Universities will have unfettered freedom to set their own fees under the most radical shake-up to higher education funding since the introduction of HECS 25 years ago.
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Budget 2014: ideologically conservative
This is a budget that cuts the role of government and gives a big role to the market, says Peter Hartcher.
While fees in some courses may fall, the cost of a degree from prestigious universities is expected to soar when government caps on course costs are scrapped in 2016. The federal government's contribution to degree costs will decline by an average of 20per cent from 2016 as students take on a greater share of the cost of their education. The changes will not affect current students until 2020.
To calm concerns about the impact on poor students, 20per cent of all additional revenue raised through increased fees will fund scholarships for disadvantaged students.
Nevertheless, heated protests are expected when Education Minister Christopher Pyne travels to campuses across the country to sell the reforms over coming weeks.
The HELP student loans scheme will remain, but in a less generous form. Graduates will repay their debts earlier: once they start earning $50,638, down from $53,345 this financial year.
Interest will be pegged to the government bond rate rather than to inflation. This means graduates will pay an interest rate of up to 6per cent on their student loan – up from 2.9per cent currently. This will affect all students from 2016, regardless of when they started their degree.
The changes to the student loans scheme will save the budget $3.2billion over four years.
Budget 2014: economic sense, but nasty
It's right to get the budget back into surplus, but some of Joe Hockey's measure are plain nasty, says Ross Gittins.
In an equally dramatic move, direct government support will be extended for the first time to students at TAFEs, private universities and in diploma programs from 2016. This was the key recommendation of the recent Kemp-Norton review into university funding. An extra 80,000 students – most in diploma and associate degree courses – will receive government support for higher education from 2018 at a cost of $820million over three years.
Total expenditure on higher education is projected to increase from $8.97billion in 2013-14 to $9.47billion in 2017-18.
"Through these once-in-a-generation reforms, the government will help build a sector that is more diverse, more innovative and more responsive to student needs," Treasurer Joe Hockey said in his budget speech.
"With greater autonomy, universities will be free to compete and improve the quality of the courses they offer."
The government will also spend $439million over five years to provide apprentices with loans of up to $20,000. Apprentices will pay back the loan when they meet the HELP income threshold for university students.
The Australian Research Council will have $74.9million cut from its funding over three years through a one-off 3.25per cent efficiency dividend.
The government is sticking by its pledge to only fund the first four years of the Gonski reforms – despite almost two-thirds of the spending promised by the Gillard government falling in years five and six.
From 2018, the government will fund schools at 2017 levels with extra money added for inflation and increased enrolments. Funding for each state and territory would be determined following a new round of negotiations.
This would mean a total federal government outlay on schools of $18.15billion in 2017-18 – down from the $19.6billion Labor says it would have delivered.
The controversial school chaplaincy program, currently facing a High Court challenge, will be continued for another five years at a cost of $245.3million over five years.
The government will also provide $139.5million over four years to continue the Future Fellowships scheme – which funds mid-career researchers – and $150million in 2015-16 for the
National Collaborative Research Infrastructure Strategy. The university sector had been worried the schemes, which were up for renewal, would not be continued.
Total spending on education is forecast to grow by 3.1per cent in real terms from 2014-15 to 2017-18.