Australia’s higher education system (Part 2) — interview with Julie Hare | VIEWPOINT

Australia’s higher education system (Part 2) — interview with Julie Hare | VIEWPOINT

August 25, 2019 4 By Stanley Isaacs


Jason: Hey, everyone. This is part two of our discussion with Julie
Hare. It picks up right where we left off in part
one. Welcome back. So for every student you enroll as a university,
you get a fixed amount from the government as a payment? Julie: So you get a fixed amount from the
government, and the government also pays the student contribution, which the student then
pays back when they’ve graduated. Jason: As the loan? Julie: As the loan. So, basically, by 2012, the numbers just started
to skyrocket because universities like money, right? Vice Chancellors like money. There’s a saying in Australia. I don’t know whether you’ve got it here, that
never get between a Vice Chancellor and a bucket of money. Jason: Well, the sentiment is sort of shared,
I’m sure, among some in the United States. But I guess what strikes me as interesting
here is Australia is almost moving closer to a system that we have in the United States. So the irony here is a lot of times people
are saying the United States should be looking to Australia because they really have this
right. They have the higher education system right. And I think that’s why it’s so interesting
to learn of these sort of controls that were in place that we don’t really have in this
country. We have various forms of limiting access,
but certainly no centralized system that’s limiting bachelor’s degrees. And so this gets removed, and universities
start enrolling lots of students. Julie: Lots and lots of students. Jason: And they get to decide which majors
they want to offer and how many places, right? Julie: Exactly. So, basically, any sort of workforce planning
is left up to students. So if you want to do science, you can do science. If you want to do law…So we ended up, you
know, a lot of people enrolling in law degrees, a lot of people enrolling in journalism degrees. And, hey, there’s no jobs in journalism anymore
either, is there? So a surplus of students in some areas and
still struggling to get students to enroll in areas like IT. We never produce enough IT graduates. We had a lot of students enrolling in teacher
education, and that became of bone of contention. It has been quite problematical. But the numbers just absolutely soared in
the first two or three years. Jason: So enrollment skyrockets. That’s a fair… Julie: A lot of that, yeah. They skyrocket. And what we realized afterwards is that there
had been this thing called unmet demand with places kept. There was a lot of students who just couldn’t
get in, and most of them mature age students. They just couldn’t get a place. Jason: So when you say mature age, sort of
adult students? Julie: Adult students. Jason: Not dependents. Julie: Depends on the university, but over
the age of 21. So students who hadn’t done well out of the
school system, hadn’t been able to get a place at university under the cap system, and just
hadn’t been able to get in. So the system grew dramatically. Certainly, there were a lot more school leavers
getting a place because what we call our leaving certificate, which is the ATAR, the Australian
Tertiary Admissions Rank. Jason: Okay. Sounds like an admissions standard, or it’s
a test, to grades. Julie: An admissions standard between nought
and a hundred. If you get a hundred, you’re brilliant. If you get nought, you’re basically functionally
illiterate and innumerate. So there was a lot more school students coming
in, but also…You know, if you think about the brighter school leavers, they were already
going to university and the demand-driven system didn’t change anything for anyone with
an ATAR over 90, probably for anyone with an ATAR over 80. It really didn’t change. Jason: Right, because they were getting admitted
because they had the good scores. They were going to get admitted probably under
any of these systems. Julie: Yeah. But they were white, urbanized, privileged
kids, and they were going to go to university anyway. So the system wasn’t designed to increase
access for them because they already had access. What it did was open the doors to poorer kids,
more disadvantaged kids, kids in sort of the midrange, and, unfortunately, some kids with
very poor academic backgrounds. Because what the government didn’t do at the
same time was uncap foundation programs, basically the stepping stone into university. So they just uncapped bachelor degrees, so
all the incentives with the universities was to put students, even with poor academic backgrounds,
straight into university degrees instead of putting them into sub-bachelor programs and
giving them some of the academic skills to survive. So there was a lot of discussion, and there
has been a lot of discussion, about attrition of students dropping out in first year. And so the lower your ATAR, the higher your
risk of dropping out. Jason: In the U.S., we call this sort of the
college completion crisis. We have an open system, much more open, and
a decade ago in the policy world people started to worry that students, exactly of the demographics
that you’ve described, were enrolling and they weren’t finishing. And so same thing. Same thing is happening in Australia because
they’ve opened access. Julie: There’s the safety net in Australia. There is the safety net. They don’t have to repay if they don’t benefit
from their education. They might go and get a job somewhere else
