Category: Higher education

Will the new Student Start-up Loan save money?

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Today the Liberals introduced legislation for Labor’s conversion of the Student Start-up Scholarship into a new income-contingent loan, the Student Start-up Loan.

Overall, its design is closely linked to the Higher Education Loan Program (HELP). However, people who take out SSLs will not have to start repaying until after they have repaid their HELP debt. Potentially, that is not for a very long time.

Experience with the former Student Financial Supplement Scheme, under which students could trade in $1 of income support for a $2 loan, suggest that there is significant adverse selection with income support loans.

From figures given during discussion of closing the SFSS down in 2003, I estimate that about $2.7 billion was lent between 1993 and 2003. The Department’s annual report for 2012-13 says that $1.8 billion is still owed, of which they class 63% as doubtful debt. Doubtful debt for HELP is estimated at 23%.

Presumably this is from a mix of people taking out loans they never expected to repay and income support entitlement being a proxy for other characteristics that put people at above-average risk of being bad debtors.

In this case, the Commonwealth can’t be financially worse off. This is a loan replacing a grant, so long as repayments exceed administration costs they will come out ahead.
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Does HELP kill price competition?

Andrew Norton3 Comments

In The Australian this morning, Bruce Chapman returns to one of the few topics on which we disagree: whether there can be price competition under an income-contingent loan scheme.

“Price competition is not on because the behavioural responses are close to nothing,” Professor Chapman said. “Governments should set the fee where they think it’s fair.”

We need to be careful here in distinguishing different circumstances.

I think Bruce is largely right for the school leaver market and the yes/no decision as to whether to go to uni. This has been confirmed again by recent British experience. Despite a near tripling of average fees, demand from 18 year olds is at near-record levels.

But that is not the same as saying that prospective students do not take price into account in comparing similar programs. The figure below compares MBA costs at different unis in the Melbourne and Sydney markets (Melbourne’s MBA is very expensive, but its pricing structure is so confusing that I have not included it on annualised basis). There are fairly predictable patterns based on reputation and prestige. But Deakin, RMIT, UTS and UWS get themselves into the market by charging more affordable fees.

MBA fees

It has to be true that HELP fosters higher fees. As with any loan system, it increases the number of people with enough capital to buy. But that does not mean that particular institutions will not compete on price. Strict price control is unlikely to be desirable, because it puts less-prestigious unis at a competitive disadvantage and limits scope for product innovation.

To me the policy question is whether supporting the very high fee courses with HELP is sensible investment in human capital, or whether it is just supporting largely wasteful status competition between universities.

New book on the Dawkins higher education revolution

Andrew Norton2 Comments

Last night The Dawkins Revolution 25 Years On, which I co-edited with Simon Marginson, Julie Wells and Gwil Croucher, was launched by the Chief Scientist, Ian Chubb, with a right of reply by John Dawkins himself.

In my chapter on the Coalition, I described Dawkins as the most important education minister yet to hold office. Gillard’s combined tenures as education minister and then prime minister might yet see her take that title, but for now it is both the scale and durability of what Dawkins did that puts him in the top position.

These include:

* The mergers of many institutions and the transformations of former colleges of advanced education and institutes of technology into universities (discussed in chapters by Simon Marginson and Ian Marshman and Gavin Moodie).

* The introduction of HECS (discussed in a chapter by Bruce Chapman and Jane Nicholls).

* The introduction of a system of setting funding rates by discipline that is still the basis of today’s rates (discussed in a chapter by Ross Williams).

* A substantial expansion in student numbers (discussed in a chapter by Richard James, Tom Karmel and Emmaline Bexley).

* Increased the role of competitive grants in funding research (discussed in a chapter by Gwil Croucher and Frank Larkins).

* Contributed substantially to the opening up of Australian higher education to international students, including a prior period as trade minister (discussed in a chapter by Margaret Gardner).

* Started deregulation of postgraduate coursework markets.

Most reforms since then have built on the foundations of Dawkins. As I argue in my chapter, the 1999 Kemp reform proposals (which I worked on as his higher education adviser) were the only major attempt to over-turn Dawkins in favour of a more market-driven system.

Those reforms were destroyed after the Cabinet submission was leaked to Labor. Ironically, it was Labor ten years later that introduced a version of the ‘voucher’ system proposed in 1999.

Should the HELP debt be sold?

Andrew Norton2 Comments

The government is now hosing down yesterday’s speculation that the accumulated student HELP debt will be sold.

There are good financial reasons for not selling, as Matt Cowgill explained yesterday. Investors would only buy the HELP debt if they could get it for less than they thought it was worth, in which case the government should not sell unless it is desperate for cash. But for now at least financial markets are willing to lend to them at low interest rates.

