Higher ed bill: what’s likely to pass and what’s likely to be be blocked

The Conversation      |      1 September 2014

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The higher education reform bill , if passed, it will result in the most significant changes to the Australian higher education system since the Dawkins reforms a quarter of a century ago. However, it is unlikely to make it through the Senate in its current form.   Education Minister Christopher Pyne has as much as accepted this. He is prepared for a marathon, not a sprint, suggesting it might take until November before the Senate decides the fate of the bill.  Each of the following elements of the bill will be debated at length. Tim Pitman (Curtin University) assesses the likelihood of passage of the various elements and in what form.

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Student fee deregulation

This is the most significant of all the changes. In Schedule 1 of the bill, the government seeks to deregulate fees for domestic Commonwealth supported students by removing the current maximum student contribution amounts. Put simply, this will allow universities to charge student fees at whatever level they deem appropriate.

Many have speculated on how high fees might go. Really, we don’t know. However, analysts generally believe fees will rise for most students.

The sector is divided in its support with some for and some against fee deregulation. Given a primary goal of this reform is to increase competition between universities, it’s a safe bet those universities that support fee deregulation think they will be winners. And vice versa. However, the consensus position of the sector is to support fee deregulation with moderation of the subsidy cuts and loan indexation (see below).

Labor and the Greens strongly oppose fee deregulation. The Palmer United Party is also opposed, though the government believes it can negotiate with PUP members. The Senate could allow fee deregulation to occur, but with compromises in other areas.

This part of the reforms is crucial for the government’s vision of a more competitive sector. It is hard to see the government giving this up. Equally, however, its centrality to the Coalition’s policy agenda means the government is likely to be willing to allow substantial compromises elsewhere to see this part through.

Verdict: Likely to pass in some form

20% cut to support subsidy

Schedule 1 of the bill also proposes reducing subsidies for new Commonwealth-supported students at universities by an average of 20%. This will result in fee increases for students, though exactly how much is unclear.

The government currently subsidises different courses of study to different degrees, calculated by what are known as clusters. If universities were to charge students strictly as per the new funding clusters, some courses (such as humanities) would actually become less expensive for students. The rest would increase anywhere from a little (e.g. law) to a lot (e.g. science and engineering).

But since the new bill allows universities far greater flexibility in setting fees, there is nothing to stop a university from cross-subsidising, or spreading the increase evenly across all courses. Throw in fee deregulation and it’s hard to accurately predict fees for individual students at this point in time.

The Greens and Labor are opposed to reducing the subsidy and so the government needs to negotiate with the other senators. Whereas fee deregulation is critical to the Government for ideological reasons, the subsidy cut’s primary value is to the budget’s bottom line.

Verdict: Likely to pass in some form

Expansion of demand-driven funding

Schedule 1 also seeks to expand the existing demand-driven funding system. Currently, universities are allowed to enrol as many domestic undergraduate (i.e. bachelor) students as they wish. The government provides a subsidised place for each, reducing the cost to the student by 40% on average (but see above regarding the proposal to reduce this subsidy).

The government proposes extending this support to diploma, advanced diploma and associate degrees and to bachelor and sub-bachelor courses at private providers and non-university higher education providers. However, student places offered by private providers will be funded at 70% of the rate for universities on the basis that these providers are not required to conduct research (which is expensive) or allocate resources towards community services like universities do.

The government calculates that this reform will result, by 2018, in more than 80,000 additional students each year accessing government subsidies for their education. So, together with the move to cut the student subsidy, the government is proposing to increase the overall number of students eligible for Commonwealth support, but reduce the per-student level of support.

This element is likely to be passed in its current form. It was a key recommendation of the Review of the Demand Driven Funding System and received almost unanimous endorsement from the universities. Nor is it opposed by Labor or the Greens.

While the system increases access, it also has the potential to increase Commonwealth debt. Not all students pay back their debt, and estimates have said debt could be as high as $13 billion by 2017. That’s before this proposal has been factored in, so future debt will likely be higher still.

