21/10/14

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Dropping interest will make very little difference to student debts – NTEU

21 October 2014     |   The National Tertiary Education Union says that dropping the highly controversial proposed “real Fee increaseinterest rate” on university student debts will have little impact on student debt levels. NTEU analysis shows that while removing interest from HELP debts will marginally reduce the cost and the time it takes to pay off HELP debts, it is the amount students will be required to borrow or the cost of their degree which will be the most important factor determining the size of their debt and how long it will take students to repay their student debt. The NTEU posited a debt scenario based on an accounting student paying $75,000 for the degree (more than twice the current price). Assuming six years out of the workforce almost a decade after graduation, the NTEU scenario has the debt repaid “only” seven years earlier if a real interest rate does not apply……[ MORE ]….

Pyne will concede on interest in return for fee deregulationfees3

21 October 2014    |    The Commonwealth education minister Christopher Pyne has confirmed that, if the Senate will agree to his fee deregulation plan for universities, the government is willing to back down on the budget decision to set the interest rate for HECS debt at the 10-year government bond rate which is currently set at the Consumer Price Index. Pyne has been in regular talks with Palmer United Party leader Clive Palmer about the university changes, expected to be voted on in the Senate next week. A Senate committee report on the legislation is due by 28 October. Pyne has made clear that fee deregulation is the key reform he and Tony Abbott want to achieve, even if it meant $5 billion in planned savings fell short…….[ MORE ]….

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Milestones

It was time

21 October  2014     |    Gough Whitlam, the 21st prime minister of Australia, has died. This item was first posted on 13 November 2012 to mark the forthieth anniversary of his “It’s time” campaign speech.

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Most readers of The Scan – and indeed the parents of some readers – are too young to remember the balmy evening of 13 November 1972 when Gough Whitlam declared at Goughthe Blacktown Civic Centre, before 1500 supporters and a television audience of millions, that “It’s time”:

Men and Women of Australia!

The decision we will make for our country on 2 December is a choice between the past and the future, between the habits and fears of the past, and the demands and opportunities of the future.

There are moments in history when the whole fate and future of nations can be decided by a single decision. For Australia, this is such a time.

It’s time for a new team, a new program, a new drive for equality of opportunities: it’s time to create new opportunities for Australians, time for a new vision of what we can achieve in this generation for our nation and the region in which we live. It’s time for a new government – a Labor Government.

Whitlam outlined  a comprehensive program of reform, touching every area of Australian life and society – income support, national and regional development,  healthcare, education, what was then called Aboriginal affairs and on and on….

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Comment & analysis

Submissions to the Senate Inquiry

The Conversation   |      30 September 2014

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Submissions to the Senate’s inquiry into the higher education reform bill have now closed. The inquiry is now conducting public hearings throughout Australia and is to report to the Senate on 28 October. Here, Tim Pitman overviews the 163 submissions received.  The Scan has extracted some key points from about 50 of these submissions (something we will never, ever attempt again).

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The key elements of the bill are outlined here but in essence it seeks to greatly deregulate the higher education sector by allowing universities to set their own maximum fees for undergraduate domestic students and increasing competition between public and private providers. If passed, the legislation will shift a greater proportion of the cost of higher education onto the student and increase the way in which interest accumulates on student debt. The changes will also increase competition by opening up the sector to private providers of higher education.

At the time of publication more than 130 submissions have been made public. The majority are against most of the proposed reforms. But the real tale of the tape is in how those submissions break down across the various stakeholder groups. They give great insight into who thinks they will win, or lose, if the bill is passed.

The summaries below refer to the majority opinion of each of the stakeholder groups. In most groups, opposing views were expressed in the minority.
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University fees and participation: study of nine countries

 13 October 2014

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The Group of Eight is working overtime making the case that fee deregulation would be “good”, won’t really affect students much –  what, with income contingent loans, they’ll hardly notice – and won’t have a deleterious impact on participation by people from low SES backgrounds.  This latest note is based principally on a study by Canadian higher education analyst Alex Usher.  Usher was recently in Australia and, while not “alarmist” , neither was he insouciant about the likely impact of the passage of the government’s higher education package:

HECS will still insulate students from the main financial consequences of the new fees, and so, as in Britain, they will likely absorb the higher fees with very little effect on enrolment. As a result, institutions will push the fee levels quite high because they can do so without fear of losing students (the exception will be students who learn at a distance – which is a more significant chunk of the student body in Australia than it is in most other OECD countries). The likelihood is that they will get quite close to the international student level – and they will do so at nearly all institutions.

The real question is: what will institutions do with that money? The likelihood is that every penny of the extra $5,000 – $10,000 per year students will be asked to pay will be ploughed back into research for prestige reasons. It won’t be the access disaster some are predicting, but it’s a bad deal for students nonetheless.

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Following the introduction of HECS, and changes to the system in the 1990s and again in 2005, several studies examined the impact of tuition fees on participation in higher education.  In particular, studies looked at the impact of fees on participation by people from low SES backgrounds.  In short, the literature finds that the reintroduction of tuition fees in 1989, and changes in 1997 and 2005, did not have a lasting impact on participation in general or by low SES students in particular.  Studies have found that income-contingent loans largely take fees out the equation: since fees can be deferred, they do not present a barrier to access.  Further, research finds that the persistent under-representation of low SES people in higher education is explained by limited opportunities at school as well as beliefs about the value of higher education, more than concerns about the cost.

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 The best compromise for HELP loan interest rates

    25 September 2014

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 The government’s plan to charge up to 6% interest on HELP loans has been widely attacked as unfair. Many critics, including Shadow Education Minister Kim Carr, the Group of Eight universities, Universities Australia and HECS architect Bruce Chapman, have come out against pegging HELP loans to the bond rate, rather than CPI as it is now. Geoff Sharrock of the LH Martin Institute sets out a compromise.

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Interest rates

In the government’s Senate negotiations, a good compromise would apply CPI plus 1 percentage point to all HELP debts. The savings would tap a larger pool of graduates, not just those likely to face higher fees and larger loans in the future.

At lower real interest than the cases described here, CPI plus 1% may still bridge much of the gap between the two rates. In the last 10 years CPI ranged from 1.2% to 5%, and the bond rate from 3% to 6.5%. In the last two and a half years CPI ranged from 1.2% to 3%, and the bond rate from 2.9% to 4.3%.

CPI plus 1% would also give graduates an incentive to repay HELP debts as soon as they can, not just the minimum required. The risk is notably higher repayment costs for those who don’t clear their debts in say 20 years. But at 1% the real interest risk is less than with the Group of Eight 1.4% scenarios.

If the Senate agreed to this “1% solution” the budget savings would still be substantial. This would allow more scope to minimise subsidy cuts, another savings proposal that shifts costs to students. In turn this would reduce the risk of higher tuition fees, and higher HELP debts in the first place.

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Life & stuff

1 October 2014

Charity

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Despite an evident mean spiritedness in the public sphere (the poor are unworthy, the unemployed are leaners, the “age of entitlement” is over), Australians are a remarkably generous people. In its third annual study of 160 countries, the Charity Aid Foundation measured giving behaviours across three criteria: volunteering, helping strangers, and donating money. Australians rated most highly.

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Charity

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