I believe that there are also good political reasons not to sell now. HELP’s costs are very high, mostly at the moment due to a prediction that 19% of new loans will not be repaid (at p.93 of the portfolio budget papers). Due to the low interest rates government is paying at the moment that is not currently a big expense. But with total debt likely to be over $30 billion now, even small increases in government bond rates can translate into major additional outlays.

These costs need to be brought down. But rule changes to benefit investment banks will not be an easy political sell. It’s hard enough to sell public interest rule changes that help bring total government spending back down towards total government income.

New data on the close link between SES and university attendance

Andrew Norton1 Comment

I’ve criticised the government’s exclusive focus on attracting more university students from the lowest 25% of geographic areas, as measured by an index of education and occupation. I had found several data sources suggesting that educational achievement in the second-lowest quartile wasn’t much better than in the lowest quartile.

Today the ABS released an update to its online 2011 census package that lets us classify students according to their socioeconomic status ($$$ if you want access). I calculated university attendance rates for 20-24 year olds by SES deciles, with one the lowest and ten the highest.

I think my general point stands: there are low rates of university attendance well above the lowest 25%. Someone in the 4th decile is well above the lowest 25%, but still only has a third of the likelihood of attending university as someone in the top 10%. Even removing early school leavers from the analysis, their chances of attending university are still less than half those of someone in the top 10%.* We need a re-investigation of the role poor school results versus other factors play in this outcome.

uni attend 20-24 take 2

However, the data is less lumpy than I expected. There is the upper middle class at deciles nine and ten with high rates of education and professional employment which is quite different from the rest of the population. But below that attendance rates do slowly but steadily increase as people move up the SES spectrum, without the large and weakly-differentiated lowest 50% I expected from other sources.

* The decile differences are somewhat exaggerated due to students who move from low SES areas, especially in regional areas, to live near universities which are in high SES areas.

What do high-ATAR students study?

Andrew Norton4 Comments

The Australian‘s Higher Education Supplement ran a story this week on how high-ATAR Victorian students chase a narrow range of courses and unis. It was based on research by La Trobe’s Andrew Harvey.

The national applications data shows how this produces a counter-intuitive outcome: applicants with ATARs above 90 are persistently less likely to get an offer than students with ATARs of 80-90 or 70 to 80. The 2012 offer rates were, respectively: 91%, 97%, 96%.

It means that a few per cent of the 90+ students take all or nothing gambles. Even though there are hundreds of courses that would accept them, they only apply for one or a small number, and some of them end up missing out. Presumably most of them learn a lesson about hubris and put in a more realistic application the following year.

Andrew H also comments that “the progression of elite students into a narrow range of courses and universities arguably has a distortionary effect on the workforce and society.”

While I partly agree with this, data I received from DIICCSRTE (I hope this name will soon change) on the ATARs of first-year students suggests that the top-performing school leavers are more spread across the disciplines than the applications data might suggest.

The figure below has the 2011 ATAR for a student admitted at the 90th percentile of everyone taking that subject, or in other words with just enough to put them in the top 10%. It just shows those where the 90th percentile is at 98 or above. Surprisingly, radiography is at the top and maths is second (though there are few specific maths courses). From the arts, language and literature is there. If we drop down to 97, politics, history and the performing arts are all there.

90th percentile admissions

Teacher education has a 90th percentile of ATAR 90, with a median of 75. Not spectacular, but far from the very low cut-offs at some unis that attract so much attention.

The complicated university teaching-research relationship

Andrew Norton3 Comments

In The Age this morning, Don Aitken argues that university teaching has come off second best. ‘Today research, and only research, is really important,’ he says.

I certainly think that university teaching needs improving. But the story is not one of the decline of teaching and the rise of research, with one improving at the clear expense of the other.

Up until the Dawkins reforms of the late 1980s and early 1990s more than half of higher education students attended colleges of advanced education or institutes of technology. Their mission was teaching rather than research, although some of their academics were doing research. The universities were teaching-research institutions, but with weaker research pressures than today. Most research funding was delivered as a block grant that was (unlike today) not linked to indicators of research performance.

If the teaching-focused colleges of advanced education and institutes of technology were good at teaching, we would expect their positive legacy to show when the first national student survey (the course experience questionnaire) was conducted in the mid-1990s. In reality, the CEQ showed generally dismal results. Across the country, the average positive response to six teaching-related questions was around one-third.

As the government started emphasising research performance in its funding policies, the apparent incentive was to focus on it over teaching. But this is not showing in the trend data (the figure below). The time series was was upset in 2010 in ways that exaggerate satisfaction compared to the past, but the steady upward trend in satisfaction cannot be disputed. (Some theories as to why are here.)

