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Financing Tertiary Education: An Examination of the Issues

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  • Julie Hope
  • Paul Miller

Abstract

The subsidies provided to the tertiary sector in Australia are more generous than those offered in most other advanced countries and most other industries. Evaluated using the criteria of economic efficiency, equity and consistency with the stated aims for the tertiary sector, these subsidies do not appear to be given for the right reasons. It can therefore be argued that there is justification for the imposition of tuition fees and for consideration of loans as a method of student finance. Overseas experience with loan finance is reasonably encouraging. Income contingent loans have been advanced as a viable means of perfecting the market for investment in human capital and as a form of profit sharing in which taxpayers share in both the costs and benefits of the educational investments of a nation's youth. Many standard arguments against loan finance, such as their disadvantaging lowincome groups and their constituting a negative dowry for female students, do not stand up to close scrutiny of the empirical evidence. The gradual introduction of a student loans scheme characterised by a high degree of income contingency, lengthy repayment periods, decreasing marginal tax rates per unit of debt, and moderate interest rate subsidies, appears to have considerable merit as a means of passing on to graduates part of the cost of the expensive service they now receive largely for free.

Suggested Citation

  • Julie Hope & Paul Miller, 1988. "Financing Tertiary Education: An Examination of the Issues," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 21(4), pages 37-57, December.
    • Handle: RePEc:bla:ausecr:v:21:y:1988:i:4:p:37-57
    DOI: 10.1111/j.1467-8462.1988.tb00566.x
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    References listed on IDEAS

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    1. Psacharopoulos, George (ed.), 1987. "Economics of Education," Elsevier Monographs, Elsevier, edition 1, number 9780080333793.
    2. James, Estelle, 1988. "Student aid and college attendance: Where are we now and where do we go from here?," Economics of Education Review, Elsevier, vol. 7(1), pages 1-13, February.
    3. Paul W. Miller, 1982. "The Rate of Return to Education: Evidence from the 1976 Census," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 15(3), pages 23-32, November.
    4. Gary S. Becker, 1975. "Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education, Second Edition," NBER Books, National Bureau of Economic Research, Inc, number beck75-1, March.
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    Cited by:

    1. Wolfram Richter, 2006. "Efficiency effects of tax deductions for work-related expenses," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(6), pages 685-699, November.
    2. Barr, Nicholas, 1993. "Alternative funding resources for higher education," LSE Research Online Documents on Economics 280, London School of Economics and Political Science, LSE Library.
    3. John Creedy, 1994. "Financing higher education: public choice and social welfare," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 87-108, August.
    4. Daina McDonald, 2006. "150 Issues of The Australian Economic Review: The Changing Face of a Journal over Time," Melbourne Institute Working Paper Series wp2006n01, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    5. Anh T. Le & Paul W. Miller, 2005. "Participation in Higher Education: Equity and Access?," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 152-165, June.

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