and end up repaying, but they might not. So the Australian system is good because of
the safety net system. Jason: That’s provided through the loan? Julie: That is provided through the loan. You know, and I think there’s just a moral
issue, too, about setting up kids to fail. We know now, I’m sure it’s the same in America,
attrition is closely correlated with low ATAR. Jason: A low test score. Julie: Low test score, part-time study, and
online study. And when you’re getting those three put together,
some universities were having one in three students fail in first year. That’s a cost to government, and it’s also
a huge cost to students through opportunity cost, to the fact they have a debt that they’ve
got to repay at some stage. It’s a moral issue, it really is. Jason: So debt and no degree. Julie: Debt and no degree. We look to America, and we go…you know,
your $1.5 trillion student debt crisis, and we go, “We don’t want to be like that.” Jason: That’s a good point to sort of talk
about the loans, what’s happening with the loans. So we have an open access system, and we have
a lot of loans. We give everybody a loan if they want to go,
including for graduate school and in the community colleges, technical schools. And the non-traditional students, the older
students that you’ve talked about, and graduate school are ones that have really contributed
to this big increase in debt. So what is happening? What has happened to the amount of outstanding
student debt in Australia since this demand-driven system, where universities could enroll as
many students as they wanted and they were allowed to take out loans? Julie: Okay. So the amount of income-contingent loans,
the debt held by the government on behalf of students, have soared. It’s soared, but it also soared because, at
the same time, there was another government policy about giving vocational students who
were doing diplomas and advanced diplomas, degrees, it was an appallingly implemented
policy, and there were no barriers to entry. So every rogue operator just started setting
up colleges, and it was just a complete disaster and failure. But that added a lot of money to the income-contingent
loan system. At the moment, I think there’s about $60 billion
held by the government in loans, and about $20 billion of that is considered doubtful
debt, the amount that will never be repaid, because students will never reach the threshold
or will move in and out of the threshold. Jason: So they won’t earn enough to really
repay it. You said $60 billion? Julie: Yeah. Jason: I’ve seen some statistics that that
is a big increase since the start of the demand-driven system, double, triple, something in that
neighborhood? Julie: Yeah. Something in that neighborhood. I don’t quite have the numbers in front of
me. But, yeah, it’s been a massive increase, and
it’s continued. The trajectory has gotten steeper over time. Jason: Okay. So enrollment goes up a lot, and student debt
goes up a lot. In the U.S., we’ve sort of labelled that a
crisis. How do people in Australia look at it? Is this a success, or are they worried about
it? Julie: There are a few people who are worried
about it. Conservative governments are worried about
it, and we’ll come back to this, but are addressing it by lowering the threshold at which people
have to repay and by effectively recapping the system. But I don’t think there’s widespread concern
about it. Most students are ignorant as to how much
they owe. Both my children are university students. My son is 25 and doing, basically, his post-graduate
year, and he owes about $55,000. I think the average debt is around $26,000. Jason: Okay. $26,000. Julie: But, you know, he’s dropped in and
out and had a lot of fun along the way. Jason: So it’s common to have student debt
in Australia? Julie: It’s common to have student debt, but
because it’s collected by the tax system, people aren’t particularly aware of it. The debt is not a large part of the discussion
or debate around government and government debt and…yeah. Jason: Okay. So there are some groups that are worried
that the demand-driven system has led to too much student debt but sort of… Julie: They’re not worried about student debt. In Australia, we’re not worried about student
debt. I could say that pretty categorically. Occasionally, there’s a few students who owe
more than $100,000, but there is effectively a cap on how much you can borrow from the
government, and after that you’ve got to bear the loan yourself. Jason: So you mentioned this, though. I think it was some time around 2014, 2015,
one of your budget agencies releases this report saying there’s been this big increase
in what you call doubtful debt. There’s been a big increase in the percentage
of the loans and the dollar value of the loans that aren’t going to be repaid following this
demand-driven system. And my understanding is there were some people
who were concerned about that. Julie: In government. In the government, there are concerns about
that, yeah. Jason: And it’s my understanding that, what
we would call conservative government, and you mentioned this a little bit before, has
actually taken steps to make the student loan program less generous in response to this. Could you say a little bit about…? Julie: They have. So they’ve lowered the threshold at which
students have to repay. I think it’s gone from about U.S. $35,000
down to, as of sort of July this year, around U.S. $30,000 repayment, so they can capture
more students and get more. It’s also staggered, so if you earn sort of
