“A crime against the Humanities!”

“An assault on the very Idea of a University.”

“A plot to STEM our CASSH-flow.”

“A cunning plan to muzzle critical thinking.”

“An ode to serfdom.”

“A complete and utter cluster-fluctuation.”

“Polymorphously perverse! But not in a good way.”

Fake quotes, all. Yet they convey the vibe of many early reactions to the Education Minister’s funding model shake-up plan, announced in his recent speech to the National Press Club:

…we will provide an additional 39,000 university places by 2023 and 100,000 places by 2030. To do this, we will address the misalignment between the cost of teaching a degree and the revenue that a university receives to teach it. We will reform the system…

Education Minister Dan Tehan, speech 19 June

An Education Department paper outlines the mechanics. Fields such as Philosophy and Law, a Deloitte study finds, earn less per Commonwealth Supported Place than their cost to teach, while those such as Engineering and Environmental Studies earn more.

Figure 1. Source: Education Department. Job Ready Graduates – Higher Education Reform Package 2020 (24 June) (Author notes added)

The new model aims to align total income (funds + fees) to teaching costs in each field (but can’t with Vet Science). This shift would have many effects – good, bad and ugly.

First, it lifts student fees from $8.6 to $9.3k and lowers grant subsidies from $12 to $10k (on average, per year).

Second, a planned 6% growth in enrolments (39,000 by 2023) is financed by way of a 6% fall in total funds per place, from $20.6 to $19.4k (on current profiles, which the plan aims to alter).

Third, it cuts the average grant share of course costs from 58 to 52% as the student share rises from 42 to 48%. The cost of growth is met by students paying more (with HELP) and universities getting less per place. (As Tehan told the Press Club, the package aims to be “budget-neutral” for the next few years, with total funding (including HELP) of $18bn in 2020 and $18.3bn in 2021.)

Fourth, these shifts allow the government to redirect Commonwealth Grant Scheme savings into other parts of the package outlined in Tehan’s speech. As another Education Department paper shows, total teaching grants fall from $7.2 to $7.0bn over 2020-2021. But overall, total non-research grant spending – including transition funding – rises from $7.7 to $8.1bn.

Figure 2. Source: Education Department. Better University Funding Arrangements – more transparent and accountable funding

With research spending yet to be sorted, the full funding picture is not yet clear. The plan was cautiously welcomed by some sector leaders:

More time is needed to assess the detail, but overall the plan will result in a higher growth rate of funding for universities to support a higher participation rate than would otherwise have been possible…

Victoria University vice-chancellor Peter Dawkins, 23 June

For many, the effect on overall funding for teaching may be close to neutral. At the ANU the changes “will enable us to teach more domestic students starting next year…[and] ANU will receive slightly total more funds for teaching than we have in the past.” The University of Melbourne will be “$3 million worse off” on its current student profile – a fraction of 1% of its total revenue, and minor compared with a $300m expected loss from lower international enrolments.

For universities facing big international revenue holes, the plan’s main disappointment is how little it does to fill them. As a piece of system reform, sector leaders note much “devil in the detail”. Technical complexity and a mix of aims make the plan’s implications hard to parse. From a sector (and Senate) point of view, these can’t be debated sensibly without mapping the before and after effects in considerable detail.

The current (2020) funding model pairs one of 8 government “funding clusters” with one of 3 student “fee bands” to set a total income cap per student per course. The new (2021) model converts these into 4 clusters and 4 bands to create new income caps – some higher, some lower, some about the same.

As Chart 1 shows, rates in the current 3 band structure ($6.8, $9.7 or $11.4k) are replaced by a wider 4 band structure ($3.7, $7.7, $11.3 or $14.5k). The most newsworthy aspect is that in some fields of study, fees change dramatically. In early reporting many journalists (such as Tim Dodd, Fergus Hunter, Robert Bolton, Paul Karp, Jordan Hayne) published charts to show which student groups would win or lose.

The biggest winners are those studying Maths and Agriculture, who would pay $6k less per year. The biggest losers, in fields such as History, Political Science and Communications, would pay $7.7k more. Other winners emerge in Teaching, Nursing, English and Clinical Psychology ($3.1k less). And other losers in Law, Economics and Commerce ($3.1k more).

Chart 1. Source: author. Job Ready rises and falls in domestic student fee caps for Commonwealth Supported Places (fees financed by HELP loans).

