Own goal

It’s been a dramatic and painful week around the world, and a week for scepticism about the value of “breaking news”. Here’s Australia’s contribution to the world of redundant announcements, from our busy Minister for Everything*, Craig Emerson:

No one’s surprised at the news that if elected Tony Abbott will hang on to the cuts made to higher education without passing them on to schools. We’re a risk averse sector with a sharp eye for the unforeseen. And this risk was exceptionally easy to see: it’s the elephant that’s been sitting in our kitchen all week, helping itself to cake. When the Labor government announced cuts to Australian universities in order to save Australian schools without securing the support of the mostly conservative State governments, with all the polls and pundits predicting Tony Abbott as the PM of a new government, our lunch money was gone.

And although the government has spent the week downplaying the Efficiency Dividend as a modest speed bump of 2% followed by 1.25%, the detail written in small print is that this is cumulative: 2014 at 2% followed by 2015 at 3.25%; and its impact will extend beyond the two years in which it’s applied by pegging the indexation of our operating grants after that to the lowered rate. In other words, we’ll continue to feel the Efficiency Dividend like shadow limb pain for quite some time.

It’s hard not to see this as an own goal by the current government, a parting gift for their successors. We’re a really small and efficient sector. We’re on track to meet the targets we were given for increased participation overall. We’re a star exporter of services. We’re already floating on a cushion of volunteered time and work. There’s not that much more to cut without suffering pushback from students and industry partners, not to mention our actual partners and families, and Australia’s full-time university workers and managers have been fairly vocal about this. (Do read Tseen Khoo’s post, which is packed with helpful links.)

We’ve said a bit less about the likely impact of the reforms to the ways in which Australian university students are funded. There are two small but significant shifts to the current income-contingent loan system, and although one will hit middle class families harder, both have had to be managed by pretending that student debt is a virtuous and low-risk investment in a very sparkly future. Firstly, there will no longer be a discount rate for those who pay their fees upfront; and secondly, the existing scholarships that help some students meet the set-up costs of participation (especially in terms of textbooks) will now be added to their loans.

Expanding investment in student debt isn’t such a gift to the next government; really, it’s more like the prawn heads left in the curtain rods.  Not only does Australia already have a hefty unpaid bill from Australian graduates who have either left the country or died with their debt intact, but this week we also have compelling evidence from the Federal Reserve Bank of New York that young Americans with a history of student debt reacted very negatively to recession after 2008. They retreated from the sectors of the economy they had traditionally been expected to prop up, particularly home ownership. They became slightly less likely to buy cars that required loans. And the overall impact on the consumer economy of their inconfident spending and debt exhaustion is bluntly put:

Despite unprecedented growth in the student loan market, student borrowers appear to have participated fully in the recent consumer deleveraging. This was possible only through a collective retreat from other standard debt markets.

Student debt isn’t just bad for the economy, it’s also bad for students. It’s sold to the electorate with the image of doctors and lawyers who surely owe their fair share; less is said about the fact that those who owe most are those who are slower to reach the income threshholds at which they’re required to repay — those graduates who become parents and then spend a long time in the part-time workforce, for example, or those in remote and regional areas who remain underemployed relative to their qualifications. It’s also one of the only major debts that can be taken on in Australia without the obligation of the lender to counsel the borrower about their fitness to repay. Quite the opposite: universities market the benefit of participation on the promise of a graduate earnings premium, and keep the image of the lender and the future debt nicely vague.

Awkwardly for all concerned, the Grattan Institute has just pointed out that the graduate premium in Australia isn’t as high as it is elsewhere (p.40); and is off-trend in relation to other OECD countries. This is partly because the real growth in jobs and increases in wages has been in unskilled and construction work in the minerals and mining boom, and it might level out. But as the Grattan Institute also point out, it’s precisely by increasing the supply of graduates overall that we are playing our part in keeping the graduate premium low (p.39).

School-leaver students are unlikely to be experienced in risk calculation. This is the first big debt for many, especially those who have never had an car loan or a credit card. Meanwhile academics, who do know about the impact of personal and household debt, are so testy about the suggestion that students are consumers that we turn a blind eye to the fact that they’re actually borrowers. It’s something we rarely discuss, and we certainly don’t encourage them to let debt shape their decisions, just in case this results in attrition.

There’s a lot being said at the moment about how we should innovate and what we should do to achieve efficiency. I agree completely with Richard Hall that these calculations are framed within a far bigger crisis, and that the enclosure of academic labour and hedging of student debt are complexly linked with the deeply scarring patterns of social exclusion upon which capitalism increasingly depends. But while we’re here and making decisions, I think that whatever curriculum we draw up, whatever resourcing or delivery decisions we make, whatever cost savings we attempt and whatever justification we give ourselves, we need to keep in mind throughout it all that university students’ debt is also our debt to them for showing up.

