By 2027, just under one third of Australian university students will be paying more than A$18,000 for a single year of full-time study.
This makes a standard three-year arts degree at this rate more than $54,000, compared with a nursing degree, which will be less than $15,000.
The discrepancy is a result of the Morrison government’s Job-ready Graduates scheme. This was controversial when introduced in 2021 and has remained so, due to the huge increase in fees for many students.
The Albanese government agrees the scheme has “failed”. But so far, there is no clear plan to replace it.
My new research paper looks at how the system should be fixed to make it more effective and fairer for everyone.
It’s often argued we should base students’ fees on future earnings. But my analysis shows a simpler, more effective method would be for students to pay a single rate.
Read more: $50,000 arts degrees look set to stay, despite a new bill trying to slash uni fees
Remind me, what is the Job-ready Graduates scheme?
Job-ready Graduates cut student contributions (the amount students pay for their studies) in teaching, nursing, engineering and IT courses to encourage them to do degrees the Coalition government saw as “job-ready”. At the same time, student contributions jumped for arts, business and law.
In 2024, a major government report on higher education – the Universities Accord – found the policy had “failed” and needed to be replaced.
The new Australian Tertiary Education Commission says it is exploring what could replace Job-ready Graduates. But things are not moving quickly.
The commission is not due to provide advice to the government on the matter until the second half of 2027.
What is the point of uni fees?
The original aim of the 1989 Higher Education Contribution Scheme, or HECS, was to was to raise revenue to support higher education but to do so in a way that was fair and equitable.
But Job-ready Gradates is neither of those things.
As my report notes, we are seeing some students pay around 93% of the cost of their degree (with the government footing the bill for the rest). Others pay less than 13%.
How should student contribution rates be set?
Two basic options have been put forward to change the current system:
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make student contributions better reflect lifetime incomes
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a single rate of annual student contribution
The first approach has received significant backing, including from the Universities Accord review, which recommended the government base fees on potential earnings.
The logic goes, if a student does a degree that leads to a potentially more lucrative career, they should pay higher fees.
For example, let’s say a student with an average lifetime income is asked to contribute $10,000 per year to their studies.
If someone is expected to have a lifetime income 1.2 times the average, their student contribution should be $12,000. If their lifetime income is expected to be 0.9 of the average, their student contribution should be $9,000.
But problems arise when you look at how university study is organised and what happens during people’s working lives.
Universities are organised by disciplines, not occupations
Some university courses are designed to allow people to be admitted to a profession. Medicine is a key example but it has less than 3% of student places. Nursing has just under 8%.
There is no clear professional outcome for about 40% of student places in fields of study such as humanities, other society and culture fields, science and communications.
Most courses also include different fields of study with different contribution rates.
Think about someone studying to be a school teacher. Education has the lowest student contribution rate under Job-ready Graduates, but that is for subjects that teach you how to teach. If you are going to teach history or economics, you pay the highest rate to study these subjects. If it’s music, you pay the middle rate and if it’s English, you pay the lowest rate.
What incomes do people have after finishing university?
My analysis of 2021 census data shows how the link between field of study and income is fuzzy.
Across all fields of study, about one third of graduates go on to be high income earners, exceeding 150% of average weekly earnings. Most are men who have worked their way into senior positions.
In nearly all fields of study, around one third of graduates have income above average weekly earnings, but are not high income earners. Slightly more than one third have incomes below average weekly earnings.
The “medical studies” field is the standout case where there is a strong relationship to future income. But it is a narrow field, into which a small number of high-performing individuals are admitted. They then progress to well-defined, well-remunerated professional careers. It is the exception, not the rule.
For most fields, any single estimate of lifetime income glosses over substantial differences in job outcomes and lifetime incomes.
Dentistry is a good example. Some people who study in this field become dental hygienists on modest incomes. Some become dentists running their own practice.
If we are worried about the “fairness” of some graduates going on to earn huge incomes after their studies, we have to remember these grads will then be taxed at higher rates. Nor will they will eligible for welfare payments.
There are big differences between male and female earnings
The accord proposal also disregards large gender differences in lifetime earnings.
I looked at male and female earnings at different age groups between 20 and 50 years to account for different stages of their careers.
Except for two fields of study (medicine and law), no age groups of women had median incomes above $104,000 in 2021.
In contrast, there were only three fields of study (creative arts; nursing; and agriculture, environmental and related studies) in which males 40–49 did not have a median income of more than $104,000.
Read more: Female graduates are earning less than their male peers. What might be causing the gap?
So what should the government do?
My report finds a simple and effective approach to student fees is to introduce a single annual contribution rate.
This is what we had when HECS was originally introduced. Governments then changed this approach, essentially to help with the politics of increasing the share of costs met by students for their university study.
The current average annual student contribution is around $10,847. If we went with this figure, around two thirds of students would have a higher annual contribution and one third would have a lower annual contribution than they currently do.
This doesn’t necessarily have to cost more taxpayer money.
How would the funding work?
At the moment, the government provides different levels of subsidy to different fields of university study.
Some adjustment of government subsidies in each field could maintain the current level of funding provided to universities, without extra costs to taxpayers. For example, in fields where students were going to pay higher fees (such as nursing), the government could remove some subsidy. This could be added to other fields, where students would be paying less (such as the humanities).
The government could of course also choose to reduce the average student contribution rate.
Every $100 reduction in the annual amount of student contribution would have a net cost of roughly $53 million a year. There are currently three different rates of student contribution. If the student contribution rate was equal to the middle rate ($9,537), the net cost to government would be around $685 million a year.
What happens now?
The government seems to the baulking at the idea of increasing the contributions of some students, likely teachers and nurses. It says the policy will be “expensive” and “not easy” to fix.
It has already increased the repayment threshold for student loans, which had been lowered by the previous government. This means low-income graduates are not required to make repayments.
But more is still needed. It’s time to remove the inequities in the amounts students contribute to the cost of their degrees.
This article was originally published on The Conversation. Read the original article.
