Federal Education Minister Jason Clare introduced a bill to parliament on Thursday that will see universities face new caps on domestic student numbers.
At the same time, the government will fund additional student places. It says this will add up to 230,000 new commencing students over the next decade. This is to help attract more students from poorer families and regional and country areas.
How the tension between caps and growth plays out in practice will determine the success of Clare’s policy agenda.
How does domestic student funding work?
The bill’s biggest change modifies how universities are funded for “Commonwealth supported students”. This describes how the federal government subsidises the costs of a student’s study.
Almost all domestic undergraduates and a large proportion of postgraduates are Commonwealth supported students.
The bill does not change the underlying per student funding rates. These remain a combination of a Commonwealth contribution paid by the government and a student contribution (commonly paid through a HECS-HELP loan).
And the high Job-ready Graduates fees for arts, business and law students will remain in place.
But the way universities receive this funding will change.
What is changing?
Under the current system, each public university receives a maximum basic grant amount that covers Commonwealth contributions in higher education courses. For 2026, these add up to A$7.75 billion.
From 2027, universities will receive a maximum allocation of student places rather than a maximum dollar amount. This allocation will be made by the new Australian Tertiary Education Commission (ATEC), within a total number determined by the minister.
Additional uni places
The education minister will also decide each year the total number of Commonwealth supported places for the next year. He must do this by June 30 each year for the following year.
Clare says he will add 16,000 places in each of the next three years. This represents 2.6% of all the Commonwealth supported places in 2024 (the last year for which we have official figures).
The new tertiary education commission will then decide how to allocate these places between universities.
What are ‘over-enrolments’?
Under the current system, the federal govenrment’s funding for university places is capped but the number of places is uncapped. This means if universities choose to accept student-contribution-only funding, they can take additional students. These extra students are known as “over-enrolments”.
The proposed system will cap over-enrolments for each university at either 5% above its original allocation of places or 750 places, whichever is lower. If universities exceed their over-enrolment cap they will lose the student contribution revenue for those extra students.
No official figures show the scale of over-enrolment. But documents released under a Freedom of Information request show that in 2024 nine universities delivered student places worth 5% or more above their maximum funding.
Over-enrolment risks
Over-enrolment policy is the most controversial change in the funding bill.
Clare says he wants to end what he calls a “hunger games” system, under which popular universities take students he believes should attend other institutions.
But over-enrolment provides flexibility in the current system. It lets universities make offers to prospective students without worrying too much about the funding consequences. In most cases, putting additional students in existing courses does not cost a lot of money. The student contribution can cover it.
Under the proposed new system, universities will be more cautious about making enrolment offers. Nervousness about over-enrolments will likely drive student numbers down below what they could have been.
Over-enrolment and university missions
In a new paper I coauthored, my colleague and I interviewed university leaders about over-enrolment.
The vice-chancellor of a regional university told us their university was the only one available for local students preferring on-campus study. With their mission to serve their community, they tried to accommodate demand even when it led to over-enrolment. Another deputy vice-chancellor from of a university with a strong focus on disadvantaged students similarly said they over-enrol rather than reject applicants with a good chance of success.
Under the new system, the Australian Tertiary Education Commission will try to forecast demand, including from equity students, and reflect this in its allocation of places to universities. The commission can go back to the education minister and ask for more equity student places if it underestimates demand.
But this process is bureaucratic. The minister’s June 30 deadline to allocate places for the next year comes before we know the number of applications for that year. This is the first major demand indicator. Many other variables will remain only rough estimates in June. This includes how many current students will re-enrol and how many applicants with offers will accept them. This last figure won’t be known until the summer offer rounds are over in the following year.
The bill allows for late revisions, but the minister may not enjoy his summer holidays being interrupted by bureaucrats who realise they have miscalculated demand.
Funding for Indigenous students
The new funding bill preserves demand-driven funding for Indigenous students in bachelor degrees or medical courses. This means that if an Indigenous student qualifies for a university place they can have one and it will be supported by the federal government.
This operates outside the caps on student places. The bill also gives the minister a new power to make additional courses demand driven. Explanatory documents issued with the bill suggest nursing and teaching could be possible examples.
Keeping expectations modest
With this bill, the government is talking big about future enrolments and how they will “open those doors of opportunity wider”.
But on their own figures, the number of new places in the next few years will only be small increments.
The government’s restrictions on over-enrolments will limit growth across the whole sector, but especially at currently over-enrolled universities.
Policies introducing both greater bureaucratic control and enrolment growth seem to be at least partially contradictory. Total enrolments probably will increase, but not by as much as would have been possible with a more flexible system.
