Demand for university threatened as tuition fees set to sky rocket?

The grounds of Australian universities are filled to overflowing with students scurrying from class to class like crabs in shells of aspiration. The country’s top research universities, Melbourne, Sydney and Australian National University (ANU) are huge by world standards – typically enrolling 40,000 students, in comparison to American counterpart Stanford University with just under 16,000 filling their hallowed halls. With the Australian government’s budget cuts to higher education and plans to increase per-student contribution, some are concerned demand for degrees may drop and see the robust university sector fade to a skeleton.

Since the late 1980s in Australia, emphasis on private goods has seen continuing increases in student contribution towards the cost of higher education with tuition charges now among the highest in the world. Under the current higher education system, students who pay 40 per cent of their tuition fees do not have to repay it until they are earning over $50,000 annually. But with the government revealing it will remove caps on student fees from January 2016, Australian universities will be placed on a market-based footing, allowing for increased competition and fee differentiation between universities. The government’s plan is to cut tuition subsidy rates by 20 per cent overall, forcing students to contribute more.

Minister for Education Christopher Pyne told the Sydney Morning Herald the Australian education system, with its Higher Education Loans Program, is the “envy of the world”. He says the system should be deregulated. “I do think that there is capacity for students to contribute more to their own education, especially knowing that they are very likely to have an unemployment rate below one per cent, and also that they will earn, over a lifetime, 75 per cent more than a person without a university degree,” he says.

However, the picture-perfect notion presented by Minister Pyne is contested by Shadow Minister for Higher Education Kim Carr who told the Sydney Morning Herald deregulation “will make the system much less fair”. “Students and their families will have to pay more to get an education,” he says. While politicians are the face of reforms, economists have been deliberating the affects of deregulation on demand and supply behind closed doors for years.

In an eighth-floor office of Queensland University of Technology’s (QUT) business building Associate Professor Tommy Tang works away amidst masses of papers and books. He has been a university lecturer for 17 years and in this time has seen many changes to education regulation. Professor Tang reclines in his chair as he weighs up each side of the argument for fee deregulation, highlighting its complexity. “It’s more a case of balancing rational thinking in your head and some of the variable moral side of the argument, your heart,” he says.

However, if Minister Pyne is correct in saying students with a university degree will, on average, earn 75 per cent more than those without, Professor Tang says the demand for university education should not be significantly affected. “If the private benefit that they receive is greater than the cost they have to bear, they would be more than happy to continue to go to uni,” he says.

Yet 15,000km across the pacific, American freshman have already experienced deregulation. Depending on the course and prestige of the university they attend, students face fees from between a few thousand dollars to just under $50,000 per year.

In the absence of research that directly applies to Australia, Professor Tang says studies on the US model of higher education have shown the burden on students over the last 30 years has remained fairly constant despite deregulation. “If that’s anything to go by then I don’t think the demand for university education (in Australia) would be reduced due to deregulation,” he says. However, Professor Tang highlights that, with the highest level of income inequality in the OECD and over $1 trillion in student debt, “not everyone wants to emulate America”.

On the frontline, Principal Policy Advisor of QUT Dr Lawrence Stedman addresses a group of third-year QUT students preparing to take on the real world. He says he does not see the benefit of future students having $60,000 debts. “It’s quite a burden for people at a critical point starting out their professional lives,” he says.

If the plan to deregulate student contribution goes ahead, time will tell the true affects on student demand for education. In the meantime, students are caught in a tug-of-war with the failed American dream and Australian nightmare. The only certainty they can grab a hold of is that judgement day will come.

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