Category: Higher education finance

Creating a better integrated education system – some notes on Rethinking Tertiary Education, a book building on the work of Peter Noonan

Andrew Norton1 Comment

Peter Noonan was a rare person with expertise across vocational and higher education, and an even rarer person who made significant policy contributions to both. Sadly he passed away in 2022 at the age of 67.

Rethinking Tertiary Education, co-edited by Peter Dawkins, Megan Lilly and Robert Pascoe, with sixteen others as co-authors, is billed as ‘building on the work of Peter Noonan’, and does so by exploring ways of making the component parts of Australia’s formal education sector – especially higher education and vocational education, but also schools – work together more smoothly than now. Pascoe also contributes an interesting biographical chapter on Noonan.

For historical and political reasons the vocational and higher education systems in Australia have quite sharp dividing lines in the nature of the qualifications they deliver, how they are funded, how they are taught, and with some exceptions the occupations they support. The book also looks at school credentials, especially the idea that they don’t measure all they should.

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What’s new in university and NUHEP funding agreements, part 2: Inappropriate use of the agreements to create a new equity program

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In a previous post on the new funding agreements, I looked at the 2024 Commonwealth Grant Scheme funding for higher education courses and designated courses, along with the amended rules for course closures. In this post I look at a novel funding agreement section, which creates a new equity program financed by under-spends on the Commonwealth Grant Scheme. This program has legal and policy flaws. I also examine some paperwork problems with the agreements for non-university higher education providers and private universities.

What usually happens if universities under-enrol?

Due to weak student demand some, quite possibly many, higher education institutions will under-enrol in 2024 – that is, take Commonwealth-supported students valued at less than the maximum funding they can receive for higher education courses according to the funding agreements – this year a $7.24 billion pot of money.

By law, under-enrolment results in CGS grants being reduced – higher education providers are paid the lesser of the value of student places (on an EFTSL * relevant Commonwealth contribution formula) or their higher education courses maximum basic grant amount: section 33-5(2) of the Higher Education Support Act 2003 for Table A institutions and section 33-5(7), using the terminology of ‘total basic grant amount’ for other higher education providers receiving CGS funding.

Under section 164-10(1A) of HESA 2003 any overpayment is recovered by reducing grants paid to the under-enrolled provider or as a debt to the Commonwealth. Clause 4 of the funding agreements reiterates this requirement.

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What’s new in university funding agreements, part 1: Commonwealth Grant Scheme funding and course closure rules

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The 2024 university and NUHEP funding agreements were released earlier this month. These documents are the legal basis of most funding from the Commonwealth Grant Scheme, the main tuition support program. I have created a spreadsheet with institution-level funding, available here.

Overall funding levels

Any total CGS comparison with 2023 is approximate at this point, as we don’t yet have estimated payments for demand driven funding – 2024 is the first year that metropolitan as well as regional Indigenous bachelor-degree students are financed on this basis. This creates disruptions to the time series for two of the three main CGS pots of money – demand driven and ‘higher education courses’, which covers all Commonwealth supported students except Indigenous bachelor-degree students and medical students.

Higher education courses are by far the largest CGS category. In 2024 maximum higher education courses funding will be $7.24 billion, $452.2 million or 6.7% more than in 2023.

Table A providers (i.e. each government-created university plus ACU and Notre Dame) get 99.5% of this money, while nine other providers get the remaining $34.3 million.

For designated courses, currently medicine only, the 2024 total is $413.97 million up 8.1% on 2023.

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The 2003 Cabinet papers and Brendan Nelson’s higher education reforms

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In the history of Australian higher education policy Brendan Nelson, the Liberal minister for education from 2001 to 2006, is perhaps under-rated. Several student funding structural changes he legislated 20 years ago are still in place. These include:

  • Student contributions set by universities up to a legislated maximum and going to universities (previously HECS was a fixed government charge);
  • A per full-time equivalent student Commonwealth contribution based on subject field of education (previously universities received an overall operating grant, which although informed by an early 1990s costing exercise did not directly tie money paid to discipline-level enrolments);
  • Commonwealth-university funding agreements as a method of allocating student funding to institutions, which made funding arrangements more transparent (but also turned into a backdoor instrument of policy and regulation that bypasses Parliament);
  • Through FEE-HELP, extension of student loans to full-fee undergraduates and students in private higher education institutions (the more limited Postgraduate Education Loan Scheme, PELS, was already supporting university full-fee postgraduates).

The 2003 Cabinet papers

The annual National Archives release of 20-year-old Cabinet papers, with the 2003 papers released earlier this week, gives us a look behind the scenes as Nelson’s reform package was developed and debated. Three digitised Cabinet documents record proposals and decisions, but not the Cabinet discussion. Sometimes, however, Cabinet thinking can be inferred from requests for further work and contextual material in the submissions.

This post focuses on changes to income contingent student loans.

The loan scheme that did not make it through Cabinet

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The 16 universities signing up to subsidise the nuclear submarine program

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Sixteen universities have, according to a media release today, been allocated places in 38 STEM-related courses intended to support the AUKUS nuclear submarine program. The government says it is investing $128 million over four years. In reality, however, universities will need to divert resources from other activities to support nuclear submarine training.

The 75% costing methodology

Universities will need to self-finance some AUKUS places due to what the program guidelines call ‘the standard 75 per cent costing methodology’. In the program’s second year its funding for the first year’s continuing students will be 75 per cent of their commencing year allocation, and so on in subsequent years until no money is left.