Because with both sides of government now treating us all with equal contempt, we’re really in this together.

* The longer version: Minister for Trade & Competitiveness, Minister Assisting PM on Asian Century Policy, Minister for Tertiary Education, Skills, Science & Research.

(Thanks to Andrew Vann for much explaining of the sums.)

10 thoughts on “Own goal

  1. I entered university in 1999 under the very naive (but commonly held) assumption that my HECS debt would be paid off by the well-paying and fulfilling job I was going to get straight after graduation (oh the follies of youth!). That being said, I received no counselling regarding my future plans, job acquisition, or the debt I was about to take on. I just assumed ‘uni + time + effort = career’. I was Dean’s Merit List every year, won the Illawarra Mercury Award, Golden Key Honours Society blah blah. One aborted attempt at a PhD later and I find my self thousands of dollars in debt, working three casual jobs at a university and raising a three year old with my partner. I have attended job interviews to be told I am over-qualified, I have attended job interviews where the interviewees have expressed surprise that I would “even apply for a job like this”. I have worked for the government, in the community sector, and even for call centres (god help me) but back to the uni I always go.

    The spectre of my HECS debt hangs over me. I made the choice to have it sent directly to my accountant rather then receive a yearly reminder of my own failure. Perhaps this is what graduates do, internalise the failures rather than blame the system that gave us this massive debt with the promise of a glittery future it ultimately didn’t deliver. I am unlikely to start paying off this debt for at least three more years, until my daughter goes to school. I joke that they will likely never pay it back, this joke masks the real fear that this may in fact be the case.

    I loved doing my undergraduate degree. I love being a part of a university community. I don’t love the debt that has accompanied these decisions, and perhaps my time would have been better spent elsewhere in terms of my earning potential. It’s impossible to say.

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  2. Thinking back to my first undergraduate year in 1995, I have vivid memories of Keating as Prime Minister and Janeway stranding her crew in the Delta Quadrant. My first undergraduate year went by in a share-house blur as I started out with one of the ‘double degree’ offerings at the University of Tasmania in Science and Law, while I temporarily deferred the radically alternative option I’d been offered in a Creative Arts degree at the University of Wollongong.

    Paying upfront was never an option, but after taking on the HECS debt from the first year, and leaving the lab coat and/or future wig behind, I figured adding an Arts degree wouldn’t hurt too much, after all I wasn’t technically paying for it. To the 19-year-old me earning a serious income was a long way off and so I made choices that continue to financially haunt my family today. I piled on extra credit points and summer session units without any regard for my future indentured self and the invisible debt I was accumulating. It was a great time though, and I was zipping through two degrees, none of which would have been possible without support from my parents and partner.

    It payed off in one sense with good grades and a sympathetic employer during my honors year that helped to secure a PhD scholarship, and again I put off thoughts of future earning in favour of more learning, but each year meant more and more interest accumulating. So graduation and the floppy hat wasn’t nearly as life changing as the newborn who beat me to the finish line and suddenly what work I could get also meant a big chunk of change out of pocket (via the HECS debt).

    What really bites now is that despite the fortnightly absence of a good proportion of my wage, the individual deductions don’t occur until the end of the financial year. The system profits from the interest on its cut which is not deducted from the total. The interest steadily piles on and it will be a few years yet before the financial drain is over. I’ve never been interested in property, but I do occasionally think of the holidays we might have taken, or the loosening of belts during the leaner times. Do I regret the choices I made? Never, but would I give my younger self some serious advice? Hell yes.

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  3. I did a B.A. Communications degree from UTS which luckily for me was so far in the distant past that it was still free – however HECS kicked in in my last year of study. I accumulated a small debt. I got my first job and experienced the -wham!- of the fortnightly HECS repayments. At that time my wage was not high, the amount taken out was not either, but as i had not much to play with to start with, i certainly felt the pinch.

    Then, despite my life plans (have a cracking career, meet someone nice in my 30s, settle down, have kids) – i actually met someone quite amazing in the last few months of uni and after a whirlwind romance decided on the kids first, career later option.

    Then the fun started. What really shocked me, was the outrageous CPI calculations applied to my HECS balance each and every year. The debt grew and grew over the years of my child-rearing, while of course my income was diddly and grew not at all.

    So then i find myself with 2 small children, a house (ie mortgage) an exhausting 24/7 small business, and a partner chronically ill (stress-related, can you believe it!!?). I go back to uni and get a Masters qualification (M.B.A), with the view to getting a job which ends at 6pm, thus hopefully restoring me to my family. And lo and behold, i do actually find a good job in the last year of the M.B.A – back at the uni. At this point, however, I have accumulated a mammoth extra HECS debt in the process. The whole M.B.A. was on HECS.