Many critics have focused on a 113% increase in (most) Humanities and Social Sciences fields. In media commentary some details were buried in the rush to judge the wider effects:

…fees for courses like creative arts, communications, history, economics, politics, society and culture will in some cases more than double. Not surprisingly, humanities academics are aghast … Striking at the humanities strikes at the heart of university education. The arts, humanities and social science disciplines … cannot be sheared away from university study without attacking the idea of the university itself.

Ben Eltham, The Guardian, 19 June

Some professors read the changes simply as a “culture war” by other means:

[These changes] have the clear aim of undermining the humanities and social sciences – the foundations of a modern liberal arts education … The civic purpose of universities is being fundamentally contested. And it’s all because of this now perpetual culture war that defines our national politics.

Tim Soutphommasane, The Age, 20 June

Others share similar concerns, that the plan “assaults the premise” of what a university is and does. These kinds of concerns are reinforced by conservative critics applauding the move to hike fees and cut funding in the Humanities:

Want to spent three years reading Foucault and dreaming about vandalising Captain Cook statues? Fine, but don’t expect a cent from taxpayers…

Adam Creighton, The Australian, 19 June

The trouble with such caricatures – despite no shortage of easy targets – is that they ignore how much “mainstream” and “conventional” material is studied in the Humanities and Social Sciences. As one professor of politics observed:

My students learned nothing about Foucault or Derrida. Instead­ we studied Australia’s institutions of parliamentary demo­cracy … the Morrison government recognises that the Australian community benefits from people knowing about our history, society and culture. So why is it discouraging young people from studying them?

Judith Brett, The Australian, 11 July

Scholars who study higher education as a system, meanwhile, see signs of a wider agenda to create different kinds of higher education institutions, some focused mainly on teaching, not teaching and research. This is reflected in Tehan’s promotion of “university colleges”, and a course funding model that aims to meet teaching costs only, reducing an implicit 11% margin for research (again, on average) identified in the Deloitte report. Against the need for such reforms, some policy experts, such as the IRU’s Conor King, point out that Australian universities already differ widely when seen up close:

My own city has Melbourne and RMIT, so there’s already a fair bit of diversity…

Conor King, Innovative Research Universities, 30 June

University of Melbourne and RMIT University. Images sourced from: https://www.wikiwand.com/en/Tertiary_education_in_Australia

Predictably, the most vocal critics tend to focus on motive, plot and character. A “revenger’s tragedy” prism casts the plan’s creators as knavish clowns or foolish knaves. As one professor puts it, the reforms “must fall into one of three categories”:

Either they were formulated in a half-arse way with little thought, are ideologically driven to cause harm to the university sector … or details claiming value in the changes are merely a cover for the actual goal of shifting more of the cost burden of studying at university to the individual…

Peter Van Onselen, The Australian, 3 July

Critics tend not to delve into detail, or outline alternative policies. This may reflect the complexity of the trade-offs built into the existing model. But it leaves public debate under-informed, and at times misinformed. For example, some recent critiques cite figures that don’t apply to some of the fields they describe:

Women studying subjects in this field including economics, law, philosophy and history will now be … covering 96 per cent of their course costs instead of 45 per cent…

Anna Patty, The Age, 26 June

fees have gone up the most for society and culture, a broad category that includes law, economics, politics, psychology, social work and traditional humanities subjects such as history. The student contribution will rise from $6804 a year to $14,500 a year…

Caitlin Fitzsimmons, The Age, 1 July

As old hands know, Law and Economics students already paid far more than Humanities students – $11.4k per year. In the new model their fees rise by 28% to $14.5k, as for students in Management and Commerce. So yes, fees will “soar by 113%” for most in the Humanities, as reported. And yes, a $7.7k increase is a “massive hike”. But in the end a 3 year Humanities degree will cost the same as for one in Commerce; and in both cases the upfront costs are met with public HELP loans.

