Image by Martin Snicer CC 2.0 via Flickr

Australia’s higher education loan scheme has again made headlines in recent weeks, as the Federal Government announced plans to make ‘job relevant’ degrees cheaper for incoming students from 2021. At the same time, the cost of arts and humanities degrees is more than doubling.

Commentators have labelled the change as a ‘carrot and stick’ approach to influencing students’ degree choices. Students who choose degrees that are allegedly ‘job ready’ – such as nursing, engineering and teaching – will be rewarded with paying less, while those who study social work, history, sociology and philosophy, among others, will graduate with large debts if they cannot or do not pay up front.

Petitions and protests have already started against the proposed measures, reminiscent of the 2014 uproar over fee deregulation, after which proposed changes were quietly dropped.

Unresolved conflict from its inception: fair to me, fair to us, or fair to you?

The loans scheme is no stranger to controversy from its inception, as discussed in our recently published paper “Fair to me, fair to us, or fair to you?” Unresolved conflict between government and graduates over Australia’s tertiary education loans (Journal of Economic Policy Reform, 2020). In it, we analyse the experiences of an early generation of students that contributed to the cost of their education through the higher education contribution scheme (HECS), as it was then known, and ask what lessons can be drawn for higher education policy today.

In 2000, 447 recent graduates answered a survey about their perceptions of the benefit and fairness of the loans scheme. Some students were deeply disaffected by their experience and even those who saw advantages in the scheme understood others’ experience of unfairness.

Students who graduated with debt, rather than paying up front had the strongest grievances. They were more likely to regard the scheme as unfair, and their university degree as not being ‘worth it’.

The short answer responses were particularly illustrative. In terms of value, one student described their education as ‘very second rate compared to how much it cost’, another wrote their debt ‘took the shine off’ getting their degree. Many raised questions about where their fees and repayments were going, showing deep scepticism about relative government investment being made in higher education, despite increasing student contributions.

How perceived unfairness was fuelled?

Linked to the questions about values was a pervasive sense of injustice around specific aspects of the scheme.

Firstly, the constant changes to the details of the scheme were considered to be unjust: “In 1989 I signed up for a loan which was to be paid off when my income reached an ‘above average’ level, at rates which were in the range 1-3% of income. That these conditions were subsequently changed dramatically (once I had already incurred that debt) does not seem just and has resulted in a system which is much less easy to defend.” Another responded, on “changing rates I feel cheated … UNFAIR.”

The widely differing costs of degrees was also a particular source of complaints. Students asserted that certain courses ‘should not be more expensive as [it] discourages less well-off students from studying those disciplines’, a concern that has been raised again with the latest set of proposed changes.

Indeed, across groups and socioeconomic status, respondents were worried that HECS was disproportionately imposing a financial burden on poorer students: “The HECS scheme promotes inequity between the rich and the poor. The rich don’t need HECS and if they use it, they can pay it off quickly;” and “the deferred payment option is the only choice for people who can’t afford to pay up-front. This puts these people behind from the beginning.”

It is striking that unfairness linked to relative disadvantage was perhaps the strongest theme of the comments, as the loans scheme was designed originally to increase equity and access to higher education.

The lesson here is that citizens tend to evaluate fairness with reference to their peers, rather than with the macro-economic lens of governments.

Finally, perhaps most revealing is the link we found between people who considered the scheme to be unfair, and their lower commitment to paying the debt off through the tax office. Other studies also show that policies that are perceived as unfair by citizens can provoke defiance and non-compliance over long periods.

What this means is that what individuals think is fair matters for how they engage with policy, even more so when they share views of unfairness with those with whom they identify and are socially connected.

Lesson to the Government: Learn from the past

As the Government announces its intentions to regulate the costs of university courses to increase the flow of students into ‘economy building’ subjects such as STEM (science, technology, engineering, and mathematics), health and agriculture and away from law, commerce and the humanities, spokespersons for universities are confidently claiming that price signalling will be ineffective. Their argument is that choice will not be shaped by cost because the cost can be deferred through income contingent loans. We will see how these predictions play out.

Meanwhile, both government and universities seem oblivious to the problem that has mired discussions of fees, loans and the quality of university education since income contingent loans were introduced – fairness. In their many forms, income contingent tertiary education loans have been the grounds for conflict between universities, government, students and the public.

The reason is that no consensus can be built around the fairness of such loans for educational purposes. Our research illustrates how a narrative of unfairness is shared among students, within families, in communities, amongst taxpayers and among policy makers. The narratives are deeply held and persistent, being aired routinely in government inquiries and through traditional media every time governments announce changes to income contingent loans. Income contingent loans are not as dominating and destructive as Robodebt, for example. But they do weaken the relationship of trust and respect between government and citizens, most importantly manifested in gaming the tax system when loans are being repaid.

The Government, therefore, would be wise to learn from the lessons from the past when implementing higher education policy that is likely to be widely regarded as unfair. The ramifications can run long and deep.


Further reading

Braithwaite, V, Ahmed, E & Cleland, D 2020, ‘“Fair to me, fair to us, or fair to you?” Unresolved conflict between government and graduates over Australia’s tertiary education loans’, Journal of Economic Policy Reform, DOI: 10.1080/17487870.2020.1785298.

This article has 3 comments

  1. Hi, very interesting study! The results also seem to indicate a level of misunderstanding. Deferral of payment, where there is no interest charge as in Australia, and indexed only to (low) inflation, is financially better than up front payment, ignoring any discount. Ironically the longer the deferral the cheaper the degree. Do you think the students understand this?

    • Thank you for your excellent question Miranda. The perception of unfairness is not so much based on misunderstanding as on a peer-based assessment. For example, imagine you are a young person starting university without enough money of your own to pay HECS up front. You have a handful of peers in your classes whose parents paid for their HECS. When you graduate, and your pay is docked, say, $150 a fortnight, you remember your fellows with wealthier backgrounds and how they wouldn’t have to pay that now. So you see here the evaluation is not ‘was it cheaper than paying up front?’, but ‘how am I disadvantaged compared to my peers?’. Benefits of policy is relevant, but how people judge benefits is shaped as much by hopes and fears as by a rational analysis of the kind suggested. More generally, the purpose of this article and other papers by Ahmed and colleagues (see for access to these papers) has been to link adverse policy outcomes and a breakdown in citizen cooperation with government to the perceptions that people have about how policy affects them. Citizen and students analyse the effects of policy in ways that are more complex than the policy-makers’ cost-benefit analysis. A rich social science literature demonstrates that citizen cooperation depends on their perceptions of fairness: are they being treated as equals in society?; are their sacrifices greater than others?; is their voice being heard as they expect it to be heard in a democratic society? Feeling obligated to work with government is also important and can over-ride a cost-benefit analysis, happily in the case of people who opt for paying their tax bill! Policy that nudges or tells, while failing to listen and understand, is policy that often has adverse unanticipated consequences.

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