Budget confirms cuts to universities

Students will face fee hikes and a have to repay HELP debt back sooner under the budget released last Tuesday.

Source: www.aph.gov.au

Students’ university fees will increase by 7.5 per cent and the Higher Education Loan Program (HELP) debt repayment threshold will be reduced to $42,000, the budget confirmed on Tuesday, May 9.

In a big-spending budget variously described as ‘populist’, ‘pragmatic’ and ‘Labor lite’, universities are among the few substantial losers. Meanwhile, schools, the National Disability Insurance Scheme (NDIS), and infrastructure projects make up the big-ticket spending items that represent an ideological backflip by the Coalition and appear to have snookered Labor in key policy areas.

As previously reported, the amount students contribute to university fees will increase by 1.82 per cent per year from 2018, reaching a total increase of 7.5 per cent by 2022. The increase in student contributions will be matched by a proportional decrease in government contributions, meaning on average students will pay 46 per cent of their total degree cost as opposed to 42 per cent currently. The fee increases will affect all students regardless of their study start date.

The income threshold at which graduates will be required to repay their debt will be reduced from the current $55,000 per year to $42,000. However, the rate of initial repayment will also be reduced from the current four per cent of income to one per cent. The rate of repayment increases to a maximum 10 per cent for graduates earning over $120,000.

Universities will also face a 2.5 per cent efficiency dividend (read: funding cut) over the next two years, that will see resources stretched. While most of the Group of 8 (Go8) universities, including the University of Sydney, have fairly healthy finances, the dividend’s impact will be felt most keenly by poorer universities. In particular, the eight universities around Australia (all non-Go8 members) that reported funding deficits in 2015 will now face further financial stress. Charles Darwin University in the Northern Territory, for example, reported a $26.2 million deficit in 2015 and will now face $3 million in efficiency dividends over the next two years.

These reforms are still a far cry from the heavy-hitting 2014 budget that sought to cut university funding by 20 per cent, deregulate university fees, and introduce a rate of interest on student loans; measures now officially scrapped. It also marks a more cautious approach from the Turnbull government that consequently gives the legislation more chance of being passed in the senate.

Other changes to higher education include the end of Commonwealth Supported Places (CSPs) places at universities for New Zealand citizens and permanent residents from 2018 onwards. However, they will no longer have to pay fees upfront — instead, they will have access to HELP loans and be able to defer payment. CSPs for domestic students will be extended to include sub-bachelor level degrees such as diplomas and associate degrees, and will also cover industry placement units that earn credit towards tertiary qualifications.

In regards to affordable housing, the budget provides little solace, as Sydney house prices continue their skyward trajectory. The proposed First Home Super Saver Scheme will see savers eligible to deposit up to $30,000 of pre-tax income into their superannuation accounts and take advantage of the associated tax concessions as they save for a house deposit. But this provides modest assistance at best to cash-strapped millennials and is more like putting a handrail on a precipitously steep cliff face. Other measures to dampen foreign investment in the housing market are likewise expected to only marginally help.

Welfare payments remain largely unchanged as eligibility requirements and funding levels remain untouched. The main proposal involves introducing random drug tests for welfare recipients that the government deems at risk of substance abuse, with payments withheld if drug use is detected. This will be applicable to people receiving Newstart and Youth Allowance payments and will begin as a trial next year.