14
May
2014

Higher Education Budget 2014

The 2014 Federal Budget has outlined the most sweeping reforms of the Higher Education system in decades. Although there were some surprises in the budget announcements, most of the key issues had been flagged by Minister Pyne before the Budget. Below I outline the key changes and provide some initial commentary on the likely impacts on ANU. A number of the changes will require further consultation with the sector and for other changes, detailed budget information will become available in the coming days. As more information becomes available I will update the University community.

Education

Major changes to higher education will commence in 2016.

  • Commonwealth Grant Scheme (CGS) funding will be extended to non-University providers. CGS is the per-student funding provided by the Commonwealth to universities for the education of domestic undergraduate students. (Note: there is some postgraduate CGS funding for which details are not yet clear).
  • The CGS funding rate to non-universities will be lower than to universities to reflect that universities undertake research and have a broader community obligation.
  • CGS funding will also be extended to the funding of sub-degrees (higher education diplomas and associate degrees) to enhance pathways to degrees.
  • CGS is presently paid at different rates for different disciplinesthe number of bands is to be reduced and the amounts to be paid in each band are to be changed to “better reflect the relative cost of delivery”. Details of the new rates and bands will be provided shortly.
  • On average, however, there will be an approximate 20 per cent reduction in CGS funding rates.
  • At present, the student contribution to their education is fixed by the Commonwealth and varies by discipline. From 2016 universities will be able to set the amount of the student contribution. There will be no cap on this amount provided it does not exceed the amount which the University charges international students in that same discipline. I seriously doubt that student contributions would rise to anything like international fee levels. This does not happen in postgraduate coursework programs where domestic fees are similarly deregulated.
  • The aim of this change is to alter the ratio of Commonwealth to student funding for undergraduate education of domestic students. At present, students pay on average approximately 41 per cent of the cost of their education. Under these changes this will increase to 52 per cent.
  • Noting that the Commonwealth presently pays approximately 60 per cent of the cost of education through the CGS and noting the CGS is to be reduced by 20 per cent, universities will need to increase fees by 30 per cent, on average, just to cover the lost funding.
  • Any university which decides to increase the student contribution they charge, such that the total income received by the university (CGS + student contribution) increases above the present level, will need to put 20 per cent of additional revenue into a scholarship fund.
  • This is a provision I and the Chancellor have argued for. Because of the HECS-HELP income contingent loan scheme there is no upfront financial barrier to students as a result of tuition fees. However, living costs are a real and immediate financial barrier for students. This scholarship fund will provide the first real opportunity to address these up front barriers to education. For ANU it will provide an excellent opportunity to build a program of accommodation bursaries. These funds will be administered locally by universities meaning there is the opportunity to also attract further matching philanthropic support.
  • HECS-HELP is one of the great public policy innovations of Australian Higher Education. It means that higher education is free at the point of delivery. Students do not pay anything for their tuition when they come to university. This will continue in this deregulated system. However, there will be changes to how students repay their HECS-HELP debt. The threshold salary at which students commence to repay their HECS debt will fall from approximately $53,000 to $51,000 and the rate of interest charged on the loan will change from Consumer Price Index (CPI) to the 10 year Government bond rate. At present, CPI is approximately 2.9 per cent and the bond rate is 3.8 per cent. As the bond rate can rise, an upper cap of six per cent has been placed on the repayment rate.
  • As I and the Chancellor have advocated, currently enrolled or deferred students will be grandfathered. That is, they will not be impacted by fee changes until 2020.
  • There will be a reduction in the indexation rate of all Commonwealth grants to universities (this includes CGS and research grants, see below). At present, such grants are indexed using the Higher Education grant index (presently 3.02 per cent). This will change to CPI (presently 2.9 per cent).


