Australian government told that students ‘ignore price signals’

Australia’s higher education funding proposals, designed to foster study in areas of employment growth, face an uphill battle against student and university imperviousness to price signals.

The education minister, Dan Tehan, hopes that by increasing tuition fees and lowering subsidies for courses in areas deemed to offer dubious employment prospects – the humanities, for example – the government will shepherd students into job-growth areas such as health, engineering and information technology.

But sceptics say Australia’s income-contingent loan scheme, which defers students’ obligation to repay their fees for years and sometimes forever, blunts the capacity of price signals to shape behaviour.

They argue that students will follow their passions rather than choosing low-cost courses with good job prospects. “You talk about incentivising students to go into certain areas, but countless studies prove fees don’t actually do that,” a reporter told Mr Tehan at Canberra’s National Press Club. “I did journalism. No amount of counselling would have made me do nursing.”

Mr Tehan said it would be different this time: “With the price incentives we’ve made, students will pay attention.” This would be accentuated through a change in terminology, with the “census date” – the point at which students start incurring debt – renamed “payment date”.

“We want to drive a greater price signal,” he said. “What we don’t want is students to finish their degree [with a] debt and not be able to get a job.”

The change in terminology follows a recommendation from Australian National University policy analyst Andrew Norton, who says universities should do more to identify students who are unlikely to complete their courses and encourage them to leave before they squander time and money.

But Professor Norton warned that price signals arguably had even less effect on universities than they did on students. This had been demonstrated under Australia’s demand-driven funding system, when most universities continued to offer places in disciplines such as dentistry and veterinary science even though it was uneconomic for them to do so.

“At least in the domestic undergraduate market, universities are mission-driven institutions,” he said. “If they believe that a course should be provided, they will find a way to do it.”

Under the new proposals, per-student government contributions will be raised by 9 per cent in nursing, 18 per cent in education, 22 per cent in languages and 23 per cent in architecture, building, information technology and mathematics.

But they will be more than halved in the traditionally profitable disciplines of law and economics, and slashed by between 82 per cent and 90 per cent in humanities, society and culture.

Enrolment statistics suggest that the government will save money from this trade-off. Some 44 per cent of students are in society and culture or management and commerce, so the savings in these areas should more than compensate for the cost of boosting subsidies for courses in the perceived job-growth areas.

However, if price signals have any effect, the proposed settings may foster even more enrolments in the humanities. While subsidies will be a low A$1,100 (£612) per student per year, the sky-high fees – which will more than double to A$14,500 – will make humanities students about 19 per cent more financially advantageous to universities than they are now.

This could ultimately cost the government, as humanities students accrue massive debts. “They may never repay because their income won’t be high enough,” Professor Norton warned.

john.ross@timeshighereducation.com