Excellence through diversity: Funding flexibility the key

As we approach the point where 40 per cent of our young people will have a university education, we need to start asking some hard questions about whether our present higher education system really serves our students and the nation as well as it might. The recently-released Norton/Kemp review of the Demand Driven System has sparked some debate, but the argument needs to be taken further.

Today, every university in the country is funded in exactly the same way for its Australian undergraduate students, regardless of the quality or type of educational experience the students receive. This fixed funding model means little diversity in the type of education offered. It means disciplines are disappearing as institutions decide they can no longer afford to offer them, creates a perverse incentive for universities to cram hundreds of students into lecture theatres, and constrains innovation. It badly needs rethinking.

There are practical examples of these constraints from our own institution, The Australian National University (ANU).  We want to offer research-led undergraduate education, and to deliver on this aim we have some unique, elite programs, in particular the Bachelor of Philosophy (PhB) degree. This exposes gifted young students to research from their very first days as an undergraduate student. They work in the laboratories and offices of our most outstanding researchers, and in many cases complete their degrees with internationally recognised research publications to their names.

This is a remarkable one-on-one experience that stretches gifted minds to the limit, and is a major investment in the future of our nation. But this degree is funded exactly as if we put the students in a class of 300 and only occasionally exposed them to a practical session.  So we can expose only a tiny fraction of our students to this rich educational experience.

Another example: we want to offer undergraduate education at ANU built around a first-class residential experience. Some 40 per cent of our students already live on campus, but we want to give them more than just a place to live, and expose them to a whole range of extension activities which could vastly expand and enrich their learning experience. We do some of this now, but not remotely on the scale we would like to. Why? Because the funding system is simply not built with that in mind. Australian universities only rarely provide education of Harvard or Stanford quality: for us, volume wins over innovation and excellence.

It is time to change our one size fits all funding system and let diversity develop. Changes to the system will be controversial, but real change is required if Australia is to offer its young people a real choice in education and produce graduates to match the best in the world. How do we finance innovation and diversity in education? In an ideal world, government would fund universities differently for different types and quality of education. But in a challenging economic climate, this is unlikely to happen. An alternative is that government deregulates the amount which universities can charge for the student contribution to education.

In such a system, access and equity becomes a crucial issue. Just like the best American institutions we propose that any institution that raised the student contribution would also need to offer additional equity scholarships. Such scholarships could address both tuition costs and living expenses, thus addressing one of the real barriers to study suffered by low socioeconomic status students. Such scholarships would also act as a magnet for enhanced philanthropic contributions to support outstanding students. The objective must be to enhance, not in any way diminish, access to students from disadvantaged backgrounds.

Previous attempts to deregulate student contributions have failed because an arbitrary cap has been placed on the amount which can be charged. Any price competition which might have eventuated beneath that cap evaporated as institutions moved in lock-step to match it.

True price competition in Australia at the undergraduate level exists only for international students, where Australian institutions do compete internationally on both quality and price and achieve excellent results. We believe real domestic competition could be achieved with only one cap: limiting the absolute maximum income an institution could receive for a domestic student (Commonwealth plus student contribution) to the international fee for the same course.

We strongly support the HECS/HELP income contingent loan system as a great Australian policy innovation. This should continue in a deregulated environment, with no fee of any size required to be paid up-front, and all repayments remaining wholly dependent on future earnings.

The bottom line is that if Australia is to develop universities which can truly compete internationally, that can provide an excellent educational experience for students and produce really outstanding graduates of the kind that are so vital to our nation’s future, we have to not only allow, but encourage, diversity by removing the constraints that prevent innovation.

As a nation we have found it difficult to even debate this issue, but a measured and non-partisan public discussion is long overdue. Our students, our education system, and future generations of Australians deserve nothing less.

Professor Ian Young AO, Vice-Chancellor and Chair of the Group of Eight
Professor Gareth Evans AC QC, Chancellor

This opinion piece was first published in The Australian Higher Education Section 23 April 2014


Comment by Niraj Lal
April 23, 2014 @ 10:18 am

Hi Professor Young,

Perhaps as a first step, you might the secure philanthropic support and equity scholarships before requesting greater contributions from our students.
As my representative, I ask you to argue first for strong government support of university education, before so readily adopting the back foot.


– Dr Niraj Lal, BSc (ANU) PhD (Cambridge)

Comment by S. Guthrie
April 23, 2014 @ 10:49 am

While I understand the argument and it’s merits, I’m still horrified by the thought. Despite the purported support of the HECS scheme, wouldn’t it be the next logical target to raise revenue? The Go8 once accepted the system of regulation.

From there students such as myself wouldn’t be able to attend the ANU. We’d have moved full circle from the 1970s and once again limit world class education to the wealthiest rather than the worthiest.

The Government should be funding the growth in an educated populace for the benefit of society as a whole, not looking to our universities as a place to save spending. The ANU and the Go8 should use its time and considerable influence to pressure the Government into adequate spending.

