Quick Post: On why @vanbadham’s argument about HECS is right, but wrong

In the Guardian, Van Badham wrote an article outlining her argument against HECS.  In the context of the conversation about university deregulation, her argument is unusual because it doesn’t launch from the usual platform: that HECS is amazing.

Never acknowledged by the defenders of Hecs is that it is a system of unfair taxation. For all the old rhetoric about “middle-class welfare” and personal advantage, Hecs is imposed without means-testing: those on lower paid jobs accrue a higher percentage of debt to income than the wealthy who hold the exact same qualification. Stalling the repayment of the debt until graduates reach an income threshold just means that those on smaller incomes bear the same debt burden for a longer time. Not only does this disproportionately punish those who use their qualifications for lower-paying jobs serving the community rather than higher-paid ones in the corporate sector, but it also further compounds disadvantage of women already earning less than identically-trained male colleagues due to the gender paygap. [Source]

The source of the argument is somewhat hidden in plain sight: Badham thinks that the current system treats education as a commodity that is traded.  In the current rhetoric about price signals and whatnot, it’s not an unreasonable criticism.  This is the language that we use to explain the distribution of resources, to discourage production of greenhouse gasses, and to restructure Medicare funding.

But it’s not an accurate picture of the deregulation policy, and it shows what a terrible job Christopher Pyne did of explaining how the policy would work.

HECS is the envy of the Anglophone world.  It allows for sustainable growth of the higher education sector without spooking the government horses.  People can attend university and only pay it once they’re earning enough to repay it.  For most people, the payment is invisible: it comes out of their tax return once they’ve met the repayment threshold.

Since the early ’90s, there’s been one significant change to the policy.  When established, growth was limited by the government through a cap on the number of students and a cap on the fees charged to students.  Under the Rudd Government, the Group of Eight proposed that these two caps should be removed.

The argument is a fairly simple one: the government should not be able to control the university sector by limiting the number of students and by determining how much it costs to educate them.  Kim Carr (as minister at the time) new that lifting the cap on enrollments would be politically palatable, but shirked deregulating fees.  When Pyne announced the deregulation policy, Carr criticised the government by saying that he was ‘Giving the Vice-Chancellors what they wanted.’  Which, when you think about it, is a fairly odd thing for a minister responsible for the university sector to say.

This is the core part of the policy.  The government should not tell universities how much it costs to educate students.  Universities should have greater flexibility to deliver education, and shouldn’t be limited by government budget considerations.

This gets us back to HECS.  Who is the best person to pay for a student’s education?  The secret of HECS is that the future graduate is the best person to pay for the degree.

Is it unfair that HECS isn’t means tested?  In a sense, it is means tested: only people who can afford to repay their loans do.  On the other hand, the debt accrual levied against low-income earners is clearly unfair.

Or, rather, it seems unfair until you realise that the actual value of the debt doesn’t increase like a ‘proper’ loan.  This was one of the disastrous aspects of Pyne’s policy that didn’t get a lot of attention: it was proposed that the rate of increase would be changed to operate more like an actual loan.  The net result is that the government would ‘profit’ (in a loose sense) from student debt.  With the rate of increase being lower, low-income earners are getting a cheaper degree in real terms through HECS.

We can attack fairness from another angle: Anglophone students are amongst the most privileged people on Earth.  The biggest hurdle to university entrance is cost of living factors.  Lots of people simply cannot afford to go without a stable and substantive income for the amount of time that it takes to get a degree.  When students were locking themselves to staircases and whatnot, we were literally watching people assert that they were entitled to a free lifestyle at the expense of low-income taxpayers.  It’s little wonder that policy-makers now want to have a conversation about research funding without students and the unions at the table.

Badham’s solution introduces more problems into the policy pie: if you’re going to get employers to pay some kind of tax per graduate, then universities will only be able to sustain growth in vocational degrees.  That’s not the outcome we want.  We want universities that are liberated from government and business interference, that can focus on delivering education that might not have any economic benefit whatsoever.  It seems odd that Badham wants to, on the one hand, refute the commodification of education while, on the other, claim that the value of education is in economic benefit.

Fee deregulation was a good policy that we’ll eventually get, regardless of what temporary hurdles are put in the path by the Senate.  Our attention should be on how to ensure governments and industry cannot interfere with academic independence, and not on the entitled whinings of the extremely privileged.  Pyne stuffed up the communication strategy over education funding; with the Group of Eight shifting its attention to research funding, he needs to step up to the plate and prosecute the argument for reform.

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