A tipping point for Australia’s universities

Professor Janice Reid, Vice-Chancellor, University of Western Sydney 

In May this year the US Chronicle of Higher Education declared its nation’s colleges and graduate schools had reached a ‘spotlight moment’. Outstanding student debt had hit the $1-trillion USD mark. The global financial crisis had done nothing to quell rising demand and states under economic duress were reducing their funding.  Universities (the ‘market’) responded by increasing tuition fees. The average student debt rose 24 per cent between 2008 and 2011.

The behemoth of graduate debt seized the attention of President Obama, who in his State of the Union address put higher education institutions on notice: “If you can’t stop tuition from going up, the funding you get from taxpayers will go down”.

In the UK a new milestone has also been reached with universities predicted to charge an average of £8,500 per year in tuition fees over the 2013-14 academic year, with a third of institutions confidently charging £9,000 (the maximum allowed).  

For some observers the US and UK higher education ‘markets’ will be seen as success stories, registering growth during a period of pronounced economic contraction. But experience tells us this trend might simply reflect a well-recognised pattern where people invest in education during periods of labour-market instability. Either way, some commentators maintain such ‘user-pay’ models work. But for whom do they work: the institutions; the nation; students?  

Concerned about unserviceable debt, the US Government introduced ‘gainful employment’ provisions in June 2011. Colleges will lose funding for courses where they are unable to demonstrate clear progression to employment.  In the UK, students seeking to undertake studies in the arts and humanities are faced with an unprecedented contraction in their options. Many UK universities have drastically reduced or altogether withdrawn courses.  In England, full-time undergraduate course offerings decreased by 27 per cent from 2006-2012. The policy drivers in the UK have expressly favoured the elite Russell group of universities, with others suffering dramatic falls in enrolments.  

Market logic holds that competition is best served in an environment that maximises product differentiation and consumer choice. With these so obviously in retreat in the US and the UK, the march towards ‘fee flexibility’ - meaning fee increases - in Australia seems thoroughly out of step.

In the calls for institutional diversity the dangers of the re-creation of a binary divide are obvious. But this divide would not be limited to institutional resources available for research and teaching; it would be most visibly manifest in the differentiation of student populations because of their financial circumstances and sensitivity to debt.

Over many years enrolments of students of low socio economic status (low SES) nationally have stubbornly hovered at about 15 per cent. Since 2010 this percentage has shown the first signs of significant movement, reaching 17 per cent this year. But the relative distribution across institutions is manifestly different. Twenty-three per cent of UWS’s students (almost 8000) are from low SES backgrounds, double the average (11 per cent) for the main proponents of ‘fee flexibility’, the Group of Eight universities.  Similar differentials apply for many of the post 1990, regional and outer urban universities.  Of the Group of Eight, five have low-SES percentages which are less than one-third of UWS’s and a half the sector average (2011).  While there are many reasons for this, the lived experience of students, the benefits to universities, communities and the nation directly arising from improved low-SES participation are fundamental when contemplating the impact of significant fee increases.

What if there was to be a dual funding system in which universities could choose either full ‘fee flexibility’ or the current system of Government funding and support for widening participation.  ‘Fee flexible’ universities would receive a modest base government grant and be permitted to charge whatever they liked. As in the US and UK price would be determined by reputation and performance. Unfettered and confident in their ability to attract large numbers of students willing to pay higher fees, ‘fee flexible’ universities could then direct fee income as they wish, whether to research or teaching. Government funding released from these universities would then be redirected to universities with an express mandate of education enfranchisement and social and economic development.

It is impossible to predict whether such a scenario could work or whether it is model Australian governments would countenance from regulatory, funding and ideological perspectives. Proponents of ‘fee flexibility’ seem convinced of their drawing power regardless of the level of the fees and hold that scholarships would support widening participation. These are high-risk arguments which also neglect the impact of escalating student debt.

While the vagaries of industry and wage fluctuations make determining the market value of degrees difficult, their very unpredictability draws into question many of the claims made by supporters of ‘fee flexibility’ and the arguments espoused in the recent Grattan Institute Report. Many within the UK are starting to wonder whether the open market was such a good idea. From 2011 to 2012, UK universities registered an 8.8 per cent drop in demand. The Chair of the Independent Commission on Fees, Will Hutton, called this a ‘storm warning.’

Whether it is a coming storm or a spotlight moment, Australian universities should not be led blindly into a deregulated market. When education is reduced to an instrumental exercise, one based on inputs and returns, we devalue the very meaning of higher education. Worse, we risk denying opportunity to all who aspire, and have the capacity to succeed at university.


15 August 2012 

An edited version of this article was published in The Australian (opens in a new window) online.

Media contact: Paul Grocott, Senior Media Officer