Backgrounder. Private Higher Education Providers in Australia. June 2014. page 1

Backgrounder Private Higher Education Providers in Australia June 2014 page 1

Backgrounder Private Higher Education Providers in Australia Executive summary The public/private divide is not easy to define. Several commentators including the authors of the Bradley Review have rejected this distinction as obsolete. In fact, by OECD definitions, Australian public universities could be considered private providers. In Australia, the regulatory and market distinction is between universities and nonuniversity providers. The latter have been growing in market share both here and overseas. Extending Commonwealth-supported places to non-university providers should level the playing field, increase competition and deliver more choice for students. Introduction The 2014 Federal Budget proposes many changes to the higher education operating environment, among them an expansion of commonwealth subsidies to any registered higher education provider for any [undergraduate] accredited course. 1 Under the existing arrangements, Commonwealth Supported Places (CSPs) are only available to a select group of institutions, overwhelmingly dominated by the public universities. 2 Any other registered provider who wishes to offer higher education courses must do so on a full fee paying basis. The new conditions, if enacted, will allow all domestic students to access the same funding arrangements, regardless of whether they choose to enrol at a public or private institution. 3 At the time of writing, this would mean that approximately 131 additional institutions could potentially become eligible to offer CSPs. 4 Though most recently proposed in the 2014 Kemp-Norton Review of the Demand Driven Funding System, this is not the first time the idea has been raised. In the 2008 Review of Australian Higher Education, commonly known as the Bradley Review, the panel recommended: a demand-driven entitlement system for domestic higher education students, in which recognised providers are free to enrol as many eligible students as they wish in eligible higher education courses and receive corresponding government subsidies for those students appl[ied] initially only to public universities [but] extended to other approved providers when new regulatory arrangements are in place. 5 1 Dept of Education Portfolio Budget Statement 2014-15, p. 63 2 Even within this group, access to CSPs varies. Only Table A universities have unlimited access at bachelor level; other institutions can apply for CSPs, but only for courses in specified areas of National Priority. See the Higher Education Support Act, p.53 3 Though it should be noted that private institutions will be subsidised at a lower rate, to take account of the fact that nonuniversity providers are not required to conduct research. 4 At the time of writing, the TEQSA provider register showed 174 registered entities, including 39 universities, three overseas institutions (Carnegie Mellon University, University College London and Torrens University) and the specialist MCD University of Divinity. This leaves an estimate of 131 non university providers. 5 Bradley et al, 2008, p.xxiii page 2

These new regulatory arrangements included the creation of a national higher education regulator, like the now established Tertiary Education Quality and Standards Agency (TEQSA), and a national framework for accreditation, quality assurance and regulation, i.e., the Higher Education Standards Framework, enacted into legislation in 2011. 6 Given this history, it is perhaps surprising that the idea has received such a mixed reaction. Recent responses have covered the gamut from supportive, 7 to cautious, 8 to unappreciative. 9 Given the diversity of views, it may be timely to examine the mix of public and private Higher Education Providers (HEPs) within Australia compared to other OECD countries, with the aim of helping to inform the debate. What is a Private Higher Education Provider? Before proceeding any further it might first be useful to define the difference between a public and a private institution. Unfortunately, this is not easy. It might be logical to assume that private institutions are classified as such because they are funded primarily from private sources. However an examination of available data suggests this is not always the case. Figure 1 shows Australian Government Grants received by each institution in 2012 as a proportion of total institutional revenue (as reported in the Department of Education s Higher Education Finance Reports). Despite being a self-described private university, 10 the University of Notre Dame Australia (UNDA, shown in orange) received around $71m in Australian Government Grants that year, representing around 50% of its total reported revenue. 11 This was proportionately higher than 30 so-called public institutions, for which commonwealth grants represented as little as 27% of total institutional funding. 70% Percent of Total Revenue 60% 50% 40% 30% 20% 10% 0% Institution Figure 1: Australian Government Grants as a Proportion of Total Revenues, 2012. UNDA is shown in orange. Source: Department of Education, Higher Education Finance Statistics, 2012. 6 http://www.hestandards.gov.au/higher-education-standards-framework 7 McComb, 2014; Dewar, 2014 8 Hamish Coates in Pitman et al., 2014 9 Greg Craven, Vice Chancellor of the Australian Catholic University, in an interview with Mark Colvin on the ABC s PM program, April 15th 2014. http://www.abc.net.au/pm/content/2014/s3986201.htm 10 http://www.nd.edu.au/for/futurestudents/international-students/why.shtml 11 Australian Government Grants include: Commonwealth Grant Scheme and Other Grants; Scholarships; DIICCSRTE Research Grants; Education Investment Fund and One-Off Capital Grants; Australian Research Council; Other Australian Government Financial Assistance. page 3

