The Coalition’s planned 20% cut to university funding, along with the deregulation of university fees, is projected to raise the average cost of a 3-year university degree to $50,000 with a decade. From The SMH:
In the 2014 budget, the Coalition announced that it would cut funding to university courses by 20 per cent but allow tertiary institutions to set their own course fees…
The PBO said universities would lift course fees to recoup revenue lost due to funding cuts linked to fee deregulation.
It calculates that by 2026 the average annual fee for a full-time university student in a Commonwealth-supported place will be $16,836, or about $50,500 for a three-year degree. Fees for some prestigious courses at top universities would likely be much higher than that average.
Here’s the quote from the PBO report noting the likely increase in average university fees [my emphasis]:
It is assumed that universities will immediately increase student fees from 2017 to fully recoup the lost revenue from reduced subsidies under the Commonwealth Grant Scheme.
It is likely that in a deregulated market, universities will further increase fees. The PBO has used an indicative assumption that universities will increase student fees by 2 per cent each year in real terms from 2018, over and above recouping cuts in the Commonwealth Grant Scheme.
Under this methodology, in 2026 the average annual student fee for a full-time university student in a Commonwealth Supported Place is projected to be $16,836 of the total annual course fee of $27,770.
So Aussie students will pay $50,000 for a typical 3-year degree and would cover 60% of their course costs (versus 40% currently).
There is a lot to hate about the Coalition’s policy. In addition to putting greater financial strain on younger Australians, it would cause a huge blow-out in both outstanding loans:
The size of the HELP loan portfolio is projected to grow rapidly through to 2025–26, driven mainly by projected increases in student fees from 2017 due to the announced higher education reforms. The PBO projections assume that universities will increase their fees to recover the reductions in subsidies under the Commonwealth Grant Scheme. This will require an average increase in fees of 40 per cent for students affected by the changes. Beyond this increase, the PBO has used an indicative assumption that universities will increase their student fees by 2 per cent annually in real terms.
By 30 June 2026, the nominal value of the HELP loan portfolio is projected to be $185.2 billion, and the fair value of the HELP loan portfolio is projected to be $133.0 billion, meaning that the write-down in the value of the HELP loan portfolio is projected to increase to $52.2 billion.
As well as bad debts:
The costs of new HELP loans are projected to grow significantly over the medium term in line with the projected increase in the value of new loans. Doubtful debt costs associated with new loans are projected to increase from $1.9 billion in 2015–16 to $4.0 billion in 2025–26. Concessional interest rate costs for new loans are projected to increase from around $1.0 billion in 2015–16 to $2.4 billion in 2025–26.
As I noted yesterday, the potential impacts on the Budget could be even greater following university fee deregulation.
Because most welfare recipients’ payments are linked to the CPI, the inflation-rising effects of higher uni fees could have a knock-on effect on the Budget via higher benefit payments (think aged pensions, unemployment benefits, etc).
There is also the possibility that higher university fees could damage state and federal budgets by reducing enrolments in private schools.
Thus, both taxpayers and students will very likely lose from the Coalition’s policy.
The Turnbull Government should junk its universities policy or, alternatively, Labor and the minor parties must block it in the Senate.