U.S. $30,000, you start repaying at 1%, and then it’s stepped up to, if you earn I think,
I’m not sure, probably $90,000 U.S., you repay at 10%. So it’s a staggered repayment system, which
seems fairer. But you always get that kind of cliff where
at one point you pay nothing, and at another point you start repaying. But I understand that cliff’s a lot steeper
because it’s a 10% repayment, right. Jason: Yeah. So sort of the average student who has a student
loan in Australia today, are they paying back more of their income or are they more likely
to be repaying the loan than they were than under the old system where the repayment terms
were different before the demand-driven? Julie: I see. I don’t know what the actual numbers are. You know, that said, most students repay their
loan within 10 years. We’ve got a really healthy economy. Most students, the vast majority, repay within
10 years. There are some people who never repay, and
you have to look at a large number of that and not just people who haven’t succeeded
through their education. A lot of them are married women who work part-time. Our tax system is by individual, so if you’re
not working but you’re living in a high-income family, what we call the Yummy Mummies, you’re
not repaying your loan. Jason: Because it’s just based on your own
income. Julie: Because it’s based on your own income. It’s not household income. Jason: Not household income. That’s interesting. So you have a right-of-center government that’s
worried about the student loan program, wants to make it less generous, saying you have
to start paying back even at lower levels of income now. My understanding is they sort of argue this
is a result of this demand-driven system. Jason: Yeah. Which, can I point out, they supported, have
bilaterally supported all the way through but have kind of hated it at the same time
because of the cost to government. Jason: Because of the cost. Julie: Yeah. They’re just seeing the dollar signs, and
they’re not really necessarily looking forward to what that means to the economy in terms
of having more graduates in the economy, which we can show have been absorbed to this point. Jason: Right. So the additional seats that were created
under demand-driven, and more students going, and more students getting degrees, you were
saying that, to a certain extent, that’s been a success. Julie: They have. Look, there’s been a softening of the market
in terms of unemployment among graduates is very low. I think it’s around 2%, whereas unemployment
among young people is probably more like 5%. So graduates have much lower unemployment
levels. What has increased is underemployment, and
so the numbers there are a bit poorer, underemployment and part-time employment. But graduate salaries have continued…After
the global financial crisis, everything just went [makes breaking sound], and it was easy
to point the finger at the demand-driven system and say you’re producing too many graduates. But, you know, you had to look at the economy
more generally. Australia didn’t have a recession during the
global financial crisis. We’re the only economy in the world, I think,
the only advanced economy in the world that didn’t. I think we had one quarter that we went back
or didn’t progress but, other than that, we’ve had 28 years of unmitigated economic growth. Jason: Right. So there’s some argument that whatever faults
there is with the demand-driven system, some of it may have been the result of the sort
of slowdown in the economy. Julie: Yeah, a global effect. Jason: I want to get to the most recent developments
and sort of end with this on this demand-driven system. It sounds like this has become a little bit
of a politically contentious policy, and the current government…What is the current status
of this demand-driven system? Is it still universities can enroll as many
students as they want? I know there’s been changes to the loan program. What about changes to how many students can
enroll? Julie: Well, the current government, while
it was in government before the most recent election, said it has recapped placed. So the caps are back on. Jason: So the caps are back in place. Julie: The caps are back in place. So 10 years of a demand-driven system, which
has effectively worked. You know, there is nothing to say it didn’t
work. There have been some cost to it, but as an
overarching policy, it has been a success. But the government, which is now the Morrison
government, didn’t like how much it was having to pay for in terms of commonwealth grants
and in terms of HECS loans, and so they recapped the places. Now, they haven’t recapped places on a specific
level, like previously. So what they’ve done is cap it at a financial
level, saying you can’t…In 2018, they said you can’t have any more money each year than
you had in 2017. Jason: So the university sort of has a freeze
on the amount of government funding they can have. They can still enroll as many as they want,
but they’re not getting any more… Julie: But they will only get the student
contribution. They won’t get the government contribution. So that’s interesting. That’s in place until 2020, and then, after
that, it will only grow with demographic growth, and demographic growth is only anticipated
to increase by about 1% a year after that. That in itself is interesting. Jason: I’m going to sort of play this out. So under a different government, under a sort
of left-of-center government… Julie: Yeah, under the Labor government. Jason: …would this original demand-driven