Figure 2 considers private sources of funding as a proportion of total institutional revenue for the same year. 12 Again it shows that many public institutions attracted higher proportions of private funding than the private institution of UNDA; indeed, UNDA attracted the lowest proportion of such funding of any of the reported institutions in that year. So it s not surprising that Simon Marginson has described understandings of public and private within an Australian education context as unstable, ambiguous and unclear, 13 and that the Bradley Review noted the public-private divide is no longer a sensible distinction. 14 As Ryan explains: Along with privately owned universities, all 132 providers that make up the non-university higher education sector are often collectively referred to as the private sector, even though 24 of these are owned by churches of various faiths, 17 are government-owned instrumentalities, and a further five are wholly-owned subsidiaries of publicly owned universities. 15 And this is not just true of the Australian higher education system. Altbach and Levy note a huge diversity in organisations designated as private worldwide, ranging from Harvard University in the United States to what they describe as garage universities in El Salvador. 16 Percent of Total Revenue 30% 25% 20% 15% 10% 5% 0% UNDA USQ UNE USC UWS VU Swinburne RMIT Ballarat ACU CQU UC ECU UNSW SCU Deakin UTS Wollongong Flinders UniSA CSU Griffith Macquarie UTAS Curtin Melbourne ANU Monash Adelaide CDU JCU La Trobe QUT Newcastle Sydney UQ Batchelor UWA Murdoch Institution Figure 2: Private Income as a Proportion of Total Revenues, 2012. UNDA is shown in orange. Source: Department of Education, Higher Education Finance Statistics, 2012. Perhaps because of this, TEQSA, the body responsible for managing HEP registration in Australia, does not recognise public or private as a category. Instead, it organises providers into one of six distinct classifications based on criteria such as ability to self-accredit, number and level of courses offered and the quantity and breadth of research, none of which are exclusive to the public or private domains. 17 Similarly, the Higher Education Support Act (HESA) designates institutions as Table A (public universities), 18 Table B (private universities), Table C (foreign universities), and Other (non-university higher education providers, or NUHEPs). A 2012 list of providers according to category is given in Appendix A. 12 Private sources here comprise: investment income; royalties, trademarks and licenses; consultancies and contracts; and other income including donations and bequests; scholarships and prizes; non-government grants; net gain on disposal of property, plant and equipment; net foreign exchange gains; and other. 13 Marginson, 2007, pp.307-308 14 Bradley et al., 2008, p.xi 15 Ryan, 2012, p.6 16 Altbach and Levy, 2005, p.6 17 Higher Education Standards Framework 18 Table A also includes the Batchelor Institute of Indigenous Tertiary Education. page 4

