How Much Will University HELP Fees Increase?

How Much Will University HELP Fees Increase?

Proposed changes to university fees mean most students will pay more — but just how much more? Analysis for The Conversation suggests that science students, nurses and female graduates will be particularly hard-hit.

University picture from Shutterstock

Various organisations have modelled the likely fees and debts students are likely to face in a deregulated environment since the release of the budget last month. The National Tertiary Education Union (NTEU), the Greens, education minister Christopher Pyne’s office and Universities Australia have all released modelling on likely outcomes.

The Conversation has asked NATSEM to look at the various modelling attempts and how they came about, and do some numbers of our own.

The true extent of university fee increases is not yet known, but we do know the increases are likely to be significant and will mean that for many students the repayments of their HELP loans will be larger and take longer to pay off. Deregulation of fees will have different impacts on students depending on gender and the course of study.

For certain degrees, such as science, there is the potential for the time taken to repay a loan doubling and the total dollars repaid to almost triple.

What have other estimates said?

Immediately following the budget, a number of groups tried to unpack the impacts of the reforms. The response of the government suggested an increase of only "$5 per week" for a graduate.

This analysis assumed no increase in fees for students and that the interest rate charged would be the current Treasury bond rate of 3.8%. The current bond rate is at near-record lows and it is not realistic to assume this low rate will remain for decades to come.

The Greens created an online calculator that tells existing, future, and past students the changes they can expect to their fees and debt. They used calculations on reform impacts to repayment costs by Andrew Norton from the Grattan Institute. These estimates are based on a more realistic assumption of a 4.9% bond rate and assume strong fee increases relating to deregulation.

The NTEU's analysis is a similar methodology to that of the Greens and finds significant increases in the repayment time and dollar repayment as a result of the reforms.

The main differences from the Greens analysis are the assumed graduate incomes and the extent of fee increases. The NTEU finds the most significant "maximum" impacts for high demand degrees such as business, law, and medicine and other health-related degrees. These maximum impacts will only become a reality if universities lift their degree prices significantly beyond current levels.

NATSEM's calculations

Under the current fee structure, a new male business student at the University of Canberra would expect to pay off a three year degree in 7.3 years; a female would take 8.6 years.

Assuming the university simply recovered costs from the government's planned funding reduction the payoff years would increase to 8.2 and 9.7 years respectively. Total repayments increase for males from around $36,200 to $45,700 and slightly higher for females ($37,100 to $48,400).

However, business students already pay a larger proportion of the cost of their degrees then many other courses. The payoff times and total repayments are significantly higher for science, nursing and teaching degrees -- particularly for females. A female science graduate under a full fee scenario would pay off her degree in 13.9 years, up from 8.4 years. Her total repayments will increase by an estimated $51,500: from $44,200 to $95,700.

We took a similar approach to both the Greens and the NTEU, however we tried to use various fee scenarios, rather than trying to forecast what fees would be. The actual extent of fee increases is at this point unknowable although certainly expected to be significant.

Our modelling has shown that the impact will be felt most strongly for low-pay occupations such as nursing or education, and across the board the impacts are larger for females. The impact may be modest for some degrees with strong post graduate incomes and fees that already match up quite closely to the cost of the degree such as business or law.

We analysed a range of typical courses for the University of Canberra and considered the impact on repayments for students. We assumed that students will face a repayment interest rate of 5% which is around twice that of the CPI (the existing indexation) but lower than the typical 10 year Treasury bond rate (the proposed loan interest rate) of 6% over the past decade.

It is important to recognise that graduates from different fields and males and females have very different income trajectories. For example, we estimated in 2014 a male business graduate at 30 has an average income of around $112,000 per annum compared to $74,300 at 25 years. This compares very favourably to a female nurse who, at 30, earns $57,900 which is less than when she was 25 ($62,100).

An important driver of this difference is that female income trajectories are impacted by motherhood while males enjoy strong growth in incomes through their late twenties, thirties and beyond. Occupations that are dominated by females such as nursing and teaching are also occupations with relatively poor prospects for income growth.

What if unis raise their fees beyond just recovering lost government subsidies?

