Australian postgraduate financing options [Discussion Paper]

Abstract

Since 1991 Australian universities have charged fees, paid in advance (up-front), for a proportion of students undertaking postgraduate courses. In this paper it is argued that this is poor public policy, for both economic and social reasons. The conceptual basis for this case is explained fully. Given the strength of argument, it is difficult to understand why different Commonwealth governments have allowed and encouraged the expansion of post-graduate up-front fees in this period. The policy situation is particularly hard to justify since a much more equitable and efficient charging arrangement, the Higher Education Contribution Scheme (HECS), has been in place for undergraduates since 1989. The important point for policy is that HECS collects student charges contingent on incomes, and thus requires no payment at the point of entry. It is argued that a collection system of this type is a more correct policy for post-graduate education, and it is shown that such a reform can be implemented without administrative difficulties. In January 2001 the Federal Government announced intentions to change post-graduate fee arrangements consistent with the reform promoted in this paper. The proposal is known as the Postgraduate Education Loan Scheme (PELS), and its basis and implications are considered in what follows. It is argued that while PELS is a major advance over current arrangements its institution will have important and arguably undesirable consequences with respect to the level of student charges and, more importantly, concerning taxpayer subsidies of post-graduate education. If and when these effects come to pass, the government will face the need to change the scheme. An economically and administratively viable reform to PELS is explained and justified. Show more