Research

  • The Future Fellows program will continue with an ongoing scheme of 100 Fellowships per year.
  • Funding will be provided for the National Collaborative Research Infrastructure Scheme (NCRIS) for a further year. This means two years of funding are in the pipeline. During this period there will be a major review of the scheme.
  • Future Fellows and NCRIS represent a major win for the sector and for ANU. These were both terminating programs and hence represent new money. This was remarkably difficult to achieve in such a tight budget and an issue the Group of Eight have advocated for some time.
  • A Medical Research Future Fund will be established with funds of $1 billion. The fund will reach $20 billion by 2020. The dividend is estimated at $276.2 million over three years from 1July 2015 and will fund research through National Health and Medical Research Council.
  • A 3.25 per cent efficiency dividend will be applied on all Australian Research Council (ARC) administered funding from 2015/16.
  • The ARC will also direct funds to a number of specific areas such as dementia. Some of these allocations will decrease funds available for normal grant rounds.
  • The Research Training Scheme (RTS) paid to universities will be decreased by 10 per cent. Higher Degree by Research students will, however, be charged a contribution equal to this same amount. It is still not clear how this will be applied. However, I estimate this will be approximately $1,700 per year for a low cost discipline (e.g. humanities) and $3,900 for a high cost discipline (e.g. science). Students will be able to place this on a HECS-HELP loan, as for undergraduate students.
  • The Australian Renewable Energy Agency (ARENA) will be abolished. This will have a particular impact on solar energy research at ANU.
  • There has been no change to funding arrangements for the National Institutes Grant, China and the World and the National Security College. This is an excellent outcome noting the cuts to CSIRO, AIMS, DSTO and ANSTO.
  • Funding for the Coombs Policy Forum, which acts as a think tank and interfaces with the Public Service, will end (this amounts to approximately $1.5 million per year).


Other

  • There was still some funding in the Education Investment Fund (EIF). This will be closed and the funds transferred for central infrastructure investments. As a result, I believe this is lost to higher education.

As you can see, this is a large and complex package and will significantly change the face of higher education in Australia. It will not be well received by some, including students. However, in an extremely challenging budget and a very tight fiscal environment I believe it represents a good outcome for the sector.

For ANU it will open up both opportunities and challenges. For the first time, I can see a way forward to building a unique ANU educational experience which will include a research experience at the undergraduate level and a rich residential experience. The accommodation bursaries opened up by these changes will enable us to position ANU nationally.

There will naturally be a major debate about the appropriate levels of student debt and the mix of public and private contribution to education. I believe the package and the consultation period to follow will be able to manage these issues. Claims of $200,000 degrees are alarmist. This is not entirely new territory. We have a fee-deregulated environment for Australian post-graduate education which has operated without such cost blowouts.

I will shortly be inviting staff, students and alumni to have their say in a series of forums and discussions on the future shape of ANU. The impact of these budget changes will figure heavily in these discussions.

Ian Young
Vice-Chancellor

  •  6 Comments

Comment by Vincent Craig
May 14, 2014 @ 12:08 pm

The Research Training Scheme (RTS) paid to universities will be decreased by 10 per cent.

This will disproportionately impact the ANU due to our relatively large proportion of Higher Degree students. The real impact will be a reduction in the number of students taking up higher degrees. This will impact our funding and our ability to conduct research. Very damaging!

Comment by Michael
May 14, 2014 @ 12:54 pm

“The rate of interest charged on the loan will change from Consumer Price Index (CPI) to the 10 year Government bond rate.”

In my eyes, this is the death of the HECS-HELP loan system. Won’t this disadvantage those who can not pay for their fees upfront? By charging interest above inflation, university will be cheaper to those able to pay up front?

Comment by Andrew
May 14, 2014 @ 4:52 pm

I suspect changing the interest mechanism on HECS-HELP loans is designed to give more people incentive to pay up front if they are able to. Under the present system, if I had $20k free p.a, I’m more likely to invest it elsewhere rather than pay fees up front as the returns I get are better than the interest penalty on HECS-HELP.

Comment by Vincent Craig
May 15, 2014 @ 11:38 am

Is the funding for the Future Fellowship scheme additional funding (actual new money) or is it to be taken from the ARC budget that has been cut by 3.25%? (I say cut because ‘efficiency dividend’ is double-speak especially when applied to the ARC which has minimal overhead and awards grants at a fraction of their cost)

Comment by Ari
May 16, 2014 @ 12:12 am

At present this budget is short sighted and will only make it harder for the future generations to attain their first university degree. I wouldn’t have minded being taxed more to help fund the education system. Why are we modelling ourselves against the US? University education will only be afforded by the elite.

Comment by Concerned
May 17, 2014 @ 12:43 am

I’m glad to see that provision has been made to increase scholarships, but I’m concerned that, as always, students in the middle will end up being worse-off. Those whose parents are wealthy enough to pay up-front will end up getting significantly cheaper degrees, and those from very disadvantaged backgrounds will be eligible for scholarships, but there’s a big difference between having parents who pass centrelink asset tests (ie aren’t destitute) and having parents wealthy enough to shell out what’s sounding like up to 50k a year for their kids’ university education. Kids who, like me, are in the middle will be left behind, forced either to limit themselves by not going to uni or to saddle themselves with insane amounts of debt.

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Updated:  14 May 2014/ Responsible Officer:  Director, SCAPA/ Page Contact:  Director, SCAPA