving from $79,000 to $81,000 in income potentially hundreds of thousands in lost support.

Quite possibly the only solution would be a case-based, highly intrusive analysis of family means and income for every applicant. This will, of course, be an administrative nightmare, subject to rorts and abuse, legal appeals and fraught with double standards.

By proposing these low socio-economic arrangements, Education Minister Christopher Pyne has acknowledged the importance of a university education to enhance social mobility in Australia. Australians are uncomfortable with a situation where bright kids live in intergenerational poverty because they lack the means to secure an education. If last week’s proposals are intended to address this issue, they need a lot more thought.

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