It’s time for a student-centred funding model in tertiary education

Independent Higher Education Australia argues for a student-centred funding model for tertiary education.

Australia has a golden opportunity to implement a revolutionary change to the funding of higher education, and vocational education that would boost our productivity and make us a world leader in reform.

The current Australian University Accord review of higher education led by Professor Mary O’Kane, commissioned by the federal government, has noted in its recent interim report that Australia will need to double the number of higher education students by 2050 if we are to maintain, if not increase, our current standard of living. One of the key proposals raised in the Interim Report is a student-centred funding model.

This is not a new concept. It was a key recommendation of the last big review in 2008 – the Bradley Review.

That previous review was conducted by a hand-picked team chosen by the then Minister for Education, Julia Gillard. The Rudd-Gillard government ran out of time to implement the findings on student-centred funding. The Abbott Government sought to implement them in 2014 but failed to get passage of legislation through the Senate, not least because they made a questionable judgement of accompanying the reforms with significant Budget cuts to universities.

It is way beyond time that student-centred funding should be adopted. In an era when governments are seeking out policies that will enhance Australia’s productivity, via economic reform, here is one for the taking.

Over recent decades, Australia has successfully transitioned to more equitable funding models in key social welfare programs. These include Medicare, childcare funding, the National Disability Insurance Scheme, and school funding – all of which have shifted from provider-directed funding to a more equitable approach that focuses on the ultimate beneficiaries, ie, students or patients. It is time we apply this logic to higher education funding as well.

To unlock the benefits of a student-centred funding model, the government should allow domestic students to determine where they study in a provider neutral way, on the proviso that they are delivering relevant courses in national priority fields. If that is then extended to the vocational education and training sector that will be enormous reform.

Every major developed nation in the world is wrestling with the problem of how to better integrate their higher education and VET sectors. The introduction of student-centred funding is the answer to that conundrum. It allows the student to decide what is in their own best interests. If you do that the so-called “parity of esteem” problem, where VET is looked down on as a second-rate education option, is also solved, as the matter will be resolved by student choice. Australia would become the world leader in resolving what otherwise has been described as a “wicked problem.” But to be a world leader we need to act fast as other countries, such as the UK, have stolen a march on us.

The O’Kane Review’s interim report proposes a student-centred funding model, via a Universal Learning Entitlement (ULE), which champions diversity, inclusivity, and would have productivity dividends. A ULE would provide “an appropriate combination of a public subsidy and a student contribution that would be paid through and income contingent loan as in the current HELP scheme.”

Importantly, the UK Government is in the process of implementing a very similar proposal called the lifelong loan entitlement by 2025. Australia has the opportunity to piggyback off the work of the UK Government to allow us to fast track our implementation.

One of the key benefits of a student-centred funding model is the potential to improve access to higher education for students from lower socio-economic backgrounds. By allocating funding based on student needs and preferences, rather than institutional priorities, this model can help to level the playing field and ensure that all students have the opportunity to pursue their educational and career goals.

We are concerned that the O’Kane Review may recommend in its final report that the ULE be referred to a yet-to-be-established Tertiary Education Commission, for its consideration. Instead, it should be fast tracked, and the ULE should be implemented over the next two years for start-up across the whole higher education sector in 2025 and rolled out to the VET sector no later than three years after that.

The higher education sector in Australia is principally made up of public universities and independent providers, be they universities, university colleges or other institutes of higher learning.

As the O’Kane Review has pointed out the existing public universities cannot, by themselves, deliver all Australia’s higher education needs by 2050. This is especially relevant given that 59.5 per cent of universities were unable to fill their allocated government supported places in 2021-2022, highlighting the opportunity for the independent sector to fill this gap as Australia faces workforce and skills shortages.

It is 15 years after the Bradley review. It is time to get on with it.

Peter Hendy is CEO of Independent Higher Education Australia.