Media Releases...

 

Adrian McComb

Executive Officer, Council of Private Higher Education

Sydney

 

Public universities are complex organizations and face many challenges but to imply that any of their woes can be sheeted home to private providers currently enrolling around 3-4% of all domestic students or to suggest public/private competition is a serious issue is ludicrous.

 

The future is about increasing partnerships and collaboration and one that welcomes more investment, both public and private, plus a diversity of choice that meets the needs of students and the community as well as encouraging additional participation in higher education.

 

Discussion of relations between public and private institutions is hindered by inadequate data. Publicly available data for private providers of higher education, out from under the radar since the Higher Education Support Act (HESA) legislation in 2003, is limited by the fact that it has only be introduced over the past few years and some published comment based on tiny samples  has therefore been misleading. Enrolment growth in particular has been exaggerated and to some it seems almost as if private higher education is a recent phenomena that has only existed since the new reforms.

 

For our part, the Council of Private Higher Education (COPHE) has been collecting student data from higher education providers since 2000. We have encouraged members to provide student data to the Commonwealth as without sensible data we cannot expect sensible public policy.

 

The picture of enrolment growth that is evident our data, though solid, sustainable and encouraging, is from a very small base and hardly spectacular.

 

Private providers of higher education have operated in Australia since the nineteenth century though many of the earlier providers were swept up into public institutions or at least their functions were assumed before the late 1980’s. For example, faculties of business in universities may be huge now but before these even existed, private business colleges and industry bodies in, for example, banking and insurance were the mainstream of business education. Similar examples that spring to mind include teaching, nursing, physiotherapy and pharmacy schools which are all now part of public universities.

Whether an institution in the higher education sector is currently considered public or private really depends on whether it was included in the legislation that implemented the Dawkins reforms.

 

Better data on private sector enrolments is emerging. Since the provisions of the HESA have been rolled out through private providers in 2005, 2006 and 2007 a data profile, encouraged by the Commonwealth requirement for student enrolment data, is emerging. Most Higher Education Providers (HEPS) were approved at different times through 2004, 2005 and 2006, different data requirements were mandated each year as the legislation was being implemented while some providers had voluntarily provided data for the statistical collection prior to 2004. As a result and with only 2006 data available at this stage it is impossible to compare apples with apples.

 

However the good news is that the Commonwealth’s data collection for 2006 and 2007 will start to build a profile supports improved analysis though the basic numbers for private providers are so much smaller that caution will still need to be exercised.

 

The question of whether the private sector poses a competitive threat to public universities has to take account of the relative size of each segment. The key indicator figure in understanding relative size is domestic student enrolments expressed as Equivalent Full Time Student Load (EFTSL). In 2004, the year before the HESA provisions, the domestic student EFTSL figure for private providers was around 12,000 or about 2.6% of total higher education enrolments.

 

From data collected from private providers and collated by COPHE over the past few months, we are expecting the 2007 total domestic EFTSL figure for private providers to increase by about 55% over 2004 to around 19,000 or about 3.8% of higher education. Of the 2007 EFTSL count the University of Notre Dame and Bond University account for about one third between them. An increase of that magnitude over three years cannot be construed as a threat to public universities.

 

The importance of Fee HELP as an equity measure cannot be over estimated and has been a significant development in the sector. The equitable impact of Fee HELP, an income contingent loan scheme that is similar to the loan scheme part of HECS, which removes the need for a student to pay tuition up front, encourages choice and enhances further participation. The equity arguments for Fee HELP apply equally irrespective of the type of institution in which they are enrolled. In actual fact about three quarters of Fee HELP provided has been to students in the public sector.

 

Some of the recent public comment regarding these variants of HECS type income contingent loans presents only part of the picture. The debate amongst economists, reflected in a paper by Professor Bruce Chapman, the architect of the HECS scheme, and his colleagues, that has triggered much of the comment, arises from consideration of theoretical interest rates for income contingent student loans. However, a focus on theoretical interest rates in isolation is like considering home mortgage rates as the sole factor in establishing the cost of living for a family.

 

Financing higher education tuition raises very complex issues. What Professor Chapman shows clearly is that the actual subsidy to a student varies greatly according to a students choice of course and institution as well as their employment profile after graduation. This makes generalizations difficult but it does suggest that a single loan scheme to replace a complex range of different arrangements may be desirable. In any comparison of HECS HELP and Fee HELP, it has to be recognized that HECS HELP (primarily available to students at public universities) comes with a government subsidy depending on discipline of between 15% and 70% of theoretical tuition costs. In addition, the student in a public university benefits from the enormous, but difficult to quantify, sunk capital cost of university infrastructure and other subsidies. An income contingent loan that enables a student to finance his or her own education is less expensive to the taxpayer than the range of subsidies paid up front for a subsidized Commonwealth place.

 

Furthermore, it appears the fact that undergraduates incur a 20% surcharge in their Fee HELP debt may have been overlooked by some commentators. In modelling that we have undertaken, the surcharge is a pretty close equivalent to a theoretical interest rate ranging between 2% and 3%.

 

When attempting to estimate size and growth, access to Fee HELP alone does not adequately explain the growth in the private sector.

 

Apart from student choice other factors driving private sector growth include an extension from three to four year degrees in some disciplines, providers moving from offering VET diplomas to higher education awards, the development of higher education pathways programmes that encourage participation and the expansion of TAFE Colleges into Bachelor Degree provision. Given the nature of the courses and institutions generating these new enrolments it is likely that these new students present an overall gain for participation in higher education.

 

Noting that more and more private providers (or should we say more accurately non-public university providers) are actually owned by state agencies, are part of state TAFE systems or operate in tandem with universities raises an important question. What are the meaningful distinctives?

 

In my view, the key distinctive between public and private, in the context we are considering, is the relative scale of operations and the very different cultures that operate in large organizations compared to small ones. Any small enterprise, including higher education providers, needs a very clear understanding of their customers, a focus on their support constituency and confidence about what makes them unique in their situation. On the other side the large institution by virtue of size and resources can undertake activity that is beyond the scope of smaller ones. In industry it tends to be small firms that innovate and large enterprises that deploy products to the mass market. I’d suggest that this concept is part of the future for higher education providers in Australia.

 

As Martha Minow, an American public philosopher, proposed for the US situation in her book published in 2002, we need to be partners not rivals.