system, would they put that exactly back in place as it was? Julie: So one of their election promises was
that they would reintroduce the demand-driven system fully and whole-heartedly, and they
were also going to hold a full review of the tertiary education sector because, while our
focus is very much on higher education, the vocational sector in Australia has just been
absolutely annihilated over the last 10 to 15 years. Jason: And why is that? Very quickly. Julie: Very quickly, because there was a whole
lot of kind of free-wheeling, free market ideas applied to it that put the public provider,
TAFE, up against our private colleges. Also, it’s the state responsibility and state
funding with a small amount of federal funding, and the states just withdrew money and withdrew
money. But I can say categorically the vocational
sector is in crisis. That is our crisis, but it’s not going to
be addressed. There’s nothing to show that it’s going to
be addressed under the current government. Jason: I see. As a sort of final point, it seems like this
demand-driven system is still very much so up for debate in terms of where it’s headed. Julie: No, I think it’s effectively finished
under the current government. Places are capped. There’s 1% growth. There’s going to be performance-based criteria
in order to get your demographic growth. You’re going to have to meet certain… Jason: So the universities have to meet certain
targets in order to get more money? Julie: Well, I don’t know about certain targets
but, well, they haven’t said how they’re going to do it. But, obviously, in the U.S., a number of states
here have played around with performance-based criteria. Jason: Well, we also like to talk about it
and then also not give specifics, exactly as you’ve described. Julie: Yeah. And, as you know, there are real problems. If you’re telling a university it can only
have increased funding based on graduate outcomes and there’s another global downsizing of the
economy, why should future students or universities be punished for something that they can’t
control? I know this debate has been played out many
years in the U.S. Jason: And so what should we be looking for? What are the key things to watch for in this
debate in Australia and the caps and the demand-driven system, the state of the loan program? I mean, what’s the big thing we should all
be looking at for the next shoe to drop? Julie: Okay. So I’ve got a couple of predictions. One, places are obviously going to settle,
and they won’t grow, particularly. I mean, they had been flattening or plateauing
in demand anyway, but we’ve got a bubble coming from about 2022 onwards. Jason: A bubble in…? Julie: As in a demographic bubble. So we’re going to have a big boom. They’re called the Costello babies. So Peter Costello, our treasurer during the
2000s, decided that Australians needed to produce more babies, so they introduced something
called the baby bonus. You got $5,000 for having a baby, and so there
were a lot of pregnancies during that period, and they’re about to… Jason: Another successful policy. Julie: Another wildly successful policy. Jason: It sounds like, in Australia, if you
give people money to do something, they do it. Julie: Very motivated by the carrot, yeah. Jason: So these caps that are sort of back
in place sound like there’s going to be a lot of pressure to lift them again if… Julie: Well, maybe. I think what we’ll see is that, once again,
there will be unmet demand and also, because of the way that we fund different disciplines…So
some disciplines, the students pay a lot more than other disciplines or contribute a great
proportion. So if you’re doing economics or law, you pay…Say
your total fees are $11,000 dollars a year. The government puts in $2,000, and you put
in $9,000. So I predict what you’ll see is growth in
those areas where student contributions are high and government contributions are low
because, basically, students then become cash cows and then you can then fund that. What you want to get is a lot of science,
increase in science, or programs that are expensive to teach. Jason: I see. As sort of a final prediction here, do you
think the government is going to make the student loan program continuously less generous? Is that a trajectory we’re on, or do you think
that the changes they put in place are about it for now? Julie: I suspect they’re probably about it
for now. There was a certain amount of resistance. I suspect it’s about it for now because we
have had, historically, a very generous system, and it is a system that has worked. This is a successful system. And to be too hard-nosed about it, I think,
would be detrimental to the character, the underlying principles of the scheme. Jason: I think those are definitely key things
that U.S. audiences will want to keep an eye on on the Australian system. And this just gives us, I think, a lot more
context than what we normally get when we hear people sort of mention the Australian
system as something that we should all keep an eye on to learn from. Clearly, there is a lot to learn from the
Australian system. There’s just more than what we’re usually
told. So, Julie, thank you. This has been great, and I’m glad we had the
chance to have this conversation. Julie: Jason, thank you. It’s been fabulous. Jason: Hey, everyone. That’s the end of our discussion with Julie
Hare. Thanks for watching. If you enjoyed what you saw, remember to like
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