When first announcing the Abbott government’s tertiary education funding reforms, education minister Christopher Pyne described the need for a “US-style system”. The backlash to both the proposal and his comments led to the latter falling out of use. The question is why? This piece will briefly cover the core debate on the Australian tertiary education system and, in turn, consider the appropriateness of applying the US system.
What are the problems facing Australia?
At the heart of the Australian education reform debate is the role of deregulation in ensuring long term sustainability of funding and quality. At the forefront of the former is the Commonwealth government. When considered in pure numerical terms, concern regarding funding sustainability is understandable. In 2012 alone, Commonwealth grants accounted for 44 per cent of total national university revenue, a majority of which was earmarked for student subsidisation. With enrolment numbers only expected to increase, so too will government contributions.
Funding issues pose a different challenge for Australian universities. Though universities are service providers, their attractiveness as institutions are determined by the quality of their research. To risk oversimplification, academics are drawn to universities with high quality research output, as it indicates funding capacity. In turn, students are drawn to universities noted for the quality and reputation of their academics. Under the current funding model, Commonwealth contributions determined by enrolment, universities face the task of striking the balance between education delivery and investment in research output.
What are the problems facing the United States?
Driven also by concerns over funding and quality, the US debate on higher education is not different from Australia. However, if the conversation in the latter revolves around the merits of deregulations, the US is focused on how to manage its side-effects, specifically student debt. Between 1974 and 2000, state funding for public institutions went from 78 per cent to 43 per cent of total revenue. With no regulation stipulating otherwise, public universities responded by shifting costs onto students. This has recently culminated in two major events; tuition now accounts for over 50 per cent of public university revenue and total student debt is now over US$1tn.
Reduction in state funding is not the only reason for increased student debt, as important again is the balance of education delivery and research output. Perhaps the greatest source of pressure on public institutions are elite private institutions like Harvard University. Traditionally commanding greater financial resources, private universities have been able to outperform their public counterparts in research output and correspondingly, student demand. With revenue again so closely linked to enrolment, many public institutions have increasingly diverted funding to research, adding further pressure on students. Among the most infamous examples of this practice is the University of California system.
What can be taken away?
Based on the above information, one can understand the backlash against the Abbott government proposal. Beyond the rhetoric, rejection lies in using the US experience as a paragon despite its downsides. Though the US system of tertiary education can be credited with helping the US retain its position as a global innovation powerhouse and shown the viability of the education sector as an economic driver, it has has come at no small cost to young Americans.
But the impact of debt does not end with just financial hardship as it also extends into national security. In 1998, then US Secretary of Defense William Cohen chartered a review of US national security requirements in the 21st Century. In its final phase report, the commissioners pointed to the increasing competition between the private and public sector in securing the best and brightest. In it they single out student debt as a major shaper in career decision-making.
Though reduced government contributions will improve Australia’s mid-term budgetary position, if deregulation leads to increased student debt it will also lead to uncertain long-term side-affects. Among these is the human deficit that will face the Australian public service including the Defence Force. This concern is only exacerbated when considering the findings in the recent intergenerational report that shows young Australians will likely be in high demand within the century.
Andrew Young-chan Kwon is the United States Fellow at Young Australians in International Affairs.
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 Please refer to Michael Rizzo’s "State Preferences for Higher Education Spending: A Panel Data Analysis, 1977–2001" in What’s Happening to Public Higher Education?
Image credit: NTEU Victoria (Flickr: Creative Commons)