Comment by Sean H. Wang
April 23, 2014 @ 11:29 am

Support the opinion piece for Australian university education. Agree with limiting the ratio of tuition fee etc (even cannot be called ‘income’ for education purpose) from domestic undergraduates to international ones, but we should keep the balance in international fee for graduates especially those by research. Otherwise, we will lose more world competitiveness to overseas excellent students. In addition, Australian universities will further lose the attractions to both domestic and overseas excellent students (no matter undergraduates or postgraduates) if our position continuously glide in the world university rankings, which has happened after the shrink of governmental funding.

Comment by Lindsay Tassie
April 23, 2014 @ 12:03 pm

Scholarships, such as those mentioned, to enhance access to students from disadvantaged backgrounds should be established now. They certainly should be established before any debate about changes. Such scholarships should be a necessary condition to changes though not of course a sufficient condition.

Comment by Tom Worthington
April 23, 2014 @ 1:55 pm

In “Excellence through diversity: Funding flexibility the key”, Professor Ian Young (Vice-Chancellor) and Professor Gareth Evans, Chancellor of the Australian National University, discuss possible changes to university funding, in response to the Norton/Kemp report on higher education funding.

Professors Young and Evans point out that Australia has almost achieved 40% university education for young people and ask if the current system serves the students and national objectives. I suggest the current system places too much emphasis on university education for school leavers and not enough on other forms of vocational higher education, better suited to life long learning.

Australia should aim for a widespread participation in Higher Education for its citizens, however most of this should be provided by vocational training institutions, not universities. The normal path for a school leaver should be to gain sufficient vocational qualifications for employment and then consider what further study they need, with the option of university to supplement vocational training.

Professors Young and Evans argue that the fixed funding model for undergraduate courses in Australia constrains innovation in education and results in overcrowded lecture theatres. However they do not mention the main challenge for Australian universities today: transitioning to on-line education. I suggest that within the next five to ten years 80% to 90% of university research and education will be conducted on-line. In my view, any review of education funding and regulation has to remove the disincentives to on-line education for Australia institutions, to allow them to make this transition, or face being put out of business by international competition within ten years.

Professors Young and Evans envision undergraduates working in laboratories and offices with researchers. However, most researchers should not be sitting in offices and labs at a university: they should be out in the field, in hospitals and commercial workplaces, working with the community, government and industry. Our university academics need to be re-skilled for this new work environment, so they can make a contribution to the economy and so they will be equipped to teach students in how to work this way.

Australian students will increasingly have a choice of world class higher education, which does not require them to move countries, or to give up their day job. We need to change the current Australian policy mind-set which sees full time students fresh out of school, with no other commitments, as the typical higher education student. The typical student now has a job and/or family commitments. Students want to study part time and want most of their education and research to be conducted on-line. We need to flip the university, so it is primarily an online resource supporting students and researchers out in the community. If Australia does not do this, our students will simply enrol online elsewhere.

The issue of equity and access to higher education is one I suggest could be best addressed with suitable introductory courses. Students who do not have the necessary academic background need extra help to prepare for university study. This can be provided through vocational higher education institutions, not university courses.

Comment by Daniella Hincapie
April 23, 2014 @ 4:47 pm

This is wonderful and all but what about your graduate students. It should be just as important to help them especially now when having a Bachelors is like having a high school diploma. The need for a master or PhD is just as important in days like today. I do notice you help international students here but I notice that ANU seems to help more international students from certain regions financially. I am a Colombian-American and even though my parents and I live in the US by No means do we have the finances needed to pay for a higher education. I was able to go to college and get my bachelors with scholarships and grants that I recorded back home. If it wasn’t for that I probably wouldn’t of been able to go to college, and wouldn’t be here at ANU today. Therefore I believe that it would be nice to see some help in one way or another for international students over all not based on where you are applying from. Thank you.

Comment by Gregory J Clark
April 23, 2014 @ 8:53 pm

I support this initiative strongly. The debate is long over due.
The issue of bringing outstanding students into the sciences is critical. The issues of educating the broad church of students in science and technology are also critical if we, as a country, are to set good economic policy. Canberra through its geographic location is very important in setting the right, educated, worldly policies.

Comment by Nicholas Lannister
April 24, 2014 @ 3:25 pm

An overdue initiative. Australian universities are competing in the international arena, and the arbitrary limit on domestic fees is an artificial barrier restricting excellence in both teaching and research.

– Dr Nicholas Lannister, BA hons (ANU) PhD (Harvard)

Comment by Maclaren Wall
April 30, 2014 @ 2:35 pm

I love it when people who received their University education either for free or for peanuts start talking about deregulation.

Everyone should particularly note Professor Young’s enthusiasm for equity and access.

I assume then, that if the Federal Government does indeed deregulate university fees, ANU won’t raise the fee cap of domestic students to that of international students until they have in place a substantial scholarship program that will assist thousands of undergraduate students?

Yeah, let’s not kid ourselves. Can’t wait to start racking up $30 000 a year in debt, all because a bunch of crusty academics in a newly renovated administration complex made the false assumption that mummy and daddy would pay for the kid’s education.

Might be cheaper for me to become an international student and go do Denmark.

PS: “innovation and excellence” just mean pretentiousness and elitism.

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Updated:  23 April 2014/ Responsible Officer:  Director, SCAPA/ Page Contact:  Director, SCAPA