The single biggest cut to the higher education budget announced last week is the conversion of student start-up scholarships to loans, which will save the federal government $1.2 billion.
New Tertiary Education Minister Craig Emerson has defended the combined $2.8 billion in cuts on the basis that universities are elite institutions, which makes them a fair target for redistributing money towards schools that all children attend. However, a closer look at who will pay for the changes to student income support and where the money is being redirected through the government’s Gonski package reveals a sharply regressive foundation to the change.
The scholarships are worth $2050 per year and are paid at the beginning of each semester to the more than 300,000 students who receive Youth Allowance. While the reforms won’t affect current Youth Allowance recipients, the government expects 80,000 new students will receive start-up scholarships next year.
The impact of the conversion will be to dramatically increase HECS debts for these students once they graduate.
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The current average HECS debt is $16,100. For a student who receives Youth Allowance over the course of a three-year degree, that debt will now rise to $22,250, an increase of 38%. Meanwhile, a student who receives Youth Allowance over the course of a four-year degree will see his or her debt rise to $24,300, an increase of 50%.
Recent reforms designed to better decide who receives Youth Allowance means the increased debt burden will predominantly be borne by students from lower-income families and regional areas.
Since 2010, the federal government has increased the parental income threshold test for “dependent” students while restricting the eligibility of students from higher-income families. It has also granted regional students “independent” status and thus automatic access to Youth Allowance.
The reforms resulted in an immediate change in the profile of Youth Allowance recipients. In 2011, the proportion of Youth Allowance recipients who were “dependent” students increased to 68%, and there was a 25% increase in regional students receiving payments.
Currently, in order to qualify as a “dependent” and earn the full payment rate, the combined parental income of a student must have been less than $47,815 in the 2011-12 financial year. The family income test places the majority of Youth Allowance recipients well into the bottom half of Australian households, which had a median income of $64,168 in 2011.
For a single student living away from home this maximum rate, including rent assistance, is $265 per week, which is well below all standard calculations of the poverty line. Because the majority of Youth Allowance recipients come from lower-income families that do not have much capacity to provide additional support, the scholarships are a non-optional source of income for many students needing to cover basic costs, even if the government gives them the option to not receive the full scholarship amount.
The absurdity of “robbing Peter to pay Paul” when Peter — the university sector — is already struggling has been a common theme in public debate since the government’s announcement.
When the conversion of scholarships to loans is also taken into account the cuts become even more perverse. The government’s own reforms to make student payments more targeted have made HECS more regressive than it already was, by increasing the debts of lower income and regional students relative to wealthier students.
The regressive nature of the changes is even greater when the increase to private school funding as part of the Gonski reforms is taken into account.
Over the past week, many commentators have made a connection between size of the cuts to public universities and the $2.4 billion increase to private schools under the government’s package.
The Gonski Report itself found that low-income and remote students, as well as indigenous and disabled students, are markedly underrepresented in private schools — both Catholic and independent. Some 47% of independent school students come from the highest-income quarter of households.
In robbing Peter to pay Paul, Peter is not only a struggling university sector, which the National Tertiary Education Union says is facing a permanent reduction of 3.25% in per student funding as a result of the cuts.
Exactly half of the Gonski increase to private schools is being funded by increasing the HECS debt of students from lower income families or regional areas — debt-averse groups that are already under-represented in our universities.
By converting scholarships to loans, Peter is also likely to be the HECS debt of a poorer or regional student, while Paul is a wealthier private school.
*Osman Faruqi is editor of the University of NSW’s student newspaper Tharunka; Gareth Bryant is a PhD political economy student at Sydney University