Verdict: Likely to pass

Commonwealth Scholarship Scheme

Schedule 2 of the bill requires providers with 500 or more equivalent full-time Commonwealth-supported students to establish a new Commonwealth Scholarship Scheme to support disadvantaged students’ participation in higher education. Providers will be required to direct up to 20% of additional revenue from fee deregulation to the scheme.

The fate of this part of the bill lies in its wording i.e. “additional revenue that they receive from the deregulation of student contributions”. This infers you can’t have one without the other.

If deregulation is approved, it is hard to see the Senate blocking this element of the reform. If the Senate does not allow fee deregulation, the scholarship scheme similarly dies.

Verdict: Will only pass if fee deregulation passes

Changes to indexation rate of HELP debts

Schedule 3 of the bill will change the indexation rate of HELP debts from the current Consumer Price Index (CPI) to the treasury 10-year bond rate, up to a maximum of 6% per annum. This has received a lot of attention to date, because of its potential to increase student debt, especially for people who experience periods of under- or unemployment. When this occurs, the size of the debt increases, possibly leading to more students being unable to pay off their higher education loan.

Several alternative methods of calculating debt indexation have already been proposed, including Bruce Chapman, architect of the original HECS. Pyne has already said he is willing to compromise on the interest rate to pass the higher education reforms through Senate.

Universities have been advocating strongly for changes here, as it provides benefit to the student without affecting university finances. For the government, while its budget would be affected, this wouldn’t occur for some time.

Verdict: Unlikely to pass in its current form

Changes to minimum repayment level

Schedule 4 establishes a new minimum repayment threshold for HELP debts when a person’s income reaches $50,638 in 2016-17. Currently it is $53,345. This is a relatively small change (compared to the other elements) and therefore offers itself as a point of symbolic negotiation for the government.

Equally, those opposing the higher education reforms might be happy to see this point conceded in return for blocking or significantly amending the other elements. Nonetheless, it does have an effect on the budget’s bottom line and so the government will be keen to see this left alone by the Senate.

Verdict: Likely to pass in some form

Charging research students fees

Schedule 5 enables universities to charge Research Training Scheme students a capped tuition fee, deferrable through HELP. The government hopes by charging students up to $3,900 per year they could add $170 million to the budget bottom line.

Opposition by Labor and the Greens is assured, as this falls under the broader rubric of increased student fees. It’s important to the government for the budget bottom line – but not as important as fee deregulation.

Verdict: Fate unknown as will probably be used as a point of negotiation for fee deregulation and subsidy cuts

Changes to Higher Education Grants Index (HEGI)

Schedule 8 replaces the current Higher Education Grants Index (HEGI) with the Consumer Price Index (CPI) from January 1 2016. The change is expected to save more than $200 million over three years from 2015–16.

The universities oppose this as it reduces the amount by which their grants are increased each year. Labor and perhaps the Greens will oppose it too. However, the cross-bench senators will likely be more concerned with other, bigger changes.

Verdict: Likely to pass

The remaining proposals

The remaining proposals are likely to be passed with little or no amendment:

• removing current lifetime limits on VET FEE-HELP loans and the VET FEE-HELP loan fee;
• discontinuing the HECS-HELP benefit;
• allowing some New Zealand citizens who are Special Category Visa holders to be eligible for HELP assistance; and
• updating the name of the University of Ballarat to Federation University Australia.

The government will be most eager to see fee deregulation and the cut to the student subsidy passed more or less intact. The remaining elements will be highly negotiable, including perhaps entirely new amendments proposed by the Senate.

The great unknown is how the six new cross bench senators will negotiate with the government. Unlike Labor and the Greens, these senators have no political history, so to speak, and so can be assessed only on what they have so far said, as opposed to what they have previously done. That the Senate might reject the bill entirely, or pass it with amendments unacceptable to the Coalition, remains a possibility.

This article by Tim Pitman, Curtin University,  was originally published on The Conversation.