As in other university funding debates, public/private spending percentages can become symbols of injustice. In this case the Education Department paper confirms that students will still cover less than 50% of average course costs (though this will depend on future enrolment profiles):

The redesign of the funding clusters will continue to see government pay more than half of the costs of Commonwealth supported places overall…

Education Department, Job Ready Graduates paper

However, readers of the Sydney Morning Herald and the Melbourne Age may not know this, due to (otherwise insightful) reporting to the contrary. For example:

…students will pay a greater proportion of the overall domestic teaching bill than the Commonwealth for the first time in decades…

Jordan Baker, The Age, 27 June

The apparent source of this estimate is not any official statement, but earlier media commentary:

…university teaching revenue covered by student fees will increase from 42 per cent to 52 per cent. This will be the first time since university fees were reintroduced by Labor in 1989 that governments will fund a minority of university teaching costs…

Gareth Bryant, The Age, 22 June

Put this way, the Tehan plan sounds like a historic (if well-hidden) shift in the social contract between the nation-state and its citizens. But the claim is not based on any government projection. It appears to rely on a pre-emptive comment on Twitter (by Monash University vice-chancellor Margaret Gardner) before Tehan announced the policy in his speech to the National Press Club: “…the Govt reduces its contribution to degrees from 58% to 48% and student contributions will go from 42% to 52%. This is how more student places are funded without increasing govt funding”.

Since many students (in fields such as Law or Commerce) already pay more than 80% of their course funding rates, the “more or less than 50%” issue seems more a symbolic political factoid than a substantive policy concern. The outcome will depend on future enrolment profiles, in part due to the decisions of universities themselves. Such shared responsibility is common. Some university leaders have expressed concern at the fee increase for Humanities students. But none is well placed to complain too much, since the government does not set course prices, only maximum course prices. As Tehan noted after the announcement:

We have to remember also that the caps are caps, so any university can offer subjects at discounted rates if they think that best suits their institution…

Dan Tehan, Sydney Morning Herald, 23 June

To this we could add that in 2014, many sector leaders were willing to support domestic fee deregulation under “demand-driven” policy settings – in effect, a license to print HELP debt. The wider context is that policy debates about who pays what for higher education, and on what principle, go back a long way in Australia. As participation grows “from elite to mass to universal” scale, the social contract between governments, institutions and students has shifted through radical reforms and (more often) incremental adjustments.

Under the Howard government, for example, publicly subsidised bachelor degree places were capped, but extras could be offered on a “full-fee” basis, backed by “FEE-HELP” loans. The Rudd government removed these from public universities. In today’s debate, a concern with the Tehan plan is that it makes many more domestic university under-graduates effectively “full-fee” in the public university sector – if at far lower rates than (say) Bond University.

Source: author. Graph based on Grattan Institute data. Note: “Upfront tuition fees” refers to domestic student fees over 1939-1971, but mostly to international student fees over 1995-2016

While policy experts see flaws in the Tehan plan, most appreciate the complexity of what it seeks to achieve:

The plan has multiple layers and will affect several areas of funding: financing a substantial expansion of the number of students; aligning the financing of disciplines with their costs of education; redressing the major under-servicing of people in regional and remote areas; and further concentrating on serving the narrow economic interests of industry…

Gavin Moodie, University of Toronto, 29 June

Others are attuned to hints of further change to come:

I think we’re going to see more reforms … there’s certainly nothing in the package that addresses short courses, lifelong learning and micro-credentials … that’s something particularly my universities are interested in, as a signal of the longer term reform of tertiary education…

Luke Sheehy, Australian Technology Network, 30 June

In the end, the logic of the Tehan package is not reducible to a conservative “assault” on Arts Faculties, or on the fabled telos of universities as social institutions. Nor does this latest push to view study as a pathway to work mark the sudden end of John Henry Newman’s 1850s “Idea of a University”. (In fact, by the 1960s Clark Kerr had already recognised them as “multiversities”, serving many “publics” with diverse agendas and interests.)

John Henry Newman’s “Idea of a University” in 1852, and Clark Kerr’s “Uses of the University” in 1963. Image sources: Assumption Press/Create Space Independent Publishing, and Cover from Time Magazine October 17, 1960

Overall, the Tehan plan reflects a mix of longer-term policy goals and short-term pragmatism. It seeks to address demographic demand projections, funding constraints and system reform aims already in view last year. To these, today’s COVID crisis adds a sudden recession, likely to be the largest since the Great Depression – as the IMF predicted in April.

