Farrago talks higher ed: Setting funding rates

Friday, 16 May, 2014


Words by Christine Li


You may be familiar with the term ‘Commonwealth supported place (CSP)’. This is a spot in the university partially funded by students, and partially by the Commonwealth government. At the undergraduate level, anything that is not a CSP is a full-fee paying place.

Currently, universities set their own student contribution levels for each course as long as it falls within a range set by Commonwealth government (Nursing and Education degrees excepted). The rest is covered by Commonwealth grants, which are calculated based on students’ expected earnings following graduation, not the cost of providing the course.

Possible changes

You might also have heard of ‘fee deregulation’ and switching fully to a ‘demand driven system’—some of this is set out in the new Budget. While these two actions are often conveniently strung in the same sentence, they are not the same.

The Review of the Demand Driven Funding System is a government-commissioned review of the system. It is written by two independent education commentators, Dr David Kemp and Andrew Norton.

It’s important to note from the outset that the Kemp-Norton review does not recommend price deregulation, because this falls outside its terms of reference. However, its authors have flagged that price deregulation is a potential consideration if a demand driven system continues, in which case costs will explode as universities race to meet demand, or regardless, as expenses from regulation, technology and teaching methods increase year on year. Current costs also do not reflect the cross-subsidy most domestic students receive from international students (that is, because international student fees are so high, domestic students’ are essentially lower).

Why deregulate fees under a demand-driven system?

The demand-driven system got rid of the cap on CSPs, letting universities enrol as many students as they want, while maintaining government contributions to those tuition fees. So the argument for price deregulation is partly to pay for this expansion (it arguably would not be enough though).

Price deregulation would potentially also give universities greater control over their revenues, making them less dependent on Commonwealth funding. Dependence on funding tied to CSP grants while under a demand-driven system doesn’t necessarily allow universities to meet demand as the government did not increase funding when it uncapped places.

Would deregulated fees go up or down?

It’s hard to say at this point. Some who support fee deregulation say it will result in lower fees for students because universities will compete by price. This has happened at NMIT, where discounts are being offered. Some universities also offer online courses, where they can waive amenity fees. However if demand for places increase, universities might set higher fees in order to meet this demand with quality facilities.

Where to now?

Right now, the Group of Eight (of which the University of Melbourne is a member) is happy to see universities forgo public funding in some disciplines so they can have the freedom to set their own fees. So in any case, there is a high likelihood that students will see increases to fees sometime in the near future.