How Big is the Private (NUHEP) Higher Education Sector in Australia? Again, this is difficult to ascertain. Although public reporting is mandatory for those institutions in receipt of Commonwealth funds, numbers at other institutions are unclear. Departmental statistics show around 58,000 equivalent full time students (EFTSL) enrolled at non-table A providers in 2012, or about 6.3% of all reported load; and around 40,132 EFTSL, or 6.1% of reported domestic student load. But this is likely to under-estimate the total numbers studying at NUHEPs, since it excludes those students whose studies are not subsidised. The Council of Private Higher Education (COPHE) says its members enrol almost 10 percent of Australian higher education students, 19 with others claiming that it s 10% of load (EFTSL). 20 Taken with the estimate of slightly less than 15,000 equivalent full time students in 1999, 21 or 3.5% of total higher education load in the year 2000, 22 this could suggest that the NUHEP share of the market has been growing. Some of this is undoubtedly due to the 2005 decision to extend FEE-HELP loans to non-university higher education providers, 23 allowing students to fund their studies on an income-contingent basis. However, this in turn suggests that the NUHEP sector is attractive to some students, provided cost barriers are not put in their way. It could be that some of this growth can be attributed to NUHEPs exploiting gaps in the market. While demand-driven funding has clearly resulted in booming bachelor level enrolments, non-research postgraduate and sub-bachelor provision were specifically excluded from these arrangements. Universities can offer postgraduate courses on a domestic fee paying basis, but are prohibited from doing so at sub-bachelor level by the Higher Education Support Act (HESA). This leaves a void for those students who aspire to higher education but who are not yet adequately prepared. In a 2013 study, Edwards and Radloff found that Private providers have a smaller share of bachelor enrolments and more other undergraduates among their undergraduate commencers, 24 suggesting they have helped to fill this niche. Furthermore, the majority of these students would appear to come from non-traditional backgrounds, with 86% at private HEPs and 100% at Table B institutions being admitted on a basis other than ATAR. 25 Although the recent budget decision to extend demand-driven funding provisions to subbachelor courses may close this particular niche, it s likely that others will emerge over time. NUHEPs have shown that they may be better placed to address smaller gaps in provision that could be difficult for more traditional institutions, helping to ensure a more comprehensive suite of higher education provision. This growth in Australian private higher education provision appears consistent with international trends. In 2005 Altbach and Levy reported a global expansion in private provision, driven both by a general trend towards massification of higher education (leading to the need for more HEPs), and a shift in societal attitudes that has seen the notion of private benefit of further study emphasised over perceptions of public good. 26 In a truly mass system of higher education, students necessarily have a sharper focus on the likely private returns on their education investment. What are the Benefits of Studying at a Non University Higher Education Provider? From a student perspective, NUHEPs can offer a range of benefits. Many are teaching-intensive niche providers, translating into longer academic terms and thus faster progression into the workforce than is possible at many universities. 27 Non-university providers are not required to conduct research, which means different course structures, often leading to cheaper fees. Many are staffed by industry professionals rather than academics, able to offer their students real world experience. 28 And although courses do not currently attract commonwealth funding subsidies, the ability of approved NUHEPs to offer FEE-HELP loans removes the barrier of upfront fees. 29 For students with a clear focus on the career path they wish to pursue, private providers can offer a faster track into their desired industry. 19 http://cophe.edu.au/about 20 Ryan, 2012, p.7 21 Norton, 2013, p.11 22 Ryan, 2012, p.6 23 Ryan, 2012, p. 24 Edwards and Radloff, 2013, p.11 25 Edwards and Radloff, 2013, p.15. Figures are for the 2012 year. Note that two of the three private universities include an interview as part of the admissions process. 26 Altbach and Levy, 2005, pp.3-4 27 Norton, 2013, p.13 28 http://www.acpet.edu.au/students/why-an-acpet-college/ 29 Ryan, 2012, p.7 page 5