This means surging unemployment, massive calls on government spending, wide anxiety about the months and years ahead – and yet more demand for tertiary education. As seen in its earlier April push to offer cut-price micro-credentials, the government sees universities more as partners to enlist in meeting wider social crises than as candidates for handouts:

Australians will use their time social distancing to develop skills for new jobs in National Priority areas such as nursing, teaching, health, IT and science … The cost to study short, online courses … will be slashed to help Australians retrain … Our Government will also guarantee funding for universities at current levels, even if there is a fall in domestic student numbers, and provide greater flexibility in the use of these funds…

Ministers Dan Tehan and Michaelia Cash, 12 April

The crisis exposes differing views of the government-university relationship, and of what kinds of learning universities should offer. Initially, some experts dismissed Tehan’s plan for low-price “micro-credential” courses as neither a funding bailout for universities, nor a worthwhile offering to students. But most universities (and many other providers) took them up. As Tehan told the Press Club in June:

…micro-credentials were introduced to give Australians the opportunity to learn new skills quickly that, in turn, would make them more employable in areas of national demand. The courses are significantly discounted for students … A key feature of this initiative has given universities the flexibility to adjust the number of bachelor, sub bachelor and postgraduate places within their funding allocation. The response from universities has been overwhelming … there are 54 providers offering 344 short courses … We want short courses to be a permanent fixture of the Australian higher education system…

Dan Tehan, 19 June

There are signs that the June plan has been hastily assembled. (An earlier version of Figure 1 suggested that average costs would clearly exceed average income in the new model. A later version fixed this but still (in early July) had text suggesting that Creative Arts was over-funded and Agriculture under-funded, rather than vice-versa.) For all its flaws, the June plan is a logical extension of the April plan’s motif of skills for jobs in areas the government expects to grow. Some experts point out that there is good evidence of good income and employment prospects in fields of study the plan does not favour from a student point of view, and that in favoured fields such as teaching the problem is not course fees, but salary levels in the profession. Its critics tend not to focus on micro-credentials, or more flexible use of funding allocations. Instead many focus on Tehan’s failure (again) to re-fund a sector that has been rapidly adapting to mass online delivery while facing looming budget crises.

Longer term reforms aside, the mix of aims in the June plan was most plausibly unpicked by the University of Canberra’s Michelle Grattan:

… the shake up will reduce student fees for courses in areas the government identifies as potentially job-rich and increase them for … other courses to produce a result that’s funding-neutral for the government. The first driver of the policy is the surge in demand for places … Secondly, the changes reflect Scott Morrison’s overwhelming preoccupation with jobs … Finally, there does seem to be an ideological tinge to the policy, notably in the treatment of the humanities…

Michelle Grattan, The Conversation 21 June

Will students be enticed or deterred by fee changes? Many experts point out that, by design, the HELP scheme mutes price signals; and that past fee changes have had little visible effect on course choices. The ANU’s Andrew Norton put it this way:

The big question is whether demand will fall at these prices. Basic economics says that when prices go up demand goes down and vice versa. But in higher education that is not always the case. Student price sensitivity is low partly because the HELP loan scheme means that they pay their fees years later…

Andrew Norton, ANU, Sydney Morning Herald, 20 June

On the other hand, the new fee bands create starker price disparities; job outlooks are suddenly bleaker in a newly fractured economy; and “Generation Less” sensibilities already exist. The notion that HELP makes price no object (so why object to price hikes?) may well reflect yesterday’s social contract, but not tomorrow’s. On this question, Tehan told the Press Club that the government’s confidence in fee reductions reflected its recent experience with responses to the low-cost online “micro-credential” courses announced in April.

In some parts of the sector the changes have been welcomed. The Regional Universities Network response accepts the logic of lower fees lifting demand:

Lowering the cost of the student contribution for courses such as nursing, allied health, teaching, agriculture, engineering, IT and maths, should encourage greater uptake by regional students in these areas. 

Helen Bartlett, Chair, Regional Universities Network

In Senate debates a likely concern with fee hikes will be that some of the new disparities seem both “ideological” and “punitive”. And while the fiscal rationale for budget-neutral expansion may be strong, the wider policy rationale is not. One of the weak points in Tehan’s speech was its assurance that Humanities students

…will still pay less for those degrees in Australia than they would for a similar degree in similar countries, like the USA and the UK…

Education Minister Dan Tehan, speech 19 June

The problem with this is, many US and UK graduates already face massive debts, often for decades. The UK uses a loan scheme somewhat similar to ours. But fee hikes since 2012 have led to a system where 35-45% of graduate debts will go unrepaid. While closer to Australia than the US, the UK example shows what not to do with student fees and HELP loans.

