One of Brendan Nelson’s few achievements in higher education was to extend the FEE-HELP scheme, which offers income-contingent loans to full-fee paying higher education students of any education provider that meets objective criteria. This replaced the previous PELS scheme, which was available only to postgraduates, and only at public universities and a small number of private institutions that were favourites of the government.
So far more than 40 new institutions have been approved, and lending is increasing quickly from a small base. However, the private higher education industry still largely reflects its circumstances of the last few decades. Since it was difficult for private universities and private higher education providers to compete directly against the free or very cheap public universities, most of them are in niche areas that don’t interest public universities – religious training institutions or institutions with a religious perspective, specialised professional training institutions, natural medicine colleges, and sundry others.
There is an expectation around the sector that this won’t last. As fees have increased at public institutions the price gap has narrowed substantially, and with FEE-HELP students no longer need worry about having to pay up-front. There has been some streamlining of accreditation rules that should make it easier for foreign institutions to enter the Australian market, and we are already seeing some activity there. The conditions exist for public universities to face competition in their core teaching activities.
The National Tertiary Education Union said universities would respond to the competition by slashing unprofitable courses and concentrate on those that made money through full-fee paying students. The University of Sydney had already done so by ending undergraduate nursing, said the union’s policy and research co-ordinator, Andrew Nette.
Public universities do rely on complex cross-subsidies from those disciplines and students that generate surpluses to those that do not. But the problem here is not competition, it is the absurd system of subsidy and price control.
In a well-designed system, the government would support those disciplines that the market would probably under-supply, such as nursing, where the costs of the course are high relative to the subsequent labour market returns. But because the subsidies provided by the Commonwealth are only marginally better than numbers picked out of the air, universities have trouble financing many of the courses subject to ‘market failure’ from government-authorised or supplied revenues.
To fix this ‘market failure’, universities have turned to…the market. They use the profits from full-fee students in courses leading to lucrative professions to support Commonwealth-supported students in other fields. Yet HECS students in those same disciplines do receive Commonwealth support. So the market pays for things the goverment should pay for, and the government pays for things the market should pay for.
It has dawned on both the Minister and her Shadow that something is deeply wrong here – though neither yet have credible alternatives. But at least they don’t think, like the NTEU, that the problem is competition.