How Does Australian NUHEP Provision Compare to Other Countries? Definitions of private higher education provision vary across international borders. The OECD considers an institution to be private if is controlled and managed by a non-governmental organisation (eg., a Church, Trade Union or business enterprise), or its Governing Board consists mostly of members not selected by a public agency. 30 In contrast, they see a public entity as one that is controlled by a public or governmental organisation, or with a governing board that is publically appointed. 31 As Norton points out, the self-governing nature of Australian Table A institutions would make them all private based on this definition. 32 The OECD then further sub-divides private HEPs into two categories: 33 Independent private institutions: receive less than 50% of core funding from government agencies and have teaching personnel who are not paid by a government agency; Government dependent private institutions: receive more than 50% of core funding from government agencies or have teaching personnel paid by a government agency. Figure 3 shows the proportion of revenue from government sources reported by each Australian university in 2012. It shows most universities fitting into the government-dependent category, including the private institution of University of Notre Dame Australia. This suggests that the independent private category would make the best comparison for Australia s private HEPs, even though the presence of Macquarie and Murdoch universities below the 50% threshold makes it less than perfect. Comparisons are further complicated by data collection issues, with independent private institution data being incomplete in many countries, 34 so the following analysis should be viewed in this context and as indicative only. OECD data suggests that around 4% of Australia s full time Tertiary-Type A student enrolments were in institutions classified as independent private in 2011 (Figure 4). 35 This is considerably less than the estimate of 10% made by the COPHE, though definitional differences and lack of accessible data make such discrepancies unsurprising. % of Revenue from Govt Sources 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Macquarie Murdoch Curtin CQU RMIT Sydney UQ UWA UTS Monash Melbourne Ballarat Swinburne UNSW Adelaide Wollongong QUT Griffith La Trobe Deakin Newcastle CSU JCU ANU UC UniSA ECU ACU UTAS CDU VU Flinders USQ Batchelor UNE SCU UWS UNDA USC Figure 3: Percent of Revenue from Government Sources, 2012. The orange bar represents the private university (University of Notre Dame Australia). The broken grey line indicates the OECD 50% threshold for type of private institution. Government sources comprises the reported categories of Australian Government Financial Assistance (including HECS-, FEE- and SA HELP loans) and State and Local Government Financial Assistance. Source: Department of Education, 2012 Financial Report of Higher Education Providers. 30 http://www.oecd.org/edu/eag%20glossary.pdf. Capitalisation appears as in the original source material. 31 http://www.oecd.org/edu/eag%20glossary.pdf 32 Norton, 2010 33 http://www.oecd.org/edu/eag%20glossary.pdf. Note that in both of these definitions the concept of dependence refers only to funding, and has no implications for the degree of government regulation. 34 OECD, 2013, Education at a Glance, p.172 35 Tertiary-Type A programmes (ISCED 5A) are largely theory based and are designed to provide sufficient qualifications for entry to advanced research programmes and professions with high skill requirements, such as medicine, dentistry or architecture. More details are available at: http://www.oecd.org/edu/eag%20glossary.pdf. While they don t necessarily align with Australian tertiary education classification systems, they do provide the capacity for international analysis. page 6

% of FT Students 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Public Gvt-Dep Private Indep Private Figure 4: Percentage of Tertiary-type A Full Time Students (Domestic) enrolled in Public Institutions (Public), Government Dependent Private Institutions (Gvt-Dep Private) and Independent Private Institutions (Indep Private) in 2011. A star (*) indicates that some data was not available for that country; a circumflex (^) indicates that the data is included in other categories. 36 There was no data for the following OECD countries: Brazil, Canada, Czech Republic, Denmark, Greece, Hungary, Iceland, Ireland, Israel, Luxembourg, Netherlands, New Zealand, Portugal, and the Russian Federation. Source: OECD Education at a Glance 2013, Table B5.1. OECD data (where available) suggests that the proportion of students in independent private institutions varies considerably depending on the country (Figure 4). In Korea and Japan the independent private sector appears to cater for the majority of students, while in Finland and Sweden the numbers are given as nil to negligible. 37 This is consistent with Altbach and Levy s assertion that Asian countries such as Japan, South Korea and Taiwan constitute major centres of private higher education. 38 In contrast, Western Europe s tradition of state support for higher education means that the majority study in the public sector, 39 reflected in the high proportion of students in public institutions in Finland, Sweden and Germany. Estimated Average Tuition Fees Figure 5 compares OECD published data on domestic annual average tuition fees (in US dollars) for first degree courses in independent private institutions for those countries for which data was available in 2011. Annual Average Tuition Fee (USD) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Figure 5: Average Annual Tuition Fee, 1st Degree Program, Domestic, Independent Private Institutions, 2011. The grey dotted line indicates the median value. Source: OECD Education at a Glance 2013, Table B5.1. 36 eg., a breakdown of the data at this level was not available. For more information see OECD Codes of Missing Data, http://www.oecd.org/education/skills-beyond-school/31112718.pdf 37 http://www.oecd.org/edu/skills-beyond-school/35333193.pdf 38 Altbach and Levy, 2005, p.1 39 Altbach and Levy, 2005, p.2 page 7