Aside from the fact that it offers no bailout funding, for universities the new funding model poses other kinds of problems. For sector leaders a core concern will be its “business model” effects on Schools and Faculties. Chart 2 shows how government grant rates would change in the move from 8 to 4 “funding clusters”.

Chart 2. Source: author. Job Ready rises and falls in Commonwealth Grant Scheme funding for Commonwealth Supported Places.

Here a second line of critique finds a “perverse” mix of measures in the new model. As Chart 3 shows, fee reductions may not be matched by grant funding increases; in fact, a reduction in both grant and fee rates may result in large net losses (to reflect the Deloitte study average teaching cost). So a fee rise of $7.7k in Communications does not fully offset a far bigger fall in direct funding, of $12.4k (from $13.5 to $1.1k). And in Environmental Studies a fee reduction of $2k is paired with a funding reduction of $7.9k (from $24.4 to $16.5k).

Chart 3. Source: author. Job Ready rises and falls in fee and funding rates by field of study.

It seems likely that the longer term policy logic – to match revenue to teaching costs in any given field of study, as per Figure 1 – is out of step with the newly urgent focus on job preparation, with fee discounts in priority occupations. For universities the new model creates internal winners and losers across Schools and Faculties. The “biggest loser” in Chart 4 is Environmental Studies, with total income per place falling from $34.1 to $24.2k. The “biggest winner” is English, with total income rising from $13 to $17.2k. Fields that break even include Languages, IT and Architecture.

Chart 4. Source: author. Job Ready rises and falls in income per Commonwealth Supported Place by field of education

As critics point out, this creates “perverse incentives” for universities to offer fewer places in newly under-funded fields where fee caps are lowered to attract more students – and vice-versa where fees and total funding increase. Thus fees in Science and Engineering fall from $9.7 to $7.7k (Chart 1). Along with funding cuts of $2.8k (Chart 2) this removes $4.8k in all, lowering total income to $24.2k (Chart 4). As Andrew Norton explains, in some fields the scheme creates demand-side and supply-side incentives that pull in opposite directions. One sector leader outlined the “perverse incentives” as follows:

supporting the government’s laudable objective to train more scientists and engineers will cost universities more – creating a perverse financial incentive for some universities to decrease training in science and engineering … and train more in the humanities, law, economics, management and commerce, where the overall fees are increased…

University of NSW vice-chancellor Ian Jacobs, 22 June

This insight into how universities might seek more students in what the government sees as lower priority fields raises questions about the model design. With big international budget holes to fill, and with new flexibility to shift “CSP funded load” across fields of study, it appears to allow, if not invite universities to “game the system” to maximise revenue.

For example, one professor of English observed that teaching some Humanities subjects “under the English umbrella” will cut the price of student fees to a fraction of what they’d pay if it were a History subject (i.e. part of a $3.7k fee per year field, not a $14.5k field). He could have added that at $17.2k, the total income under English would be higher than for History ($15.6k). He suggests that :

All this confusion … will generate epic gaming of subject codes by universities rather than real innovation…

Robert Phiddian, The Australian, 23 June

Two former University of Melbourne executives have outlined how “code-gaming” might eventuate this way:

An issue for government will be whether the discipline-based changes in funding places will lead to gaming by universities, which may seek to redefine subjects to secure higher funding rates. In humanities, the incentive will be to have subjects coded as English and languages. Environmental studies will receive increased funding if coded as agriculture. Legal studies may be presented as education.

Ian Marshman and Frank Larkins, The Conversation, 24 June

Hence my title today: Game of Codes. As in past attempts to reform funding, the “one size fits few” problem looms large. Academic programs have very diverse cost structures. Even within a field the “average” teaching cost may vary widely: to those of us remote from Engineering Faculties, systems engineering, mechanical engineering and civil engineering all sound like “Engineering”. At the whole of institution level there are diverse funding streams, public and private. Economies of scale and scope vary widely – from large, research-rich inner metro campuses to small, multi-campus regional operations. From a business model viewpoint, the most “typical” aspect of an Australian university may be that it has more moving parts than the start of Game of Thrones.

Image sources: https://www.artofthetitle.com/title/game-of-thrones/ https://en.wikipedia.org/wiki/Game_of_Thrones

Subject code gaming aside, a further problem with the new model design was soon picked up by university chancellors and other sector leaders. As one vice-chancellor put it:

the proportion of the fee in humanities contributed by the government will be so low … that some universities will simply recruit as many of these students as they can outside the government cap [on CGS grants]….