Some reduced funding to take account of student attrition is reasonable, but 25 per cent is not. Over the 2005 to 2020 period the proportion of domestic commencing bachelor students leaving their university after first year peaked at 18.4 per cent. Nearly half the nuclear submarine places went to Group of Eight universities, which have lower attrition rates than the national average.

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The dangers of single point of failure higher education systems

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When the entire Optus network went down last week – knocking out mobiles, landlines and internet connections – my new paper Job-ready Graduates 2.0: The Universities Accord and centralised control of universities and courses was in the late stages of production. If the Optus incident had happened earlier I might have included more on the risks of the Accord interim report’s proposed Tertiary Education Commission as a single point of failure.

A Tertiary Education Commission’s role in allocating student places

My new report builds on my earlier explainer of the Accord interim report’s proposals for distributing student places, focusing on how this would affect the relationship between higher education and skills needs.

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Mapping Australian higher education 2023 – official release

Andrew Norton2 Comments

Update 20/12/2025: More recent data here.

Mapping Australian higher education 2023 is now available from the ANU Centre for Social Research and Methods website.

Update 30/10/2024: There is a later version of Mapping 2023’s data here.

Update 26/10/23: A reader has pointed out that list of FEE-HELP NUHEPs is incomplete. A column of names from the original Excel file was omitted during production. The full list is available here. This list also includes three non-FEE-HELP providers registered by TEQSA since the pdf version was finalised. A corrected version of Mapping with the full list of NUHEPs, as of mid-2023, is here.

If anyone has noticed other errors please let me know.

Should funding be partly based on student characteristics?

Andrew Norton3 Comments

Australia’s higher education teaching funding system is primarily based on subjects rather than students. Subjects taken are converted into ‘equivalent full-time student load’ (EFTSL), the amount of study a full-time student does in an academic year. The funding rate per EFTSL varies by field of education, assuming that subject characteristics drive costs.

Various supplementary programs calculate funding on headcount equity students, but with trivial resources compared to the subject-driven funding programs, the Commonwealth Grant Scheme and HELP.

Funding on headcount?

One interesting idea in submissions to the Universities Accord review, especially suggested by regional universities, was to base more funding on the student. For part-time study one EFTSL could be two or more individual students. While their combined classroom time matches one full-time student, a student with 50 per cent of an EFTSL could put similar or even greater demands on other university services as a student at 100 per cent of an EFTSL.

In RUN’s submission they report a member university’s finding that, on average, their part-time students utilised eleven services compared to five for full-time students.

Older students are more likely to enrol part-time (chart below). Given the high rates of upper ATAR students going to university soon after school older first-time students must disproportionately be people with weaker school results. They plausibly have above-average needs for academic support to complete their courses successfully.

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How would student places be allocated under the Universities Accord?

Andrew Norton1 Comment

The task of interpreting the Universities Accord interim report is like that of a biblical scholar trying to extract meaning from fragmentary and sometimes contradictory texts. But building on my post on a universal learning entitlement, in this post I try to understand what kind of student places allocative system the report proposes.

Existing and possible Accord allocative systems

All funding systems need methods for determining total resources and then allocating them between institutions, courses and students. The chart below has the three allocative models currently in use – what I call technocratic, block grant, and demand driven – and the Accord model, which on my reading has elements of the technocratic and demand driven models. However these models are in tension with each other – technocracy puts experts in charge while demand driven funding is based on decentralised decision making.

DecisionTechnocratic (current system for medical students)Block grant (current system for most students)Demand driven (current system for bachelor degree regional Indigenous students with likely extension to all Indigenous students)Accord model?
Total number of places/dollars for each year (system level)Government decisionGovernment decisionUniversity and student decision. Aggregate outcome of student decisions (especially if universities have less control over who they admit).
Or aggregate of Tertiary Education Commission university allocations.
Total number of places /dollars for each universityGovernment decisionGovernment decisionUniversity and student decision.Aggregate of student decisions with full learning entitlement model, possible voucher system.
Or as negotiated/allocated by the Tertiary Education Commission.
Total number of places/dollars for each course or disciplineGovernment decisionUniversity and student decision.University and student decision.Target allocations for courses determined by Tertiary Education Commission.
Possible caps via aggregate voucher allocations/university-level enrolment caps on low priority courses.
Student-level allocative criteria, such as academic results or equity group status.Can be a government decision, but for medical students a university and student decision.University and student decision.University and student decision.Possibly a government decision through Tertiary Education Commission/national admission centre. Or keep current system but use targets to push unis to enrol more students, in general and from priority groups.
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The Universities Accord universal learning entitlement – how might it work?

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One Universities Accord interim report suggestion is a ‘universal learning entitlement’. But what would this mean, and how would it differ from what we have now?

The first part of this entitlement is to support Australians in obtaining a tertiary qualification. But it aims to go beyond ‘traditional targets’, such as for higher education or VET, to meet ‘a range of skills and other objectives’.

The interim report defines entitlement funding as ‘an appropriate combination of a public subsidy, a student contribution that would be paid through an income contingent loan … and, for some lifelong learning, an appropriate employer contribution’.

Current limits on higher education enrolments

While no Australian citizen is specifically disqualified from accessing a funded place in higher education, in practice three admissions-related obstacles can stand in their way.

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