The review of higher education funding has been asked to look at the issue of the relative public and private contributions to tuition costs.
Some people think it is anomalous that law and business students pay more than 80% of the nominal cost of their place, while for example medical and engineering students pay a third or less.
Another perspective is to ignore cost shares and focus on the size of private benefits. Post-1996, this is roughly the perspective that has dominated. The basic idea is that students in disciplines with high incomes can afford to pay more.
Using occupational income data from the ABS Employee Earnings and Hours publication I’ve been playing with another version of the private benefits idea.
The idea here is that graduates pay for their courses in work effort, defined as the number of weeks it would take to repay their debt if they devoted their entire net weekly earnings to doing so. While some courses are much more expensive than others, the higher salaries their graduates earn mean that they can repay more quickly.
The table below shows that for most occupations the time to repay is closer to the average than the $ dollar cost relative to the average (closest number in bold). Mostly the differences are not large, though for arts professionals and medical practitioners there is major correction towards the mean on the time to repay measure (the figures are all based on average earnings for full-time males in May 2010).
Of course I should add the important caveats that this is very limited sample of occupations, and that the average salary figures are higher than graduates would be receiving early in their careers.
But I would be interested in feedback on whether time to repay is useful way of conceptualising the debt burden, and whether this idea might have any place in public policy discussions of fee setting (given the politically realistic parameters of the debate).