University of NSW vice-chancellor Ian Jacobs, 22 June

The “funding freeze” from early 2018 capped grant levels only, while leaving HELP loans formally uncapped. As Andrew Norton notes, in fields where student fees would rise to meet nearly all of the teaching costs, publicly financed places become “demand-driven” once more:

From a university perspective, $14,500 is close to teaching costs in these fields. They could probably afford to meet student demand without the low proposed $1,100 government subsidy. In effect, these rates semi-restore the demand-driven system the government ended in 2017…

Andrew Norton, Sydney Morning Herald, 20 June

Counter-intuitively, for a university budget the grant-to-fee split may be more critical than the level of total income per student. Chart 4 indicates that an Engineering student earns more for a university ($24.2k) than a History student ($15.6k). But Ian Marshman and Frank Larkins – old hands familiar with the warp and woof of university budgets – show how “tempting” it would be for a university to transfer its $16.5k Commonwealth grant for a single Engineering student place (Chart 2) to support 15 Humanities student places at $1.1k each, to tap uncapped HELP revenue.

As Chart 1 shows, each Humanities student place will earn its Faculty $15.6k (once the $14.5k fee is added). Instead of earning just over $24k for a single Engineering student each year, the university could earn $234k per year – mainly in the form of HELP loan income paid directly to the university by the Commonwealth. In other words, swap 10 Engineering students for 150 Humanities students and the university gains nearly $2 million in revenue in a year: $242k in losses versus $2.34m in gains (less some extra teaching costs).

A University of Melbourne seminar showed how different assumptions led to opposing conclusions about how much enrolment growth the Tehan plan would support. One presenter argued that the plan’s projected growth in student places was “largely illusory”, and would “reduce higher education attainment levels” over time. The next concluded that for universities with a strong brand, “…in the Humanities and Social Sciences … if you want to increase your income … it is unlimited the number of students you can take”.

In today’s “Hunger Games” context of international revenue shortfalls, this looks like a lucrative loophole. If market leaders chase larger slices of domestic markets in fields such as Business or the Humanities, the domino effects could create enrolment crises in these fields at other institutions. In turn, such a shift could echo the VET-FEE-HELP problem seen in private vocational education. In that case students did not pay up front, and could not assess the benefits of what they were signing up for. So, absent a cap on HELP loans as well as teaching grants, greater risks of moral hazard arise as cash-strapped institutions become “hooked on HELP” to make ends meet.

How should the sector respond to the Tehan plan? Since critics don’t appear to have presented any alternative model to address its flaws, it may help to sketch a possible “Plan B” here. Instead of translating 8 funding clusters and 3 fee bands into a 4/4 model, a 6/5 model could moderate the more extreme effects of the proposed model.

Job Ready 4/4 model source: Education Department. And for comparison, a 6/5 approach

Charts 5 and 6 outline how such an alternative model might skirt at least some of the problems critics have raised. (It would cost more than the Job Ready scheme; but if modelled against enrolment profile projections, could be tweaked to achieve a better balance of trade-offs).

Compared with Job Ready, total on-campus income per place in Chart 5 rises from $24.2 to $26k in Science and Engineering, from $20.2 to $22k in Nursing and Allied Health, from $17.2 to $18k in Teaching and Maths, from $17.2 to $20k in Clinical Psychology and from $15.6 to $17k in Communications.

For lower-cost fields such as History, Behavioural Science, Social Studies, Law, Economics, Management and Commerce total on-campus income is slightly lower than in the Job Ready model, at $15, not $15.6k; and lower than for English ($15, not $17.2k). But still higher than 2020 settings for English, History, Law, Economics, Management and Commerce ($13-$13.6k – see Chart 4).

Chart 5. Source: author. The model uses fee bands of $5, $7, $9, $11 and $13k, combined with funding cluster rates of $2, $4, $8, $13, $17 and $27k (see Chart 6). For fully online study fee discounts of $2k apply, reducing total income per place by $2k. (Vet Science, Medicine, Dentistry and Agriculture are not shown. All get the same $27k subsidy and similar fees as in Job Ready).

In Chart 5 the prospect of “cloud campus discounts” gives providers scope to address different student market segments with differential pricing for the same course ($2k less). How this may benefit their students without eroding quality or disrupting business models could be negotiated in each university’s mission based compact discussions, along with other performance goals.

