Students Shouldn’t Fear the Federal Budget

by on 13 June, 2014

Luke HughesStudent Luke Hughes argues the Federal Budget improves competition, accessibility, and equity within higher education:

In their 2014-15 Budget, the Federal Government has committed to significant changes to higher education funding. The most controversial of these include a 20% decrease in contributions to students’ university fees, the deregulation of fees, and pegging HECS-HELP interest to the 10-year government bond rate.

The Government’s political opponents have interpreted these changes as attacks on students, and have responded with violent protests, marches, and rallies around the country. These groups claim student debt will soar to unknown levels as university fees skyrocket; leaving tertiary education as “the preserve of the rich”, while “poorer students are priced out of the education they deserve.”

Budget Papers foreshadow a different reality: one of increased competition, accessibility, and equity.

While it is true Commonwealth contributions to a new student’s fees will decrease by an average of 20%, university fees will be deregulated, and HECS-HELP interest will be pegged to the 10-year government bond rate, Budget critics mistakenly assess each Budget measure in isolation, without regard to the broader context of the Budget; thereby distorting expected outcomes.

A more accurate reading of the Budget understands the spending trade-offs faced by governments, and the interplay that exists between individual Budget policies.

In contrast to claims that fee deregulation will price poorer students out of tertiary education, Labor frontbencher and former economics professor Dr Andrew Leigh argues Australian universities should be “free to set student fees” and deregulation would result in a “strong incentive to compete on price and quality and meet the various requirements of the different segments of the student market.”

Similarly, writing for the Sydney Morning Herald, University of New South Wales Vice-Chancellor Professor Fred Hilmer says fee deregulation is an important step ensuring the ongoing quality and sustainability of our higher education system.

Rather than resulting in unreasonably high fees, deregulation will enable increased competition between universities; students will benefit from more competitive pricing of a greater range of higher quality products.

In addition to measures aimed at improving competition and quality, the Budget also sets out to improve accessibility to tertiary education. Rebalancing spending in certain areas of the higher education budget allows the Government to achieve a more equitable outcome for students and non-students.

According to Department of Education estimates based on a Grattan Institute publication, Australian university graduates earn an average of 75% more than their high school-educated counterparts. This works out to around $1 million more in lifetime earnings.

Currently, the HECS-HELP loan scheme charges no real interest, but a rate equivalent to inflation. By pegging HECS-HELP interest to the 10-year government bond rate, the cost to students more accurately reflects the true cost of borrowing to the Government. This equity-increasing measure ensures taxpayers are not excessively subsidising students who will go on have higher lifetime earnings.

Access to the HECS-HELP system is also significantly expanded under this Budget. Students studying higher education diplomas, advanced diplomas, associate degree programs, and bachelor degrees at approved higher education institutions will now be able to access financial support from the Commonwealth.

Rather than facing prohibitive upfront costs of higher education, students are not required to start paying off their HECS-HELP loan until they are earning a reasonable wage—currently around $51,000.

Current and aspiring university students should not view the Federal Government’s Budget with concern or suspicion. Rather, these measures will improve the quality, equity, and accessibility within higher education and ensure its ongoing sustainability.

Luke Hughes is an undergraduate economics student at Queensland University of Technology and a member of the QLD Young Liberal National Party.

One thought on “Students Shouldn’t Fear the Federal Budget

  1. Shadow Assistant Treasurer Andre Leigh (ALP) said there was no evidence that students who had grown up in low income families would be less able to pay after they finished their degree :/

    So your statement is at odds with the consensus really.

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