Should scholarships be exempt from Centrelink income tests?

One popular theme in the submissions to the Bradley review of Australian higher education policy is that scholarships paid by universities ought to be exempt from Centrelink income tests. The problem is that if the scholarship gives a student on Youth Allowance more than $118 a week it will be caught by the YA income test, and so the scholarship saves the government 50c in the YA dollar. The universities reckon that this provides a disincentive to provide income-support scholarships.

While the frustration of universities is understandable, there should be no special treatment of scholarship income. The main function of scholarships is positional competition between universities. Mostly they compete for the very bright students. Often these students come from privileged backgrounds, but even when they do not their high intellectual ability means that they are likely to do very well in life whether they get a scholarship or not. The public policy case for sending special extra financial rewards their way, through exempting them from welfare reductions that all other students must suffer, is very weak. Indeed, exemption would be a particularly egregious example of the generally regressive nature of higher education subsidies. Continue reading “Should scholarships be exempt from Centrelink income tests?”