A key aim here is to offset some of the sharp revenue drops in Job Ready – compared to current settings – in priority fields especially. This is achieved in part by smaller student fee reductions, which could be extended by price discounts for subjects studied online in “cloud campus” mode. (The discounts assume that even disciplines with lots of lab, field or practice-based learning also have subjects that can be studied fully online – as recent experience suggests. This would need to be confirmed field by field.)

Chart 6 shows how alternative fee and subsidy levels could combine in these on-or-off campus models. On-campus fees for Science, Engineering, IT and Allied Health are $9k, discountable to $7k online (compared to a Job Ready $7.7k). For English and Languages they are $7k, discountable to $5k online (Job Ready $3.7k).

For Nursing, Teaching and Maths they are $5k, discountable to $3k online (Job Ready $3.7k). For History, Behavioural Science and Social Studies they are $11k, discountable to $9k online (Job Ready $14.5k). For Law, Economics, Management and Commerce fees are $13k, discountable to $11k online (Job Ready $14.5k).

Chart 6. Source: author. The model uses fee bands of $5, $7, $9, $11 and $13k, combined with funding cluster rates of $2, $4, $8, $13 and $17k). For fully online study fee discounts of $2k apply, reducing total income per place by $2k (see Chart 5)

To reach the total revenue levels shown in Chart 5, these “Plan B” 5 fee bands and 6 funding clusters are paired broadly in line with the proposed Job Ready Graduates adjustments. These add subsidies of $2k in Law and Commerce; $4k in History and Social Studies; $8k in English; $13k in IT, Allied Health, Languages, Teaching, Maths and Clinical Psychology; $17k in Science, Engineering, Environmental Studies and Nursing; and $27k for Medicine et al. (not shown here). Comparing these with Job Ready subsidy rates ($1.1, $13.5, $16.5 and $27k) Commonwealth grant costs would rise over 2021-2023. But if “cloud campus” enrolments rise markedly by (say) the end of 2023, the economies of scale this affords create scope for the government to “discount” subsidy levels also in high-volume fields, without commensurate fee increases, from 2024.

In sum, my sketch relies on 5 fee bands and 6 subsidy clusters. It assumes that the Job Ready shift from an 8/3 to a 4/4 model creates too much “shoe-horning” to create snug fits between Deloitte costings on one hand, and “budget-neutral” total grants on the other. (Whatever the rates, 4 subsidy levels may be too few: the 2014 plan to deregulate fees used 5 levels.)

It also offers short term budget relief to universities. This would help bridge their current international revenue collapse, and buy time to build greater “cloud campus” capacity – for staff as well as for students, now that working off-campus has been normalised by the COVID crisis. During the transition period, universities could gather useful “action research” data on how price-sensitive prospective students actually are with HELP-financed course fees. Would some groups opt for online study on the basis of lower prices in subjects of moderate interest, and pay more for on-campus subjects of major interest? Would some who might not have enrolled in any on-campus course – due to price and convenience concerns – opt to commence a lower-cost course online to test whether it is worth pursuing to completion? This fits with a “lifelong learning society” future where access to study and skills is frequent, low-cost and flexible, and where “university credentials” are short, sharp and stackable.

By 2030, much higher domestic student volumes could be met, at progressively lower funding costs and student fees per course place or per subject. Many variations are possible. Much modelling will be needed. (If we had a tertiary education commission, one of its tasks could be to have a suite of models to hand.) In the coming months, the main tasks for the university sector are to engage with policy makers on these questions, and help devise a better set of trade-offs to support students and the sector’s contribution to Australia’s future. Meanwhile, one sector leader who has worked with the Education Minister suggests there are “10 key features of the package that give cause for optimism”:

The HELP scheme remains unchanged … [up-front] affordability will not change … universities will have flexibility … Funding … is aligned to the costs of teaching … the matrix of clusters and bands is flexible … universities to develop micro credentials … The current dire unemployment situation is acknowledged … additional places are funded … a return to indexing of all Commonwealth Grant Scheme funding … strong regional and social inclusion elements … the National Priorities and Industry Linkage Fund will help … increase industry relationships … a three-year transition period for the reforms…

University of Wollongong vice-chancellor Paul Wellings, 30 June

How the Tehan reform plan will fare in the Senate remains to be seen. Its adoption broadly as proposed should not significantly “pervert the course of higher learning” in Australia. But it would pose needless risk and uncertainty. Some sensible modifications may well avoid a good deal of short term pain, and offer real gains to all in the longer term.

