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How will universities set their fees in a deregulated market?

26 Aug 2014, by Informa Insights

In the May budget, the Abbott government announced plans to deregulate tuition fees at Australian universities, allowing higher education institutions to set their own course prices from 2016.

Plans to cut government contributions for undergraduate student education by 20 per cent were also unveiled, essentially passing the cost of going to university onto learners themselves.

Other proposed reforms included making students pay back debts under the Higher Education Loan Program (HELP) more quickly and increasing the interest rates on borrowing.

The changes have been met with mixed reactions across the education sector, particularly as universities will have no cap on the fees they can potentially charge.

g08-logoAustralia’s Group of Eight (Go8) universities have welcomed the news. These prestigious education centres consist of the Australian National University (ANU), Monash University, and the universities of Sydney, Melbourne, New South Wales, Queensland, Adelaide and Western Australia.

It is expected that these well-known institutions are the most likely to benefit from the proposed reforms, as their reputation will enable them to set fees at a premium.

Ian Young, vice-chancellor of the ANU and chairman of the Go8, claimed the changes would be advantageous to the whole market, including non-Go8 universities and students.

He said Go8 members would likely lower their enrolment numbers as they increase fees, meaning other higher education centres could gain access to a wider pool of talent.

“We have created a perverse incentive that rewards universities for enrolling as many students as possible and teaching them as cheaply as possible. That’s what our current system does,” he said.

“For students to have real options and real choices, we need real diversity among our universities.”

How high will fees go?

The question on many people’s lips is how high will university fees climb if the market is deregulated?

Experts claim it is almost impossible to tell, although it is almost guaranteed that all universities will increase their fees because failing to do so would cost them money.

As previously mentioned, the Go8 universities are likely to bump up fees the most. However, a more accurate calculation could be difficult.

Bruce Chapman, director of policy impact at the Crawford School of Economics and Government at ANU, said this is a world-first set of reforms, so there is no precedent to examine.

“We can expect to see domestic fees increase both significantly and rapidly from 2016,” he told The Conversation. “How fast and by how much we just can’t know.”

Despite this, Mr Chapman said it is unlikely that domestic fees would exceed current prices for international students, which are around 2.5 to three times higher at the moment.

The potential impact on students

Give me back my futureThe proposed reforms are likely to have a huge impact on students, with many critics claiming they could discourage already disadvantaged individuals from furthering their education.

The National Tertiary Education Union (NTEU) predicts course tuition fees will climb by 33 per cent at least, while social science degrees could jump as much as 59 per cent in cost.

Medical course fees may climb as high as $180,000 for a three-year course, up from current averages of just over $60,000. Similarly, law students would see costs rise from around $50,000 to $120,000.

Changes to HELP are expected to increase the expense of attending university even further.

NTEU estimated that a three-year accountancy degree for students currently taking advantage of the scheme would cost $30,255 in tuition fees. With no real interest charged, this would take approximately a decade to pay back.

The same degree in 2016 could cost $75,000 in tuition fees, plus a further $24,000 in interest on loans, resulting in a total of $99,000.

Under the new higher education reforms, the Government will cut public funding by 20%, and universities will rely on the market-based competition which, in theory, will effectively determine the cost of a degree, so that universities can set the fee for their courses accordingly.

Want to know more about how the reform will impact the Australian higher education sector?

Be part of the 9th Annual University Governance and Regulation Forum, and share your opinions and ideas with like-minded professionals.


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