    And so, finding myself in the same place as Chris (above) where with kids and a job and being slugged a huge amount out of my pay that i cannot afford, i made the decision to re-finance our mortgage and borrow some extra money against the house, so i paid off the whole damn HECS debt in one, glorious, marvellous, “woo hoo!” moment. And hid that debt as part of the mortgage – but the increase in payments when spread over 25 years was not even noticed. In other words, i got control of my household budget back. I paid it back the way i wanted, not when Big Brother insisted. Not a huge slug every fortnight. And i don’t regret it for a moment.

    Sarah Lambert

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  4. Oh Kate, your mournful and articulate wordsmithery yet again has me looking forward till I get to hear you speak again in person. So beautifully said…your words are medicine to my soul, tapping into so many sides of the story, being so many voices in one. Thank you for voicing your justified concerns for all the educators/students out there.

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  5. And as a PS, i think there is a new trend developing. Those of us who have been HECs whallopped over a period of years now have kids travelling through (and in my case) emerging out the end of the high-school tunnel. And i’m certainly not pushing them into uni to get a degree and a profession. Please do consider TAFE my sons, you are no less likely to get a job and when/if you get one, you won’t have a horrifying debt to payback.

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  6. “We also have compelling evidence from the Federal Reserve Bank of New York that young Americans with a history of student debt reacted very negatively to recession after 2008. They retreated from the sectors of the economy they had traditionally been expected to prop up, particularly home ownership. They became slightly less likely to buy cars that required loans. And the overall impact on the consumer economy of their inconfident spending and debt exhaustion is bluntly put…Despite unprecedented growth in the student loan market, student borrowers appear to have participated fully in the recent consumer deleveraging. This was possible only through a collective retreat from other standard debt markets.”
    This is super cool. I never really thought about the potential effects of student debt on students after they enter the labour market; I especially never thought about the ways in which my own student debt might affect me “in the future”– I guess I store all those kind of angsts and bad feelings somewhere in the back of my head, somewhere next to any thoughts of actually paying off my HECS debt. Which maybe fits nicely into this bit: “universities market the benefit of participation on the promise of a graduate earnings premium, and keep the image of the lender and the future debt *nicely vague* [my emphasis]”.

    “…they’re actually borrowers…”
    This actually fits quite neatly into something I’ve– that is, that it seems like students get a fairly shitty deal in that whilst it has become obvious that we are totally the consumers in the business model designed by the professionalised managers of the university, we don’t particularly have “consumer autonomy” (whatever that means); we aren’t able to kind of mobilise market forces in order to force the suppliers (the universities) to make products that we actually want/need. This is (maybe– I could be way off here) because we actually occupy this weird, pseudo-capitalist twilight world, in which we are neither students in an ivory tower, nor consumers in a neoclassical economic model, but *borrowers*; we *do* exist in a market, but we *can’t* or don’t control that market because we haven’t really bought our way into it properly yet. Of course, I guess the thing is with “market forces” and all the rest of it is that it’s kind of a flawed model, and even in situations where people are legitimate consumers, where their stake in the market isn’t borrowed, but legitimately paid for, ideas about “market forces” and “consumer autonomy” still fall by the wayside. Maybe a good example of what I’m thinking here would be something like, say, Nike using child labour to make shoes. Though massive consumer movements were launched to try and stop that from happening, Nike was still able to manipulate consumers in a way that let them continue to employ unethical production practices. So consumer autonomy or consumer power didn’t really work out there.