Recommended reporting and commentary

Vin Massaro, 28 April 2020, Far-reaching reform of the funding model must begin now

Paul Karp, 19 June, Australian university fees to double for some Arts courses but fall for STEM subjects

Fergus Hunter, 19 June, University fee overhaul won’t change demand or affordability: HECS architect

Michelle Grattan, 19 June, Fee cuts for nursing and teaching but big hikes for law and humanities in package expanding university places

Tim Dodd, 19 June, Radical shake-up for university fees proposed

Peter Hurley, 19 June, Humanities graduates earn more than those who study science and maths

Fergus Hunter, 20 June, Perverse incentive for universities to use humanities as cash cows

Andrew Norton, 20 June, A simpler reset could have met Dan Tehan’s education aims

Michelle Grattan, 21 June, Tehan’s student fees are not just about jobs, but about funding and a dash of ideology too

Ian Marshman and Frank Larkins, 21 June, The vocationalisation of university education

Peter Dawkins, 23 June, Tehan’s funding plan means more money for unis and more students

Andrew Norton, 23 June, Dan Tehan’s reforms have unpredictable outcomes

Richard Ferguson, 23 June, Uni fee reforms risk ‘rush for the humanities’

Michael Tomlinson, 24 June, Job ready graduates: ready for what jobs?

Ian Marshman and Frank Larkins, 24 June, The government is making job-ready degrees cheaper for students but cutting funding for the same courses

John Fischetti and Catharine Colebourne, 24 June, The government’s funding changes are meddling with the purpose of universities

David Peetz, 26 June, Can government actually predict the jobs of the future?

Jordan Baker, 27 June, “Tumultuous”: the seismic change hidden in Tehan’s plans for unis

Tim Dodd, 27 June, An education in university funding reform

Julie Szego, 28 June, Making sense of the government’s war on arts degrees

Gavin Moodie, 29 June, Australia’s fee shake-up is overly complicated and inconsistent

Andrew Norton, 29 June, Coronavirus and university reforms put at risk Australia’s research gains of the last 15 years

Peter Goss, 30 June, The government claims teaching is a national priority, but cheaper degrees won’t improve the profession

Paul Wellings, 30 June, It is time for universities to embrace the Tehan blueprint

Claire Field, Andrew Norton, Luke Sheehy and Conor King, 30 June, Podcast discussion: The higher education reform package – “it’s quite a beast”

Tamson Pietsch and Gwilym Croucher, 1 July, Podcast: The future of higher education: who will set the settings?

Joel Barnes, 3 July, Defunding arts degrees is the latest battle in a 40-year culture war

Robert Bolton, 6 July, Doubts on uni reforms but Tehan says more people will graduate

Ian Marshman, 6 July, Policy questions the grad reforms package should answer (but probably won’t)

Melbourne Centre for the Study of Higher Education, 7 July, What will the Tehan changes mean for students and universities? Expert discussion

John Ross, 7 July, Australia leads the way on funding reform, but does price matter?

David Crowe, 10 July, Repaying uni fees for decades: the burden on generation COVID

Judith Brett, 11 July, Citizens not all equal when it comes to the getting of wisdom

Andrew Norton, 11 July, Funding incentives for universities and students in the Tehan reforms: some are aligned, others contradict each other

John Ross, 14 July, Australia should discount fully online classes post-COVID

Vin Massaro, 15 July, Funding model inadequate on teaching and quality standards

John Ross, 15 July, Pandemic prompts lifelong learning pivot and 500 job losses as UNSW

Maxwell Yong, 19 July, Why the uni fee hike makes no sense

Stephen Parker, 28 July, This is the ailment which really threatens universities’ future

Greg Craven, 28 July, Dan Tehan’s common sense approach to real problems

Lisa Visentin, 17 October 2020, University fees are changing: how will it affect you?

Tim Dodd, 10 June 2021, Uni fee hikes cost graduates less than $1 a day, says Bruce Chapman

Mark Warburton, 13 September 2021, New analysis shows Morrison government funding won’t cover any extra uni student places for years

Note: since posting on 11 July I’ve added further recommended reading, updated my text to clarify some points, and embedded further links to related material, for readers with special interests in one area or another. And added a new chart from a later post, Guest Lecture Notes.

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