On 5 October 2016, Minister Simon Birmingham announced the new VET Student Loan Program including the capping of VET student loan amounts.
Subject to the passage of legislation, the highly publicised VET Student Loans program will commence on 1 January 2017, replacing the current VET FEE‑HELP scheme, which will cease on 31 December 2016.
In September 2016, Mitchell Institute Victoria University, Melbourne proposed an independent body to administer government investment in tertiary education, including a balanced approach to funding higher education and VET.
A financing authority that considers how best to deploy the funds available and has a central role in setting fair prices for government subsidies and student contributions through income contingent loans was proposed.
The Mitchell Institute provided options for bringing some consistency to the way the tertiary education operates in Australia. The VDC News 31 August 2016 carried an overview of the Mitchell Institute’s response to the Commonwealth’s discussion paper, Redesigning VET FEE-HELP. The Institute’s response, written by Professorial Fellow Peter Noonan, a former Chair of the VDC, made a pretty firm statement:
Decisions on the design of VET FEE‐HELP must therefore be taken as part of a comprehensive redesign of the financing of tertiary education in Australia. The redesign must recognise the interrelationships between the different financing systems within and across the sectors, and also recognise the different roles and characteristics of the sectors.
Noonan has followed up with a new report, A new system for financing Australian tertiary education (17 Pages), that offers a firm proposal about the way forward.
Australia must plan for higher tertiary education participation rates
The report frames the urgency of this policy task in a number of ways, not least the numbers of students that the tertiary education system must accommodate over the next 15 years:
… if enrolments remain at current levels participation by 15-24 year olds in tertiary education will fall from a peak of 34 percent in 2012 to 32 percent in 2030, the same as it was in 2008. Enrolments will need to increase by almost 166,000 just to maintain current participation rates and by 424,000 if we are to achieve a participation rate of 39 percent by 2030 when most children starting pre-school in 2017 will be leaving secondary school.
You can argue we will need considerably higher participation rates. A tertiary qualification is all but essential now for a young person entering the labour market. The report lays down the national challenge of moving from mass tertiary education to universal tertiary education. We’ve done this before with secondary education; the retention rate from Year 7 to Year 12 rose from 36 per cent in 1982 to more than 77 per cent in 1992. In 2015, around 96 per cent of young people completed Year 11. We’ve still got a bit more legwork to do in secondary education, but while we’re finishing that off we need to get started on the universal tertiary education target.
Our tertiary education financing muddle
Australia has adopted a model where both governments and students pay for tertiary education. But it’s a model with more than a few problems. Higher education funding, which is provided by both government subsidies and student fees, has bloomed with demand-led higher education. At the same time national investment in VET has generally gone south. The result is an unbalanced tertiary education system.
In addition, there’s no consistency across states and territories about how much students pay for what qualifications. This is primarily because funding arrangements vary for students enrolled with private providers of both degrees and diplomas, students enrolled with public non-university providers of degrees and diplomas, students enrolled at public universities, and students enrolled in certificate programs with VET providers. Fee levels, government subsidies and access to student loans make for a messy bit of turf that the Mitchell Institute wants to put the policy roller over.
Setting prices for tertiary education
As Noonan sees it, the way to smooth the ground is to set up a national, independent authority to manage the pool of funds available for investment in tertiary education. This isn’t a new regulator in the way of ASQA and TEQSA. It’s a financing authority that considers how best to deploy the funds available and has a central role in setting fair prices for government subsidies and student contributions through income contingent loans.
This is similar, Noonan notes, to the way that pricing is managed for hospital and disability services. He wants that model extended to oversee government and student co-investment in the nation’s human capital development.
Noonan’s paper attracted a good deal of attention after its release on 26 September. It was everywhere from the Financial Review to an interview with Phillip Adams on ABC Radio National’s Late Night Live (‘Tertiary education: In need of reform?’ – 20 minutes).