GTS

A consistently calculated time series on research productivity only goes back to 1997. It shows steadily increasing productivity up to 2005, where it stablises at an average 2.1-2.2 publications per full-time researcher per year (counting teaching-research staff as 0.4 full-time equivalent in research, in line with common time use expectations).

Publications per academic

Rather than research rising at the expense of teaching, on these indicators they both rose together until the middle of last decade. In research, the focus has shifted to research quality – it’s still too early to put numbers on it, but simultaneous with on-going increases in satisfaction with teaching universities are culling weaker researchers and focusing their investment in areas of relative research strength.

As well as it being difficult to find evidence for research at the expense of teaching over time, our recent Grattan research project failed to find much evidence that low-research departments are better at teaching than high-research departments, as measured by recent student surveys.

My view is that at the dawn of the Dawkins era universities were under-performing institutions, across both teaching and research. Research was further down the path of professionalisation and favoured in academic culture. But both teaching and research needed to improve a lot, and that is what we have seen.

Just removing research and making some universities ‘teaching only’ would not on its own make things better. Improved teaching needs concerted effort, whether or not it occurs in an institution that also produces research.

Why is student satisfaction with teaching increasing?

Andrew Norton2 Comments

My new Grattan report argues that teaching in Australian universities could be improved. But despite remaining shortcomings, I think significant progress has been made since the 1990s.

We often hear that with higher student-staff ratios Australian academics have less time to spend on students. But in the long-running course experience questionnaire survey it is the time-use questions that have shown the greatest improvement over time.

The figure below shows that the proportion of completing students agreeing that staff ‘put a lot of time into commenting on my work’ and ‘normally gave me helpful feedback on how I was going’ has roughly doubled since 1997.*

feeback questions ceq

I think a major explanation is likely to be technology. The increase last decade matches with the spread of home internet connections. Academic staff became much more accessible via email and learning management systems than they had ever been before, and were also able to efficiently give the same or similar feedback to multiple students.

There were also good improvements (20 percentage points plus) in agreement with propositions such as lecturers were good at explaining things, teachers motivated me to do my best work, and staff worked hard to make their subjects interesting. These are not so obviously technology driven, suggesting that other forces for good teaching were at work.

These might include the spread of subject-level student surveys and their link to promotion and greater (though still typically very short course) training in university teaching.

Whatever the exact causes, these results highlight how increasing funding is not necessarily the key to improved education. Through most of these years, real per student funding for Commonwealth-supported students was declining. How universities organise themselves is the most important factor.

* All five points on the response scale were labelled for the first time in 2010, with points labelled strongly disagree, disagree, neither agree nor disagree, agree and strongly agree. In previous
years, only the anchor points of strongly disagree and strongly agree were labelled. This seems to have increased positive responses.

The persistence of health and education students

Andrew Norton2 Comments

I recently received some new data on completion and attrition rates by ATAR, a surprisingly under-examined topic in Australian higher education. My Mapping Australian higher education publication summarises research suggesting a weak relationship between ATAR and average marks. However, data on 2005 commencing students shows a quite strong relationship beween ATAR and completion – the higher the ATAR, the higher the chance of completion. The whole cohort data is in this article.

We also have the data by field of education. Most disciplines have the same general pattern. But two, health and education, have higher persistence at lower ATARs, as can be seen below.

health ed atar completion
Source: DIICCSRTE

The same two broad fields of study also have graduates with high rates of retention in jobs related to their field of study, as seen in the chart below.

Degree job relevance

I’m inclined to think that the main reason is that people who choose these degrees have a relatively high degree of commitment to the end occupation from day one. A colleague notes that this may in part be because students in these fields don’t necessarily have many attractive alternatives. For people with lowish ATARs who don’t want to do voc ed, teaching and nursing have been paths to relatively secure and reasonably paid careers.

What other degrees do science graduates hold?

Andrew Norton1 Comment

This morning The Conversation ran another article by me on the employability of science graduates.

I used some data from the ABS Learning and Work survey. Unfortunately access to their micro-data is not free, but it does allow more detailed exploration of graduate qualifications and outcomes than most other sources. Most ABS surveys, for example, just ask about a respondent’s highest qualification. Learning and Work asks about multiple qualifications.

Learning and Work estimates that there are about 348,000 people with a bachelor degree in science. However, 35 per cent of the report as their highest degree either a postgraduate degree in science or a degree in another field. The most common other fields were education, management, health and IT. [Note: The figures in the table were corrected on 24 June. The figures in the text were correct.]

corrected science

So while employment prospects in some disciplines are sometimes not great, people often adapt to this by seeking higher or different qualifications that improve their job prospects.