Is the demand-driven higher education system on its last legs?

Julie Hare, Associate Director, Education

The overarching government policy dominating the Australian higher education landscape in recent year is the demand-driven system.

Introduced incrementally from 2010 and fully in 2012, the system allowed for the uncapping of student places, effectively giving universities to freedom to enrol as many students as they deemed eligible.

The motivating priority behind the Rudd government policy, following a report by former University of South Australia head Denise Bradley, was equity. Students from poor and disadvantaged backgrounds were – and still are – underrepresented among undergraduates compared to their wealthier peers, largely because they don’t do as well at school. By restricting the number of places available, thousands of capable but educationally undercooked students (and mature age people) were deprived of getting a toehold in the university system.

The policy also sought to increase, more generally, the proportion of young people with a degree to 40 percent. The thinking went that the skills and capabilities needed for the new economy – which is fast upon us – would be best gained via a university education.

In many ways, the demand driven system has been a success with the target of 40 percent of 25-34 year olds with a degree being reached some time ago. However, progress in the proportion of the bottom 25 percent socioeconomic quartile has been slow. It edged up less than one per point from 16.2 percent to 17.7 percent between 2009-14 and has barely budged since. For regional and remote students, participation rates have remained static. Indigenous students, however, have seen their undergraduate numbers swell by 60 percent – obviously one of absolute successes of the policy.

Unsurprisingly, most universities see the demand driven system in a very favourable light since it has allowed them to dramatically increase student numbers. Western Sydney University, Australian Catholic University and Macquarie University all increased enrolments by more than 6000 students in the five years to 2014, raking in an additional $121 million for WSU, $124 million for ACU and $107 million for Macquarie.

Enrolments have subsequently more or less plateaued in most universities – the result of demographics and unmet demand, particularly among mature age students, having been sopped up in the preceding years.

However, a small number of institutions have struggled to keep their heads above water, victims of intense competition in small markets. Regional universities, too, have struggled as traditional cohorts move to more prestigious universities in cities. The result, as the headlines have repeatedly screamed, have been plummeting ATARs and entry standards.

Increasingly, however, questions are being asked about the ongoing longevity of the demand-driven system. An open chequebook policy is always going to have critics and they unsurprisingly their voices are increasingly being heard.

One reason is that booming enrolments have come, to some degree, at the cost of vocational education as students opt for university over TAFE.

There are also signs that the graduate employment market is softening with full-time work and salaries either on the decline or static. Others point to rising enrolments in masters programs as new graduates seek to gain an advantage in the employment market. It’s a phenomenon known as credentialism.

At the same time, the dramatic increase in enrolments (as well as the failed vocational student loans scheme, VET FEE-HELP, which saw billions of dollars rorted by dodgy colleges) has left the government sitting on ballooning student loans which increased from $25bn in 2012 to $48bn in 2016. Around a quarter of all students are expected to never repay all or part of their loan.

In an era where new online offerings, microcredentials and a raft of other innovative short, sharp and cheap offerings are beginning to threaten the traditional degree, one wonders how much longer the Commonwealth will maintain its appetite for funding three-year full time bachelors programs that may, or may not, produce work-ready graduates.

The test will be whether a government can find a way to ration university places without undermining equity. A return to centralised bureaucratic allocation of places is not an option. But a system that is sensitive to equity concerns while giving the government certainty over its outgoings must surely not be out of the question.

One gets the feeling that while vice-chancellors strongly support the demand-driven system, there is a certain fatalism emerging that the policy does not have a long life span beyond the next election.

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