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  7. Fascinating conversation here about this topic from so many angles, looking forward to hearing Kate’s responses to us all. Sounds like the parents of today’s ‘uni consumers’ are suggesting their offspring consider a more practical or garmented road to a job. Does that mean that these future students would be more interested in paying for professional courses in the future? Paid up front or payment plan courses, but ones that are more relevant and fast changing to match the employer demands and skills? These are interesting questions to ponder when considering the future of institutional learning in our world.
    I feel that online learners are particularly voiceless in their issues (as touched on Jessie with her ‘consumer autonomy’ theory- which I like btw). I say online learners are more voiceless than on campus because quite literary- they have no institution wide presence (and please don’t mention ‘student feedback evaluations’ and why they are so very wrong and suffering from all the terrible research response biases possible). Sometimes they barely even have presence with their own lecturers because they dont know HOW to. They are often not taught how to make authentic virtual connections with the people that matter in their degrees (ie- lecturers and fellow students). Largely because the lecturers dont really want to encourage more interaction with themselves, they are already flatout with their schedules as it is…I dont blame them…I have been on that side myself also and really got to experience the ‘other side’ challenges.
    I have always used the analogy that the experience of being an Online Learner at university (I tend to speak of uni students in contact to online learning, so please assume its this demographic I am always talking about, as I only like to talk about where I have knowledge)…
    ….is like being a Mobile Phone Customer…
    You get in thinking the phone looks awesome, the deal seems cheap/reasonable, and the company trustworthy. And then you discover there is limited insurance and lots of inconvenience if anything goes wrong with the phone, the deal in the long run is actually not as reasonable as you first though, especially if your financial situation changes, and the last straw is that the company has CRAPPY RECEPTION!! It cant even guarantee to give you regular uninterrupted service or outcome. AKA career or quality courses, or lecturers who dont treat you like crap -yes, crappy nasty lecturers are not a myth they still exist.
    And there is nothing you can do once you work this out cause you are stuck in a contract, and don’t know if any of the other service providers would be any better (cause its not like HE is transparent in the experience or anything- no forums like there are for mobile phone companies) and you have to just battle till your contract is finished.
    At least though with uni you dont have to repeat the experience as many times as you do a bad mobile company I will give it that! I have always said too… that the university that cottons on to this idea…and uses it in its branding/marketing with something along the lines of “Not happy with your current higher education provider…..?” etc…
    I hear the uniform sounds of cringing academics everywhere at the sound of their ivory institution being discussed as ‘any old product’… but in this thoughts defence…. My experience of Higher Education…both sides…. by comparison to other training services and what not out there..has been exactly that…’any old product’…
    Im sure revolutionary and experiential learning is happening in areas of medicine, and maybe engineering…but in most of the other disciplines that you ‘need ‘ that piece of paper for… the quality has not been anything to write home about. I dont say this from a place of bitterness…but from a place of sadness… I had a lot of hope in HE when I returned to education a mature age student…but it just kept hitting me over and over with its underwhelming, uninspiring, and at times even very blatantly shoddily made education….
    I would like to find a way to end this rant on a positive note…but I dont have it in me right now after revisiting my halls of disappointed memories… Ill come back later once I fill my hope bucket again perhaps.

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  8. Welcome and thanks to all of you. I’ve been reading these over and over, and I’ve heard from several people privately. There’s something about debt that hits a nerve. I think shame is a factor, which is truly so perverse in relation to the way the culture of “investment” encourages and values and recruits to indebtedness as a sign of social capacity. But long-term debt eats away at something, it feels undisciplined and disorderly and personal.

    Jessie, I’m really so glad you’ve called out the market for failing to deliver what we are so often told is its promise: consumers have the power, and the result is continuous improvement. It seems to me that students have very, very little power as things are because (like adjunct or sessional academics who make up the majority of those actually teaching in universities) the power only shifts to the consumer when the consumers can coordinate their responses and leverage the power of mass. A single consumer is mostly a frustrated user on call waiting, hearing “your call is important to us” multiple times while the elevator music plays, as Phemie points out.

    I hope others will come by any time now or in the future and share experiences about student debt. Too often this critical policy issue is debated in an arm wrestle between political stereotypes and economic data. We hear very little from real individuals about the grounded stories of their debt experience.

    Phemie, I agree, the question of hope is very important. As with so many issues in higher education at the moment, hope seems to me to depend on trust, and trust really does begin with strangers who are willing to speak up in front of others and begin to form a kind of coalition, or at least a conviction that might be somewhat shared.

    But in the meantime, the key point that universities should be watching is Sarah’s: those with practical adverse experience of student debt really are going to give different advice to their own children. This is a factor everyone has underestimated.

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  9. A legacy of my growing up in a low income family was and is my ‘thinking’ about HECS in many ways being intentionally ignorant. In the neighbourhood where I grew up (an entire suburb of public housing), a common (survival?) technique (skill?) was to just not think about that which was outside our means. By not thinking about it, we did not have to grapple with the implications (which we had little or no ability to change). The pervasiveness of this continues to surprise me.

    HECS, and the costs of university, was introduced to senior students at my (public) high school — situated inside this public housing suburb — as beyond our (financial) means. The implication was, given the significant hurdles already in front of us to even be offered a place at a university—including what are now referred to as being low SES (Socio-Economic Status) and ‘First in Family’, HECS being something we should bother thinking about. I followed this advice.

    In this neighbourhood, the introduction of HECS was seen as just another way for ‘the man’ to keep us in our place. It was seen as another (electoral) political decision which disproportionately impacted us (i.e. people from lower income backgrounds) and not them (people with money). This was a common perception and, more importantly, actual lived experience.

    In many ways my approach to not thinking about HECS was (and is) a resisting practice, even a ‘fuck you‘ to the ‘man’. It was also a way to raise a middle finger to those who judged as a group of people who would not amount to anything in society. [I differ here from Rebecca in that I don’t see a HECS debt as a failure, rather a reinforcement of the structural violence of neoliberalism]

    I am completely oblivious to the scale of my HECS debt beyond the somewhat abstract references to it on my payslips—they are just numbers on a page. I currently have no intention of finding out how much debt I have nor how it continues to grow. Perhaps telling, I do not consider it how much I ‘owe’.

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