It shows Australia as sitting above the median, though Slovenia, Austria and the USA all had average annual fees that were higher. Conclusion International comparisons of higher education systems are problematic, due to definitional differences between countries, variations in international higher education systems, and numerous data issues. However, commentary (and limited data analysis) suggests that private provision has been increasing both in Australia and around the world, possibly consistent with a sharper, global focus on the private benefits higher education can bring. Australian private providers currently enrol around 6% of reported EFTSL, and possibly up to 10% of all load. If the proposed extension of government subsidies to all approved HEPs goes ahead as planned this could increase still further, especially if NUHEPs leverage off their lower overheads to provide quality teaching at more competitive prices. page 8

Appendix A: List of Higher Education Providers by Type 40 Table A Australian Catholic University Monash University University of Canberra Batchelor Institute of Indigenous Tertiary Murdoch University University of New England Education Central Queensland University Queensland University of Technology University of New South Wales Charles Darwin University RMIT University University of Newcastle Charles Sturt University Southern Cross University University of South Australia Curtin University of Technology Swinburne University of Technology University of Southern Queensland Deakin University The Australian National University University of Tasmania Edith Cowan University The University of Adelaide University of Technology, Sydney Flinders University of South Australia The University of Melbourne University of the Sunshine Coast Griffith University The University of Queensland University of Western Sydney James Cook University The University of Sydney University of Wollongong La Trobe University The University of Western Australia Victoria University Macquarie University University of Ballarat Table B Bond University The University of Notre Dame Australia MCD University of Divinity Table C Carnegie Mellon University University College London (UCL) Other Private Academy of Information Technology Pty Gestalt Therapy Brisbane Phoenix Institute of Australia Pty Ltd Ltd Adelaide Central School of Art Gordon Institute of TAFE Polytechnic West Adelaide College of Divinity Harvest Bible College Queensland Institute of Business and Technology (QIBT) Alphacrucis College Harvest West Bible College Raffles College of Design and Commerce Australian Academy of Design Holmes Institute SAE Institute and Qantm College Australian College of Physical Education (ACPE) Holmesglen Institute of TAFE South Australian Institute of Business and Technology (SAIBT) Australian College of the Arts, Collarts Insearch Southbank Institute of Technology 40 http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0cdqqfjab&url=http%3a%2f%2fwww. innovation.gov.au%2fhighereducation%2fhighereducationstatistics%2fdocuments%2fpublications%2f11listofhep. xls&ei=hzqmu4bqimhikwxuuogoag&usg=afqjcnfoj6c_v7n4pguqd17_2pmzb3q8iw&bvm=bv.62922401,d.dgi&cad=rja page 9