There is the possibility that universities in a deregulated market could increase fees beyond the current funding envelope. We estimated the impact of a price increase of 20% beyond current costs.

Here, the impacts are again strongest for degrees with relatively low income prospects and for females. Female science graduates would be expected to continue paying off their student debt for 16.4 years, up from the current 8.4 years. Her repayments would nearly triple from $44,200 to $123,000 and initial debt would double from $39,700 to $79,700.

These scenarios don't include single parents who would be in a significantly worse position. With a higher interest rate and potentially several years out of the work force or working part-time (and thus not paying off the debt) it would be highly likely that such persons, particularly for high-fee and lower income occupations could be paying off their degrees for well in excess of 20 years.

In spite of the likelihood of large fee increases and longer repayment times the payoff from university degrees should be expected to remain higher than the costs. The AMP.NATSEM report What Price the Clever Country estimated that the average degree holder receives a dividend in lifetime earnings of around $1.5 million.

The potential wrinkle in the policy relates to degrees with lower income profiles and particularly so for parents (mostly females) who reduce their employment while looking after children. Certain degrees that are relatively high cost, such as science, will likely be impacted heavily if universities attempt to fully recover costs.The Conversation

Ben Phillips is Principal Research Fellow, National Centre for Social and Economic Modelling (NATSEM) at University of Canberra. He does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published on The Conversation. Read the original article.


    • Whilst everyone loves getting something for free, myself included, past a high school education, why should ongoing learning whether through Uni, tafe or apprenticeship be free or subsidised? I am a strong believer in equal access to education for all regardless of your socioeconomic situation, however this policy still provides an equal opportunity for all to access education.

      Why shouldn’t the people who benefit from the education both personally and financially (education generally leads to higher income) pay the full cost of what they’ve bought?

      • Very simply? Schooling until the age of 18 has existed since the 19th century. It has been publicly available since before 1910.

        So we had a year 12 education available since the horse and cart were big.

        Bluntly: If one wishes to be legitimately useful in society at this stage, we must either educate beyond this point, or limit ourselves to engaging only in those areas of the labor market which have existed since the 19th century.

      • Because you are looking at it from a individualistic point of view rather than a societal perspective. In a society where good well paying blue collar jobs have disappeared overseas with nothing to replace them well paying jobs now require a university education, putting barriers in front of people to attain that education can only result in fewer people getting that education. The wealth of society continues to be concentrated in the few elite and we create a society more like that of the Victorian era than the booming post war period. If you want that fine but don’t pretend that Australia is the free egalitarian classless country that it prides itself on and acknowledge the reality. Also see the United States where deregulating university fees in the 1970’s was meant to create competition and keep fees lower except what we found is that education is the one commodity that doesn’t play by the rules of market capitalism. Fees have increased by 3000 percent well above the rate of inflation since they were deregulated in 1978 which means that, unless you have rich parents, those coming out of university you face a lifetime crippling debt that pretty much wipes out any economic benefit of getting that education in the first place, the end result again is wealth concentrated in the already rich, less social mobility and a poorer overall society. again education is a societal and economic issue it doesn’t make any sense to look at it from a purely individualistic perspective.

      • Well nothing is free really, uni students will still have to pay back that debt but this could make it increasingly harder for students to move forward in life (buy a house, start a family, etc.) and without a safety net to fall back on the poorer people will be significantly disadvantaged.
        Education is an investment into the future, looking at US (as an not perfect example) students are driven into serious debt by their student loans (though US loan are different) largely because of their deregulated market and for profit institutions. Degrees that provide less value for money (including the time taken to pay off the debt) will have lower uptake such as science causing more problems.
        But of course, who needs science right we got Abbott and God will show us the way (sorry political rant)
        Leaving people in debt for longer will not be good for anyone and will create a bigger divide not only between the social classes but between other countries such as China and India (millions of graduates every year).

      • Two things:
        1. Why should high school education be paid for by the government rather than on a loans scheme (or at least year 11 and 12, which are not mandatory)? Does the same logic then apply to university?
        2. Even with a loan scheme, a larger loan can act as a disincentive for pursuing further education and this will have a differential effect based on the ability for the family to pay for the education. That applies now, as well, but the bigger the loan the greater the effect.

