Higher Education and international students

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I hate to say I told you so – but that never stopped me.

Back in February I noted the problems that changes to visa laws for international students would create for Australian universities. Well, guess what? Despite the numerous warnings by the university sector, visa law changes are now biting and are undermining one of Australia’s largest export industries. One article is here.

Now obviously as a Dean at Monash University I care about this. But why should you care?

Two reasons. First, if the university sector ends up in financial crisis it is the taxpayers who will be bailing them out. As I noted in my earlier article:

to the degree that our universities hit a crisis due to a federal government induced collapse in the market for overseas students studying in Australia, the problem will fall on the funders of these universities – the same federal government.

Put simply – the Federal government and the taxpayers are the biggest winners from the overseas student education industry.

And the second reason? Well, if you have students that are at university or will be heading there in the next decade then you have been in line to receive a large subsidy. As I have also noted before, our university sector is currently underwritten by a huge cross subsidy from overseas to domestic students. If it messes up our education exports then the government may have to start charging you or your children the true cost of their education. At a rough guess that is probably three or more times the current HECS rate for business degrees.

So the federal government in the short term has three choices:

  1. fix the visa issue so that the Australian education system remains internationally competitive and the cross subsidy to domestic students can continue; or
  2. massively increase the funding per domestic student so that it covers the true cost of that student’s education (either backed up by an increase in HECS or via taxpayer funding); or
  3. prepare to inject billions of dollars into the tertiary sector in the form of bailouts over the next 2-3 years.

Given that option 3 is the default option, I expect that option 3 will occur. And if it does, the federal government will be responsible for trashing the reputation of our universities and killing a viable long-term export industry in education.

12 Responses to "Higher Education and international students"
  1. I don’t know the detail of the visa rule changes, but I thought they were designed to deter non-genuine students (those seeking permanent residency as their primary objective in “college” courses of dubious standards) from entering the country. And weren’t the new rules also intended to protect such students from exploitation from fly-by-night education operators..
    Is this a case of unintended consequences to the formal tertiary sector or have I  misunderstood the situation?
     

  2. I think Monash is a fair way from that ratio Paul.  Also, universities are also about research too, not just teaching… 

    You do not attract the best academics in the world if you force them to spend all their time teaching.  From what I gather its hard enough as it is with Australia’s location denying academics the same access to networks they would have working in the US or Europe.

  3. @Clausen, There is an interesting article in a recent edition of the Economist that suggests a drop in US education standards due to a lack of engaged teachers as opposed to a multitude of gifted researchers. Both ‘types’ are required.

  4. <!– @page { size: 8.5in 11in; margin: 0.79in } P { margin-bottom: 0.08in } –> <!– @page { size: 8.5in 11in; margin: 0.79in } P { margin-bottom: 0.08in } –>
    The system, that was implemented under the Howard government, required tweaking, but not “throwing the baby out with the bathwater” which politicians and public servants, terrifed of media and public perceptions, did. Unfortunately there have been misinformation campaigns and “dog whistling” running for many years in media and used by politicians to alarm people, and generally underpinned by xenophobia.
    Conflation of myths and misinformation, along with concern over environment and population, included suggestions that study to PR was automatic, all private colleges were dodgy, industry un regulated, (state regulators were not doing their jobs), all candidates were Asian/Indian, taking domestic places etc.
    Ironically, many of the leading suggestions about international education, study to PR, employment skills of graduates, “foreign” students etc. actually emanated from Monash University’s Centre for Population and Urban Research CUPR. The CUPR directed by Dr. Bob Birrell, and its “research” journal “People & Place” actively seeks out related research fields, with flawed and biased methodology, which lead to negatives about non British/European immigrants, refugees, international students and temporary workers. Conversely, CPUR could be viewed as a propponent of the long gone “white Australia” policy which still has resonance in Australian society, especially when helped along by “research”, media and politicians.
    http://aiec-studyaustralia.blogspot.com/
    http://aiecquest.wordpress.com/

  5. But Stephen, there is nothing special about education exports.  And surely you would not be arguing the case for export subsdies?

    It does seem as though the goverment may have gone over the top with its changes to visa arrangements, especially given that the problems were probably confined to the non-university sector.

    But surely the university sector should have been making its case more strongly for proper financing from the Commonwealth, rather than rely on the potentially fragile continuation of cross-subsidies from overseas students? It looked very much like a case of making hay while the sun shone.