Australian College of Theology Australian Film, Television and Radio School (AFTRS) Australian Institute of Management SA Division (AIM SA) International College of Hotel Management (ICHM) International College of Management, Sydney (ICMS) Jansen Newman Institute Pty Ltd Stotts Colleges Study Group Australia Pty Ltd Sydney College of Divinity Australian Institute of Music Ltd Jazz Music Institute Sydney Institute of Business and Technology (SIBT) Australian Institute of Professional Kaplan Business School Tabor Adelaide Counsellors Pty Ltd Australian International Conservatorium of La Trobe Melbourne Tabor College NSW Music (AICM) Australian Lutheran College Leo Cussen Centre for Law Tabor College Tasmania Australian School of Management Macleay College Tabor College Victoria Avondale College of Higher Education Marcus Oldham College TAFE NSW Blue Mountains International Hotel Management School Melbourne Institute of Business and Technology TCOL (The College of Law) Box Hill Institute Melbourne Institute of Technology The Australian Guild of Music Education Campion College Australia Monash College The Cairnmillar Institute School Canberra Institute of Technology Moore Theological College The JMC Academy Carrick Higher Education Morling College The Melbourne Institute for Experiential and Creative Arts Therapy (MIECAT) Cengage Education Pty Ltd National Institute of Dramatic Art (NIDA) Think Education Group Chifley Business School Nature Care College Pty Ltd TOP Education Group Pty Ltd Chisholm Institute of TAFE Navitas College of Public Safety Universal Business School Sydney Christian Heritage College Navitas Professional Institute Pty Ltd UOW College Curtin College Northern Melbourne Institute of TAFE Wesley Institute East Coast Gestalt Training Educational Enterprises Australia (Eynesbury College) Endeavour College Oceania Polytechnic Institute of Education Pty Ltd Perth Bible College Perth Institute of Business and Technology (PIBT) Whitehouse Institute William Angliss Institute page 10

Reference List Altbach, P.G., and Levy, D.C., eds, (2005), Private Higher Education: A Global Revolution, Sense publishers, Rotterdam, https://www.sensepublishers.com/media/787-private-higher-educationa.pdf Bradley, D., Noonan, P., Nugent, H., and Scales, B., (2008), Review of Australian Higher Education Final Report, Commonwealth of Australia Department of Education (2014), Portfolio Budget Statements 2014-15: Budget Related Paper No, 1.5, Commonwealth of Australia Department of Education (2012), 2012 Finance Report and Tables, Commonwealth of Australia, http://www.education.gov.au/finance-report Dewar, John, (2014), Why are Universities so Afraid of Competition?, The Australian, April 25, http://www.theaustralian.com.au/higher-education/opinion/why-are-universities-so-afraid-of-competition/ story-e6frgcko-1226894609367 Edwards, D., and Radloff, A., (2013), Background Paper: Higher Education Enrolment Growth, Change and the Role of Private HEPs, Australian Council for Private Education and Training, http://www.acpet.edu.au/uploads/files/acer%20background%20paper%20for%20acpet%20-%20 Growth%20in%20HE%20FINAL%20131115%281%29.pdf Geiger, R., and Heller, D., (2011), Financial Trends in Higher Education: The United States, Centre for the Study of Higher Education, Pennsylvania State University Higher Education Standards Framework (Threshold Standards), 2011, Commonwealth of Australia, http://www.comlaw.gov.au/series/f2012l00003 Higher Education Support Act 2003 (2003), Commonwealth of Australia, http://www.comlaw.gov.au/details/c2013c00029/download Kemp, D., and Norton, A., (2014), Review of the Demand Driven Funding System, Commonwealth of Australia Marginson, S., (2007), The Public/Private Divide in Higher Education: A Global Revision, Higher Education (53): 307-333 McComb, Adrian, (2014), In Support of Private Colleges, The Australian, 28th April, http://www.theaustralian.com.au/higher-education/opinion/in-support-of-private-colleges/storye6frgcko-1226894757356 Norton, A., (2010), Fairness, Diversity and Choice: A Higher Education Funding System Based on Consistent Principles, Australian Council for Private Education and Training Norton, A., (2013), Mapping Australian Higher Education, Grattan Institute, http://www.grattan.edu.au/static/files/assets/28a92f8b/184_2013_mapping_higher_education.pdf Pitman, T., King, C., Sharrock, G., and Coates, H., (2014), Demand-driven System Review: Experts respond, The Conversation, www.theconversation.com/demand-driven-system-review-experts-respond-23023 Ryan, P. (2012), Growth and Consolidation of the Australian Private Higher Education Sector, The ACPET Journal for Private Higher Education, 1(1), http://www.acpet.edu.au/uploads/acpet_he_journal_vol_1_issue_1_june%202012_web.pdf University Lobby Angered at Possible Competition for Funding from Private Colleges, PM, April 15, 2014, http://www.abc.net.au/pm/content/2014/s3986201.htm page 11