Mis-selling education to our own kids

The novelist Howard Jacobson once joked that as he sailed to take up a post at Sydney University in 1965, "steaming in the oppposite direction" he saw "Clive James, Barry Humphries, Germaine Greer and Robert Hughes. 'You're going the wrong way,' they cry as one. 'Where it's at is where you've come from'."

Jacobson found in Sydney that "hilarity pervaded the entire social structure", and that Sydney University was "more oops-a-daisy holiday camp than an academic institution".

How times have changed. Now, we take universities Very Seriously Indeed.

Universities are no longer places to drink and experiment with fringe politics -- as James, Greer and Hughes did at Sydney University -- or engage in Dada-ist pranks and performances as the young Humphries did at Melbourne Uni.

Now, they are places where enrolment day should include special classes on calculating the net present value of the educational asset you're about to buy. If it's positive, sign up and then retire to the tavern for a small light beer. Hrmph!

To be fair, the glory days of 1965 were underpinned by the post-WWII economic boom. University felt 'free' because most people didn't get to go, and the tax revenue to fund it was easier for governments to come by.

The mid-1960s was also the era in which many of our second-tier universities were founded, each promising to offer something different to the bastions of Sydney and Melbourne.

As Melbourne vice chancellor Glyn Davis notes, the first Australian universities had styled themselves as "an amalgam of universities from Edinburgh and London to Dublin ... This new institution would become the model for all later Australian higher education -- an autonomous, professional, comprehensive, secular public and commuter university".

The founders of the second tier universities set out to be very different to the handful of older universities, but Davis notes that after some years, "the lack of genuine differentiation disappointed many who championed a different approach."

Universities have worked under capped fee-structures for domestic students, but from the early 1990s began to offer more diverse programs to lucrative overseas markets. Certainly the fees were 'diverse' from the local fees -- that is to say higher and payable in full at the time of study.

And so two worlds have co-existed on campus. Davis writes: "The first is the world of domestic undergraduates, where Canberra sets strict rules about price and entry. The second is the market for international students, where universities can make choices about where to recruit, what to charge, whether to operate within Australia or set up offshore."

It is against this backdrop that education reforms led by minister Christopher Pyne are unfolding. The 'two worlds' are to become one as the fee-cap for domestic students is lifted. 

There are other big changes. HECS loans extended to students will be available as before, but bigger loans will be needed for top universities and top courses. Also, to cover the government's fiscal responsibilities, the loans will be priced not at an inflation-tracking interest rate, but at the ten-year bond rate. That's the price the government must pay for the money itself, though it has set an upper interest rate limit of 6 per cent.

An even more sweeping change it to extend the HECS-style loans to the non-degree tertiary sector. That is a profound change for the economy and for students, but more on that another day.

The Pyne fee reforms will undoubtedly act to polarise the tertiary education 'market', as it will henceforth genuinely be.  The elite universities, the Group of Eight, will become more expensive though many second-tier institutions will resist fee hikes.

Deakin University has already said it will absorb the cost of its funding shortfall under the Pyne reforms to ensure students enrolled in 2014 finish their studies on the fee-structure they agreed to at enrolment.

The sad reality is that the lowest-quality universities will be forced to compete on price.  Their profits will lie in enrolling large volumes of students to be served mediocre quality degrees. 

There are three major problems with the Pyne plan.

Who can afford to gamble?

Firstly, efficient markets rely on 'perfect information'. Students from lower socio-economic groups, particularly from families in which parents have not attended uni, have a very poor understanding of what they are signing up for. They may not know for a couple of years into their degree whether its 'value' is worth the fees incurred.

Students from families with a high stock of 'cultural capital' -- numerous degrees and better careers -- will get much better advice from parents and family members on what path to take. For a 17-year-old school-leaver, that advice is invaluable -- and they won't get it from increasingly slick university marketing departments.

Students from lower socio-economic backgrounds will therefore be more inclined to gamble their future on lower cost options, precisely because they are unsure of the returns it will bring. In less-well funded universities this will result in what Charles Darwin University deputy VC Sharon Bell calls "training and credentialism accessed through bite-sized modules that can be effectively delivered through for-profit, thin and low-cost private providers or business arms of universities that employ academic piece workers on casual and fixed-term contracts". What's that worth?

Why is a 'degree' better?

The second problem with the Pyne reform is that it is a continuation of Labor's 'demand-driven' model that saw university attendance grow hugely through the Rudd and Gillard years.

Labor believed that model enabled social mobility and hence fitted with a left-of-centre ideology.

The grim truth, however, as colleagues from the more marginal second-tier universities (really third-tier) have told me over the years, is that at that level, a 'degree' is not a degree at all. Labor's belief that a bit of paper is a social enabler is, I believe, a false one.

Yes, it's nice to have a degree. But if you learned little, had to forego three years of full-time income, and incurred even a $20,000 to $30,000 debt, then you've been had.

Pyne has failed to face the fact that many students herded into sub-standard degrees cost the economy a lot of money, and if anything, leave them further behind in their 20s than if they had taken a job or a trade-oriented course. The idea that a 'degree' is inherently better than these options needs to faced up to.

The export racket

The third big issue with allowing fee structures to polarise universities is that the best will get better, and the worst will be appalling.

To survive, 'third tier' universities will use tactics similar to those that became endemic during the Howard years. If you can't dupe local students into accepting sub-standard degrees, foist them on to international students.

During the latter Howard years and in the first two years of the Rudd government, mis-selling of education was rife.

It took strident reforms by then education minister Julia Gillard and immigration minister Chris Bowen to stamp out the rorting, which was intimately tied to the prospect permanent residency (Our migration shame is over, November 12 2010).

The temptation for underperforming  universities to cut corners and deliver poor education to make up for lost federal funding will be immense. And as in the mid-2000s, the actions of a few could damage the entire education export market.

Australia badly needs industries in which it is competitive. Education exports, set to grow to $19 billion a year by the end of the decade, must be protected from future reputational damage.

Overall, the Pyne reforms will produce more diversity in what is offered at our universities.

However, they will also tend towards reinforcing social stratification that is based on background, not ability (the government's new scholarships program notwithstanding).

And we will open our doors wider to the world in an attempt to sell 'degrees', when some of them won't be worth the paper they're printed on.

Footnote: the author lectured in journalism at a second-tier university for seven years.