The Price Of An Education

Un-Open University

My significant other has been doing courses with the Open University. She's been using them to skill up in areas of her work to do with research and psychology, and mostly because in order to do the course she really wants to do, they put up all kinds of pre-requisite courses. Some are justified, but others have been head-scratchers. Yet, over the last few years, she's managed to go through most of the maze of courses and navigate her way to the last 2 she wants to do.

Except this year, Swinburne University has raised their courses from under $1000 to $2700. In order to finish her maze of courses, she now has to stump $5400 for a pair of Open University courses. When she queried the price rises, the answer she got from Swinburne University was that inflation forced them to raise the prices.

Think about that for a moment. They had a 300% price rise. As I wrote before, I know that CPI inflation is less than reliable given that they under-report inflation, but all the same, CPI is also less than 3%. The rest of the 300% can't possibly be because of inflation. Nothing is inflating like that in 12months. The clear answer is that Swinburne University has decided to gouge the Open University students. Yet, they are not alone. The participant institutions are all asking for $2000-$3000 per course.

It's enough to make you wonder if these institutions know what they're asking of their students. Let's say you need to do 30 courses for a diploma. That's $60,000-$90,000 they want from the Open University students. A rough back-of-the-envelope calculation says you need to earn a lifetime $600,000-$900,000 gross to pay off the 10% education cost of the career. That 10% seems a bit high. HECS is more like 3%; at least that's the way the ATO went out taking out my HECS repayments in After-Tax dollars (believe me, it hurt that it was After-Tax).

So if we adjust backwards from HECS, you need to earn a lifetime of 2million-3million to justify doing that course. At 150k p.a., that's 12-20years, and that's assuming you can go do a course and land a 150k job (we wish!) and work it for the rest of your career. The average salary in Australia is more like 65k which means you could work a full lifetime and never earn the value of your education based on how the ATO and Federal Government thinks you should earn the value of your education. When you factor in that most participants in Open University are mature age students, it means they've got less time to make the education pay for itself.

In the context where wages are also decidedly not rising, it seems appropriate to say that education at that price is definitely not going to pay itself off. You really can't be telling your kids to go to Tertiary education any more given how much it burdens them with student debt. That's how crazy this has become. Even if you take the position that education must send a price signal to the market, if it prices itself out of being meaningful, then it's just not worth undertaking.

I kind of expect that their revenues from the Open University programme are going to collapse.