Higher HECS fees keep poor students out of universities

Abbott and Pyne’s effort to deregulate fees has failed. Opposition to the prospect of university fees jumping to $100,000 has seen it defeated twice in the Senate.

But many of the Senators accept the idea that students could pay a bit more, making it likely the Liberals will push for fee increases again in the future. The Abbott Government’s efforts to sell its deregulation package included talking up the current Higher Education Commonwealth Support Scheme (HECS).

HECS was introduced in 1989 by the Hawke Labor government. Under HECS students take out government loans to pay part of the costs of their degree. This is only repaid when their annual income reaches $51,309. Prior to 1987, university was free.

The Abbott government’s advertising campaign told students not to worry about fee increases, because, “The Australian Government will continue to pay a big share, around half, of your undergraduate course fees. HECS covers the rest, which means you don’t need to pay any course fees up front.” However this ignores the inequalities entrenched under HECS.

HECS has been used to continually increase student fees, and shift costs onto students. In 1997, Howard increased student fees by an average of 40 per cent and introduced full fee places for most postgraduate courses. In 2004, universities were allowed to increase fees by up to 25 per cent more. All did so within a year.

HECS was initially set at $1800 a year for all students (around $3500 in today’s money). Today, students face charges of $6152 to $10,266 a year. This is an increase of almost 300 per cent for some degrees. Currently, the average HECS debt is $15,200 and is repaid over eight years.

Shifting education costs to a user pays model, rather than through the wider tax system, is regressive. Rich students end up paying the same price for a degree as others in their cohort. Since HECS was introduced, corporate tax rates have fallen from 39 per cent to 30 per cent, and top income tax rates from 60 to 45 per cent.

Entrenching inequality

University enrolments have increased despite the rise in HECS fees over time. Students often take on HECS debt in the expectation they will be able to pay it off later.

But there are reasons to believe that students from poor backgrounds are more cautious about taking on debt, as the National Union of Students research argues. This means they are more likely to be deterred by higher fees, and excluded from university. The university participation rate among the lowest socio-economic quartile of students has remained static at 14-15 per cent since HECS was introduced. This is despite increases in year 12 completion rates and the large expansion in university places.

The rising financial cost of education is a significant factor. As a 2008 review commissioned by Universities Australia detailed, “For many such students, it is the combination of financial pressures and distance with a lack of positive attitudes to higher education that makes university ‘seem less attractive, less relevant and less attainable’.” A Deloitte study similarly found student enrolments declined temporarily in 1997 and 2005 after increases in fees. University enrolment data suggests that this affected students from poorer backgrounds the most.

Fee increases will also entrench gender inequality. Modelling by the Melbourne University Institute of Applied Economic and Social Research shows that women on median salaries would require 26 years on average to repay their loans if fees doubled, compared to 15 years for men.

In response to equity concerns, the government and many University Vice Chancellors have announced new scholarships. But handing back a measly $1 from every $5 of additional revenue for scholarships is just window dressing.

Who benefits?

Government advertising has also tried to argue that university graduates “can” earn 75 per cent more in their lifetime compared to high-school leavers hence they can easily pay higher fees. This figure is disputed by different researchers.

But education does not just benefit the individual. The benefits to business through having access to skilled and more productive workers are much more substantial. If the university system did not exist, companies such as Google or BHP would have to pay more themselves to train their workers.

The extra income produced by an increasingly productive workforce in Australia is already being swallowed disproportionately by business. Real wages have increased far less than productivity. Instead a greater and greater share of income is paid out in profits and dividends, rather than wages.

The only people to benefit from shifting more costs onto students are corporations and the rich.

By Eliot Hoving


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