Australians have about 18 months to study for an undergraduate university degree on current prices before being slugged at least 30% and as much as 60% more in fees.
The 30% rise is the bottom end of the scale. This is roughly the shortfall universities face after the Federal Government cuts its funding, starting in 2016, under Budget measures announced last month.
The cost of popular courses at some universities, most likely the prestigious sandstone ones such a Sydney and Melbourne universities, will likely rise by a lot more than that.
The cost of a degree will also cost more to finance. Unless you have the money upfront, the student loan scheme (HELP) will come with a bigger interest rate pegged to the 10 year government bond rate (as much as 6%) rather than the Consumer Price Index (currently 2.9%).
So far, the government and the universities have been reluctant to put numbers on the changes to the fees charged for degrees in 18 months’ time. However, internal analysis by two universities – and a review of the marketplace for degrees – is starting to give a clearer picture.
What may be cheaper – and it depends very much on competition – are non-degree courses such as diplomas and advanced diplomas. These will from 2016 be be partly Commonwealth funded for the first time.
Postgraduate degrees won’t charge, at least in the short term. It’s the undergraduate degrees which will cost more to those who aren’t enrolled now. Those already enrolled get a free kick, a freeze on fees, until 2020.
Universities have had their calculators out since the federal budget announced a cut of 20% in funding, changes in the interest rates for student loans (HELP) and a new scholarship scheme.
The universities are waiting to see what happens when enabling legislation hits the Senate. The big questions are whether the cuts will go through the Senate and whether they will be modified.
As it stands, the cost of a degree will go up by between 30% and 60%, according to initial back-of-the-envelope analysis by a couple of the bigger universities.
There are, however, some natural barriers, an upper limit, to how far the fees for an undergraduate degree can rise. International students at Australian universities already pay the full fees.
So it wouldn’t make sense to have domestic students paying more than international students – but there’s nothing stopping a university increasing fees for international students, and then pushing domestic fees higher too.
This is where free market forces kick in. The cost of studying in Australia for an international student is already very high and, at the time at least, can’t go much higher without hitting buyer resistance.
As this Business Insider chart shows, the fees in Australia are a bit cheaper than the US but the cost of living here is higher:
Australia is the most expensive country for overseas students, according to research by HSBC, with a combined average cost of university fees and living costs totalling more than $38,000 per year.
That’s made up of $25,375 in university fees and $13,140 for cost of living. This is higher than even the US where fees are about the same, $25,226, but the cost of living is cheaper at $10,479.
So, on the international stage, Australia needs to keep a lid on fees if its to keep its competitive edge on education sales.
Why go to Australia when you can get a degree cheaper in the US? This acts as a natural market cap to domestic fees. Universities won’t charge domestic students more than international students.
However, a substantial fall in the Australian dollar against the US dollar (something the Reserve Bank has been advocating) would make a big difference and open the door for larger fee increases for international (and possibly domestic) students.
Australiaâ€™s higher education system is made up of 37 public universities, four private universities and 131 other higher education providers able to award their own degrees.
Ian Young, who is Vice Chancellor of the ANU, has a guide to how much more degrees will cost.
The Federal Government presently pays about 60% of the cost of a degree. Under the budget measures, this will be cut by 20 percentage points, or about one-third.
Universities will need to increase fees by 30% on average just to cover the lost funding. This starts from 2016.
“There will be no cap on this amount provided it does not exceed the amount which the University charges international students in that same discipline,” says Ian Young at the ANU.
“I seriously doubt that student contributions would rise to anything like international fee levels. This does not happen in postgraduate coursework programs where domestic fees are similarly deregulated.”
At present, students pay on average approximately 41% of the cost of their education. Under these changes this will increase to 52%.
Any university which decides to increase the student contribution they charge, such that the total income received by the university increases above the present level, will need to put 20% of additional revenue into a scholarship fund.
And that’s another barrier to rampant fee increases. Universities will have to budget a loss of 20% of that new revenue.
For postgraduate degrees, such as MBAs which can cost $75,000, universities can, and have been, charging what they like for some time.
Ian Young at the ANU says:
“So I think that probably the most you would end up with, at least in the foreseeable future, for courses is typically maybe it may go as high as $18,000 a year. That’s a long way short of $100,000.”
However, it is a safe bet than the cost of a degree will rise from 2016 by at least 30%. A university could not absorb a rise of that size.
This chart shows the current breakdown of who pays what for the average degree:
And there can be a big variance in costs between universities.
At Sydney University, the fees for a full-time domestic law student are $10,085 this year. An international student pays $40,400 for 2014 alone. The difference between the two numbers is the amount by which Sydney University could charge per year for a law degree.
At Melbourne University, some of the post graduate degrees have an international flavour, at least in their costs. A four-year Doctor of Philosophy (Law) is around $156,992 and a three-year Juris Doctor $114,816.
Glyn Davis, Vice Chancellor of Melbourne University, in an email to staff, said:
“It will be impossible to settle the contentious issue of future fees (for undergraduate degrees) until Senate approval of the final package of reforms to higher education policy and financing.”
However, initial analysis by Melbourne University shows what it calls a “momentous” funding gap left by the budget cuts.
The analysis shows fees will have to rise by 45% to make up lost funding in social sciences, by 54% in science and by 61% in engineering.
This would bring the cost of an engineering degree to about $38,000 from $24,000.
“Students would get nothing new for this increased debt,” Davis told staff.
The National Tertiary Education Union says its analysis shows a similar minimum increase as that foreshadowed by the ANU and Melbourne University vice-chancellors.
The union says there will be a minimum average increase in university tuition fees of at least 33% just to compensate for reductions in government funding and the introduction of new student funded scholarship scheme.
And it says the lifting of the cap on university fees could see the tuition fees for some degrees reach or exceed $100,000 especially for degrees such as medicine, law, engineering and management and commerce.
Under the union calculations, a medical degree would go from about $60,000 to a minimum cost of $83,000 to a high of $180,000.
This chart shows the minimum and the maximum expected increases in degrees across different faculties: