The recent budget reduced the number of students who are eligible for the student allowance, particularly for postgraduate students. There have since been almost daily articles in the newspapers lamenting the students’ plight. Today there is an article in which a student describes how she will have to take on extra debt to finance her postgraduate education. Similarly, my Facebook is full of people wondering why the government refuses to ‘invest in our future’. The reason is fairly straightforward: when the government pays for tertiary education it transfers money from poor people to wealthy people. Tertiary students, particularly those in postgraduate education, are some of the wealthiest people in our society and don’t deserve to get a free lunch on top of it.
You might wonder how I can justify that statement when most students have very low incomes. Well, they are not rich because of their present income, but because of the income they will earn in future. Three years after completing their degree, a bachelor’s graduate will earn 51% more than someone with only secondary qualifications. Someone with a master’s degree will earn 74% more and a doctoral graduate 120% more. Yet it was the secondary graduate, working full time while the student was studying, that helped fund about 75% of their education. How can that possibly be fair?
OK, you might say, but the tertiary students would have earned more anyway because they are overwhelmingly from the privileged classes of society. That is very true and we can adjust for that in our calculations. Supposing that we adjust for differences in age, sex, ethnic group, field of study, industry of employment, and provider type, bachelor’s graduates only earn a 27% premium over their secondary counterparts. Masters and doctoral graduates a mere 37% and 83% respectively. Still a healthy margin of $8,000-$23,000 per year of extra income over secondary graduates within three years of completing their studies. In addition, tertiary graduates will see their incomes continue to rise considerably through to middle age, while many secondary graduates will see little increase in real income throughout their career.
Looking at those figures it’s hard to claim that tertiary students are hard done by simply because their living costs are not also provided from taxation. Of course, they do not have all of that wealth during the period of study, which is why the government provides them with unsecured loans for their living costs during that time. Essentially, students are given the opportunity to borrow against their future income to fund their lifestyle while they study full time. In fact, the current interest-free loan scheme actually subsidises them hugely: for every dollar a student borrows the government only recovers about 40% of the cost of borrowing from students in repayments. So, despite the reduction in allowances, tertiary students are still having their lifestyle choices, which will probably make them wealthy, largely funded by society. It’s hardly the tough deal that it’s being sold as in the newspapers!