Since it came to office, Labor has deferred dealing with Job-ready Graduates student contributions. First it added student contributions to the Universities Accord list of issues. In February 2024 the Accord Final Report suggested basing student contributions on lifetime earnings. Subsequently the minister said the new Australian Tertiary Education Commission would provide advice. Now we have ATEC’s legislation, but how student contributions will be handled is less clear than I expected.
All legislative references, unless otherwise specified, are to the Universities Accord (Australian Tertiary Education Commission) Bill 2025.
The ATEC bill and per student funding
The ATEC bill does not mention student contributions at all. One of ATEC’s functions, however, will be to advise the minister on:
“The efficient cost of higher education across disciplines and student cohorts and in relation to the Commonwealth contribution amounts for places in funding clusters.”: section 11(d)(ii), section labelled “Functions of the ATEC”.
In different words, in a later section on “Advice and recommendations”, a topic of advice is:
“The costs of teaching and learning in higher education and overall higher education funding amounts, including on a per student basis.”: section 41(1)(b).
Recently the Department of Education published 2021-2022 data on payments under the Higher Education Continuity Guarantee, a 2021-23 Coalition program to compensate universities for under-enrolments. It has previously released data on a predecessor program, the 2020 Higher Education Relief Program.
It shows that over the 2020 to 2022 period under-enrolments cost the Commonwealth nearly $550 million. On my estimates the sector under-enrolled by approximately 47,000 places. Eight universities were under-enrolled in each of 2020, 2021 and 2022. Only four universities received nothing under the HECG or HERP, showing that enrolment shortfalls were widespread across the sector.
What is under-enrolment?
Under the Higher Education Support Act 2003 universities get paid their maximum basic grant amount (MBGA) – see my funding agreement posts for more detail on this – or the value of their Commonwealth supported places delivered (on a relevant Commonwealth contribution * EFTSL basis), whichever is lower.
During the COVID period the Coalition decided that it would let universities keep their MBGA even if they had not enrolled enough students to justify it. This was called the Higher Education Relief Program in 2020 and the Higher Education Continuity Guarantee 2021-2023. The purpose was to provide stability for universities during COVID and post-COVID enrolment turbulence.
There is a 2024-2025 program called the HECG, but it is a redirect of money to equity programs and has nothing to do with the original purpose of the HECG.
With universities back job shedding, academics and their unions are looking for someone to blame. University leaders and consultants are being attacked for poor decisions. The government also gets criticised. UTS history professor Anna Clark says that over the last twenty years ‘we have seen gradual, steady decline in government investment across the sector’. In his recent lament Broken Universities, Graeme Turner says that there has been a ‘steady decline in the levels of funding per student’.
Five years ago, early in the COVID crisis, I wrote a post about government ‘cuts’. This post is an update.
Funding for Commonwealth supported students
As my earlier post noted, time series data is not straightforward. The chart below focuses on the major student funding programs, in today’s terms the Commonwealth Grant Scheme (CGS), HECS-HELP, and upfront student contributions. These funding sources have always had a link to the number of full-time equivalent Commonwealth supported students, although historically the money they delivered supported research as well as teaching expenditure.
Around these core funding sources other schemes serve the same purpose (e.g. transition funding) or similar purposes (e.g. NPILF). The chart below includes the Job-ready Graduates (JRG) transition funding and but excludes NPILF. It includes money paid from the Higher Education Continuity Guarantee, a COVID measure still in place for universities that ‘under-enrol’ that would normally face a CGS penalty. From 2021-2024 the time series excludes the enabling course loading that was previously in the CGS but moved to IRLSAF. But this funding is back in the CGS in 2025 due to the FEE-FREE Uni Ready places. The regional loading remains out from 2021 as it is still in IRLSAF and will join needs-based funding next year.
Overall my time series goes for simplicity over a full count of expenditure on student-related programs. In the time series, one big structural change should be noted, which is research student funding moving to a separate program from 2001, which caused a significant but artificial year-on-year decline.
Trends in total funding
Focusing on recent times, in nominal dollar terms total CGS funding dipped between 2021 and 2022, which was mostly short-term COVID places coming out of the system. HECS-HELP lending fell between 2020 and 2021, driven by the strange decision to pass on reduced JRG student contribution rates to all current students but to grandfather increased student contribution rates, so that only 2021 and later commencing students pay them. HECS-HELP lending fell again in 2022, with lower student numbers also affecting revenue from a university perspective.
Last week the government introduced legislation that would, among other things, create a new funding category for what we now call enabling courses, which will be redesigned and rebadged as FEE-FREE Uni Ready places. These courses help prepare students for higher education study.
The current system
Under the current system, Commonwealth supported enabling places are funded at the Commonwealth contribution rate for the relevant discipline.
Enabling places are not capped but the financial incentives to enrol enabling CSP students are weak because no student contribution can be charged.
An enabling loading is paid in lieu for universities with an allocation of enabling funding, but many universities have no enabling loading or a low amount.
