Fact Check: what do students contribute to their own degrees?

Education Minister Christopher Pyne said during parliament question time:

We are asking students to make a contribution to their own tuition fees. We are asking them to contribute, for those who enrol since 14 May, around 50-50 of the cost of their higher education. At the moment students contribute on average around 40%, so that more than 60% of Australians without a university degree are paying almost 60% of the cost of those students who are at university and those students will go on to earn 75% more than people without a university degree on average over the rest of their lifetime.

The ABC fact check unit found there was data to support the claim that graduates go on to earn 75% more over their lifetime, but concluded the precise figure was contestable and the claim was overblown.

But how true is the rest of this statement? What do students currently contribute to their tuition? And what will they contribute after the budget’s changes are imposed?

Gwilym Croucher, specialist in higher education policy

Minister Pyne is broadly correct when he states that on average 40% of the funding a university receives for a Commonwealth-Supported Place is from the student, with the rest funded by the government. This total amount does not cover the full cost of delivering a university degree, as the government contributes funds through additional schemes.

However, the exact amount each student funds depends on the course they take, as different areas of study are funded at different rates by the government and student. For example, law students pay most of the total amount funded for their place, with the government currently only funding around a fifth. Whereas for a medicine student, the government funds about two-thirds of the place, with the student funding the rest. The 40% figure is an average for all students, which can change depending on how popular different courses are at different points in time.

During the 20th century students have contributed different amounts, as this chart from the Commonwealth Government’s Base Funding Review shows

Under the system proposed by the government, the amount it funds for each study area will reduce by an average of 20% in real terms in 2016. Some areas such as engineering will suffer a larger reduction. Universities will be free to charge students any amount they wish on top of this funding, so a student could end up paying more or less, depending on what the university decides it needs to charge to deliver the course and compete for students.

The costs of course delivery are more difficult to assess. Degrees such as medicine are much more expensive to deliver than “chalk and talk” degrees like law or business. The exact costs of every degree are difficult to assess, however, and universities wouldn’t want to advertise the exact costs for commercial reasons.

Verdict

Minister Pyne is broadly correct in that students currently contribute on average 40% to the Commonwealth-Supported Place. However, post-budget we’re yet to have a ballpark figure on what universities will charge so it is only an assumption the contributions will be 50-50. We don’t yet know what contributions will be until universities set their fees in a newly deregulated environment.

Review

Gavin Moodie, Adjunct Professor of Education

There are four parts to the cost of a university degree. First is the Australian government’s contribution or subsidy for each university place. As Dr Croucher notes, this currently differs for each discipline, ranging from a low of $1,951 per full-time equivalent year for accounting, administration, commerce, economics and law, to a high of $21,273 for agriculture, dentistry, medicine and veterinary science.

The second part of the cost of a university degree is the student’s contribution or fee. These also differ by discipline. The Australian government currently sets maximums, ranging from $6,044 per equivalent full-time year for the creative arts, education, foreign languages, humanities, nursing, psychology and social studies to $10,085 for business, law, dentistry, medicine and veterinary science.

Parts one and two make up the total funding universities receive for each place that Dr Croucher refers to. Dr Croucher is correct in observing that on average students pay 40% of this funding. He is also correct to observe that this may change if, for example, there is an increase in the proportion of business and law students who contribute 84% of the funding for each place and a fall in the proportion of agriculture students who contribute 29%.

However, Pyne referred to “the cost” of higher education and to consider this we need to include parts three and four. Over 80% of students participate in the Higher Education Loan Program (HELP) to pay their fees, and the costs of this are parts three and four. Part three is the interest rate. This is currently set at the Consumer Price Index, which broadly preserves the real value of HELP debts. The government wants to pass on to students its borrowing costs, which it sets as the government’s 10-year bond rate.

Part four of the cost of higher education is the loans that aren’t repaid fully. The government estimates that 17% of new debt in 2013-14 won’t be repaid and that this will increase to 23% in 2017-18. This cost could be recovered by charging borrowers a loan fee but the government announced that it is removing the 25% loan fee that is currently charged for FEE-HELP. In Graduate Winners Andrew Norton estimates that if 17% of HELP debt isn’t repaid the government’s share of the total costs is around 67%, making students’ average share a rather lower 33%.

Therefore Pyne overstates students’ contribution to the full cost of their degree, although he correctly states students’ contributions to the total funding universities receive for each place. Dr Croucher is correct that there are too many unknowns to determine the accuracy of Pyne’s statement that with the budget changes students would contribute 50% of the cost of their degree.

The government has announced an average cut to its contribution of 20%, which would require an average fee increase of 30% for universities to maintain their total funding. But universities may increase their fees by much more than that, which may be offset somewhat by higher levels of unpaid debt.

Gwilym Croucher is a higher education policy analyst in the office of the Vice-Chancellor at the University of Melbourne

Gavin Moodie is an adjunct with RMIT which is likely to benefit from the changes announced in the Commonwealth budget.