        The focus on the individual gains obtained by study tend to take a very ‘accountant’ view of education: you go in, study, and earn more when you finish. They (in my opinion) ignore the broader societal impact of education, which I think has a value to society and which is worth subsidising for.

      • You’re making the assumption that education benefits the person more than society. An educated person goes on to contribute to society by stimulating the economy (buying things), paying higher taxes, and intervening in their industry. I’d argue the opposite, why is the burden on the person to pay when society reaps the benefits and it pays for itself?

        I don’t know your political persuasion, nor does it really matter, but the Liberals (capital L) make the mistake of treating education as a commodity to be sold to people, but its actually an investment in the country.

  • It is an absolute certainty that universities will increase fees beyond what is required for recovering the cost of the removal of govt subsidies, as this article understands that removal (the 20% reduction just announced). In real terms, govt subsidies have been falling for decades, and universities were very stretched before this cut. Expect increases in the order of 30-50%.

  • I guess this is why they also gutted the CSIRO. No one will be able to afford a science degree so there won’t be anyone left to work there anyway. Who needs science, after all.

    • The current ~$5K enticement for secondary mathematics teachers is going to look like even more of a token gesture. The government spends more on moisturising ointment to deal with all the hand-wringing they’ve done over supply of maths and science teachers for the last thirty years.

  • Kinda sad that the distinction still needs to be made for male and female wage levels. Would think in this day and age it wouldnt need to be relevant anymore.

    • I agree it is sad, and I certainly don’t want to justify it. There are a bunch of reasons for the disparity, though.
      First, women tend to be the ones that take maternity leave and will tend to spend more time at home with a child. This means that typically a mid-40s male professional will have at least a year more experience than a female of the same age. (Of course, some women don’t have kids, some males will stay at home, and so on but it is a common enough pattern to have an impact). This doesn’t just apply to professionals, actually – it affects a range of jobs.

      Female academics have a similar problem: they will often have a period of a year or two without publications if they took substantial leave, and that can haunt them for quite a while as they try to progress their careers. As a result, they will tend to occupy less senior roles, and so on.

      There is also outright gender bias in pay offerings and promotions, too.
      Then there is also the issue that women are more likely to work in ‘helper’ roles than men (e.g. nurses, childcare, and so on) and those positions are generally more poorly paid for the skill and competence level. That doesn’t have so much impact when comparing within the same industry but it does result in the mean full-time employed female income being lower than the full-time employed male income.

      None of what I’ve said is justification for the gap. I think that things like the difference in income in helper vs non-helper roles is a problem and really needs to be addressed, and so on.

      • All true. But a smaller (still significant) gender gap exists within jobs, controlling for time away.

        • Yes, and I find that quite bizarre. I wonder if that is just because all the ‘old boys’ haven’t been flushed out yet so are still making pay decisions.

          • I don’t see how someone in their mind can justify paying a woman less for a job. If you have both, equal experience and qualifications it shouldn’t be a consideration. Heard using maternity leave as a justification for paying less, makes me cringe a little

  • Education isn’t a cost, it’s an investment. Though I don’t expect Abbott to understand that.

    • If my facebook feed is anything to go by, a lot of young conservatives truly believe that education is a consumable commodity with opportunity costs. As a fellow economics student of these people, I want to throw myself off a cliff sometimes.

    • If education is an investment, why is there such controversy about people investing in themselves?

      • Partly because it isn’t necessarily an investment with a good personal financial return, which I would consider the very narrowest form of investment. Rather, it can be an investment in the community. Consider philosophy: someone who is actually engaged in philosophical exploration can be contributing to the perceptions of society towards democracy, justice, and a range of other things. However, they are not particularly well paid and there are not a lot of people who do it.

        Even just a liberal arts education (which tends to get widely disparaged) will tend to increase someone’s ability to analyse and understand politics and social policy, hopefully rationality (to some extent) and so have benefits to society as a whole. Thus, it is an investment but not for a financial return.

  • Tony Abbott “Haha screw education, if we lower the bar now they will be too stupid to vote for Labor in the future” *As he plays with the end of his invisible moustache*

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