The government does not seem to update the enabling loading in a public place, but indexing a previous rate I think it is $3,886 per EFTSL in 2024.
Job-ready Graduates affected the financing of enabling places in fields with Commonwealth contribution cuts. Nearly 40% of enabling places are in the lowest Commonwealth contribution field, $1,236 for 2024. That plus the enabling loading = $5,122 per place.
With arts, business and law student contributions to hit nearly $17,000 a year in 2025 – with our bout of inflation having increased them from $14,500 in 2021 – students would be wise to think about whether this is a sensible investment. That’s $50,000 for a basic 3 year degree or $85,000 for common combinations like arts/law or business/law.
The most sophisticated work to date, using NSW data to 2021, found small effects in the expected directions.
Using simple trends in subjects taken, this post will look at domestic commencing EFTSL by discipline in the 2010-2022 period, drawing on the annual commencing load spreadsheet produced by the Department of Education. This does not distinguish between CSP and domestic full-fee students, but it is the best I can do with publicly available data.
Because I am comparing fields with very different absolute enrolments, I have converted them to an index, with 2010=1. So an index of 1.1 in a subsequent year would mean 10% more EFTSL, and an index of .9 would mean 10% fewer EFTSL.
The Accord implementation consultation paper on need-based funding for equity group members was released late last week, although students with disability will be discussed in a later consultation document. That leaves low SES, Indigenous and students at regional campuses for this paper.
When the Accord interim report came out I rated the principle of needs-based funding as one of its better ideas. But turning it into policy faces significant conceptual, practical and ethical issues. The consultation paper does not resolve these issues.
Funding based on needs versus equitygroup membership
The basic conceptual problem, in the Accord reports and this consultation paper, is that it remains unclear why needs-based funding should apply only for students designated as equity group members. With the exception of people with disabilities that require adjustments for them to participate in higher education, none of the equity group categories identify personal disadvantage. As the Accord report itself notes, groups other than the equity four are ‘under-represented’ in higher education.
The higher education system should help all its students achieve success, not just those that for historical reasons are included in the equity group list.
Many of the outcome differences we observe are the by-product of mass higher education, which brings a wide range of people into the system. There are more people who were not especially ‘academic’ at school, more people who have trouble financing their education, more people who have major responsibilities other than their studies. In a mass higher education system these students are core business.
Based on the Universities Accord interim report I was concerned that its proposed tertiary education commission would be highly interventionist, controlling university enrolments to meet the government’s equity, attainment and skills targets. I called it Job-ready Graduates 2.0.
The Australian Tertiary Education Commission proposed in the Universities Accord final report is – I think, a lot of detail remains to be seen – considerably better than the version of my policy nightmares last year.
The overall funding system would have more central steering than now, but on my reading ATEC probably will not routinely micromanage – that university A must offer B places in C course and fill them with students meeting criteria D, E or F. That was the approach of recent ad hoc student place allocations, such as the 20,000 new places for skills shortages and equity groups. The Accord final report admits that these places won’t be used. Even without recent soft demand, every condition added to a student place reduced the chance that a student could be found to fill it.
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.
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
Earlier this week I made my first submission to the Universities Accord review. One issue the submission covers is whether Job-ready Graduates policies can meet demand from the so-called Costello baby boom birth cohort. This post looks at how large variations in Commonwealth contribution rates and misaligned systems of indexation could affect overall growth in student places. A subsequent post looks at the geographic distribution of places.
The relative value of Commonwealth contributions
Job-ready Graduates combines a fixed maximum basic grant amount (MBGA) for higher education courses (all CSP coursework except medical places and places for regional Indigenous bachelor degree students) with Commonwealth contributions that vary between disciplines. The maximum funding a university can receive for higher education courses is the lesser of their full-time equivalent places delivered multiplied by the relevant Commonwealth contributions or the MBGA amount in its funding agreement.
This system creates trade-offs between opportunities for students, which are maximised by focusing on the courses with the lowest Commonwealth contributions, and meeting skills needs, with skills shortage occupations typically requiring graduates from courses with higher Commonwealth contributions.
Trade-offs were already a feature of the pre-JRG funding system, but JRG exacerbated them as the chart below shows. One new place in a funding cluster 4 course (medicine, dentistry, agriculture) costs 24.6 places in funding cluster 1 course (business, law, most humanities and social sciences). Under the pre-JRG system the highest funding cluster was 10.9 times the lowest funding cluster; still high, but a less extreme trade-off than under JRG.
We don’t yet have 2021 enrolment data to see where enrolments are moving by discipline. A move towards the higher Commonwealth contribution fields will consume more of the available funding, leaving less money to finance additional student places.
I don’t believe this is an immediate major issue. System capacity may be down on 2020 JRG projections but so is domestic demand, due to a strong labour market and flat or falling numbers of school leavers with an ATAR in the big states. But increased school leaver numbers due to a larger birth cohort will push demand up again in the mid-2020s.
Andrew Norton 