    Some serious research on what happens to overseas students, particularly the fraction who become permanent residents, their real language proficiency and their field of study, would be a welcome addition to the debate.

  6. Certainly not arguing for export subsidies Judith. And the University sector should have prepared for a reduction in international students and lobbied for sustainable funding (or deregulation). it didn’t. So we have got to a certain point where the options to go forward are, in the short term, limited.

  7. Melbourne University have just moved the Melbourne model, the aim of which seems to be to redefine the basic degree as an entry into 2 years of  full fees masters (for at least k$20 pa).
     
    As a faculty Dean, you no doubt have a much better handle on costs than I do Steven. Would the following figures be roughly correct? For under-graduates, the government coughs up around k$8 for a basic degree, the student pays k$4 so the university gets k$12. Is the k$4 compared to k$12 where your claim of “three to four times the current HECS” comes from?
     
    What would be breakeven? I think you are arguing that it is something more than k$12 and the OS students make up the shortfall. What do overseas students pay? I am just after some indicative figures. You cannot get a straight answer out of anyone at Melbourne University (who currently want to charge me k$90 for a post-grad degree for my son). So this humble taxpayer is not feeling so grateful.
     
    There is a wider issue here though. The more money universities collect the less they may be publicly funded in the future. So it is not as simple as saying that an OS student pays for a domestic place. Especially when, as noted above, many, many, domestic student are forced into full fee degrees theses days (albeit with fee help). I can also not get a straight answer for how many commonwealth supported places there are under the Melbourne model, how this compares to the previous model. Indeed, would you have any figures on the number of commonwealth supported places for vocational masters, both now and in the past? This is really a key issue.
     
    There is also the issue of bundling education with PR. What would be the economist’s view of bundling education with immigration? Would it not be in principle better to have separate markets for these unless there is some kind of synergy? And if we are essentially selling PR through education, why not just sell them?
     
    This post was really lacking on any details. I am afraid that this article comes across as self serving Steven. And I say that as someone whose salary is paid largely by OS students. I for one would be grateful if you could produce a more informative post covering the essential details that I have highlighted.

  8. Hi Chris

    Let me give you some rough figures. The total payment that a university recieves for an undergraduate business student is, as I understand it, around $10,000. This includes the HECS payment and the government top up. Overseas undergraduate business students pay around $30,000 at a group of 8 university (less at other universities). So basically an international students pays three times what the university recieves for a domestic student. The actual number depends on the university and on the way you look at the payment (compare HECS to fees and the multiple is much higher).

    On costs, it is difficult to say what the cost of a ‘seat’ is in an undergraduate business course in Australia. In large part this is because undergraduate education is one of a number of joint goods (including research) produced by universities. The economic theory of cross subsidies (e.g. Panzar in the Handbook of Industrial Organization) uses the concept that a cross subsidy exists if price is less than average incremental cost. So I will try to ‘guess’ this cost.

    There are a number of benchmarks that could be used, such as the price charged by overseas institutions for similar products. But one local comparitor is private school fees. The annual price of a ‘seat’ at a top private school in Melbourne is $20,000 or more. Now we could argue about how well this price compares to cost and whether this price would reflect the average incremental cost of providing a place in an undergraduate business course (the class sizes are larger – often much larger – at university but the university also has research and (usually) higher qualified academic staff. A univesity academic generally has a higher salary than a high school teacher.)

    However you cut it, the average incremental cost of a ‘seat’ in a business undergraduate degree at a group of 8 university is likely to be a lot more than the $10,000 received from the government for a domestic student.

    So, there is a clear cross subsidy in economic terms (the domestic price is less than the average incremental cost for a domestic student. The overseas student price must exceed the average incremental cost – as otherwise the universities would be broke).

    On UniMelb and their prices – sorry, you will have to look to a UniMelb academic to explain their model. And if you do not like the Melbourne Model – can I suggest Monash as an alternative?

  9. Melbourne Uni BCom student here, Chris. I’m paying +- $30,000 p.a, and my understanding is a local full fee place is +-$25,000 p.a. No idea what the current HECS fee is like but I think 3 years ago it used to be 8000+. Also, local students are entitled to concession on public transport but not us! as if we weren’t ripped off enough already.

  10. I know that the unis make 4 times more money on International students. Why wouldnt they take them. Its good for the uni also, even if they hopelessly outdated. <a href=””>betalningsanmärkning</a>

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