Updated
1 March 2023
PDF Version [375KB]
Carol Ey
Social Policy
This Quick Guide provides an overview of
student loans, particularly those that are provided through the Higher
Education Loan Program (HELP) and the VET Student Loan scheme. It includes:
Introduction
Australia’s Higher
Education Loan Program (HELP) provides loans to students studying approved
higher education courses. The scheme allows students to defer the costs of
tuition until their taxable income reaches a certain level at which repayments
commence. HELP is regulated by provisions in the Higher Education
Support Act 2003 (HESA) and is administered by the Department of
Education.
VET
Student Loans (VSLs) provide similar loans to students studying approved
higher level vocational education and training (VET) courses. VSLs are
regulated by provisions in the VET Student Loans
Act 2016. These loans are administered by the Department of Employment and
Workplace Relations (DEWR).
Eligibility
for student loans is generally restricted to Australian citizens, permanent
humanitarian visa holders who usually reside in Australia, and New Zealand
citizens who meet certain residency criteria. In addition to these categories
of people, FEE-HELP
is also available to other permanent visa holders undertaking approved bridging
study.
Access to HECS-HELP, FEE-HELP and VSLs is subject
to having sufficient available HELP balance. The available HELP balance is the combined
HELP loan limit, minus any outstanding HECS-HELP, FEE-HELP, VET FEE‑HELP
and VSL debts. For 2023, the limit is $162,336 for students studying medicine,
dentistry and veterinary science, and eligible aviation courses, and $113,028
for all other students. HECS-HELP debts with a census date prior to
1 January 2020 are not included in the HELP loan limit.
A brief
chronology
- The
Higher Education Contribution Scheme (HECS), as HELP was first known, was introduced
in 1989, and the scheme is still commonly referred to as ‘HECS’ and debts
as ‘HECS debts’.
- In
2003, there were major reforms to higher education, including significant
changes to HECS. These reforms were legislated by the HESA and
came into effect in 2005. Additional loan types were added and the program
was renamed the Higher Education Loan Program (HELP). HECS was absorbed into
HELP and the scheme is now referred to as HECS-HELP.
The Government also extended the income-contingent loan schemes to domestic
students paying full fees (FEE-HELP) and for those
studying overseas for 1 or 2 semesters (OS-HELP).
- In
2007, the Government introduced VET FEE-HELP
for students studying higher level VET courses.
- In
2011, the Government introduced SA-HELP to assist
students to pay student services and amenities fees.
- VSLs replaced VET FEE-HELP for all new
students from 1 January 2017.
- A
full chronology is available in the Parliamentary Library publication The
Higher Education Loan Program (HELP) and related loans: a chronology.
Types of loans
HECS-HELP
- HECS-HELP
assists eligible Commonwealth supported students to pay their student
contribution amounts. Before 2005, the scheme was known as HECS.
- The
student contribution amount must be for a Commonwealth
supported place (this applies to most domestic undergraduate students
studying at Australian public universities).
- The
student contribution amount is calculated on the number of units the student
studies, the equivalent full-time student load (EFTSL) of each unit, and the
price band to which the unit belongs. The bands reflect both the cost structure
of the course and future earnings potential. The Study
Assist website lists the 2023 bands and their maximum student contribution amounts.
- Students
can pay the student contribution amount upfront, rather than take out a HECS-HELP
loan, but few choose to do so. In 2021,
less than 10% of student contributions were paid upfront (Table 5.8).
- To
retain eligibility for assistance, students who commenced study after
1 January 2022 have to achieve a satisfactory completion
rate for the units of study they attempt.
- In
2021, the number of Commonwealth supported places for which HECS-HELP
loans were paid was 882,795.
FEE-HELP
- FEE-HELP
assists domestic full fee-paying students to pay their tuition fees. These
students are usually studying through private providers or undertaking
postgraduate courses for which there is no Commonwealth supported place.
- There
is a 20% loan fee for an undergraduate course at a non-university higher
education provider or overseas (Table
C) university. This was previously 25%, and then was removed altogether for
the period 1 April 2020 to 31 December 2022 as a COVID-19 response
measure (see HESA,
Division 137, Section 10).
- Students
have to maintain a completion
rate of 50% or above to continue to be eligible for FEE‑HELP.
- In
2021, the number of places for which FEE-HELP
loans were paid was 155,721.
OS-HELP
- OS-HELP
assists eligible Commonwealth-supported students undertaking part of their
studies overseas. An OS-HELP loan can be used for airfares, accommodation and
other costs of overseas study.
- OS-HELP
loans are paid by the Australian provider to the student. The provider is then
reimbursed by the Government and a HELP debt created.
- Students may receive one loan per 6-month study period after completing
at least one year of full-time study (or equivalent) and can access a total of 2
OS‑HELP loans over their lifetime.
- In
2023, the maximum OS-HELP loan for a 6-month study period is:
- $7,348
if not studying in Asia
- $8,817
if studying in Asia
- an
additional $1,172 if undertaking Asian language study in preparation for study
in Asia.
- In
2021, the number of OS-HELP
loans paid was 33. This reflects the closure of borders due to
COVID-19. There were 16,661 OS-HELP
loans paid in 2019.
SA-HELP
- SA-HELP
assists eligible students to pay for all or part of their student
services and amenities fee.
- A
student amenities fee can be charged by a higher education provider and can be
made compulsory. In 2023, the maximum student
amenities fee that a higher education provider can charge is $326.
- Students
can borrow this amount along with their other HELP loans or borrow only this
amount.
- In
2021, the number of SA-HELP
loans paid was 552,365.
VET Student Loans
- VET
Student Loans assist eligible students enrolled in higher level VET courses
to pay their fees.
- They
replaced VET
FEE-HELP from 1 January 2017.
- Loans
are available only for eligible Diploma,
Advanced Diploma, Graduate Certificate and Graduate Diploma courses that are
linked to industry needs and employment outcomes.
- There
is a capped amount
of loan available for each course. Providers may charge above the cap for a
course, in which case students will be expected to pay the difference.
- There
is a 20% loan
fee, which is added to the balance of the loan. Students who are subsidised
by a state or territory government do not pay the loan fee.
- Students
are required to complete an electronic Progression
Form 2–3 times per year to maintain their loan status.
- In
2021, the number of VSLs
paid was 40,490.
Other income-contingent loans for
students
Trade Support Loans
- Trade
Support Loans were introduced in 2014.
- They
are regulated under the Trade Support Loans
Act 2014 and are administered through the Australian
Apprenticeship Support Network providers.
- Trade
Support Loans provide apprentices in priority occupations loans for tuition and
living expenses of up to $22,890 (for 2022–23) over 4 years:
- $763.00
per month in the first year
- $572.25
per month in the second year
- $381.50
per month in the third year
- $190.75
per month in the fourth year.
- Payments
are made monthly in arrears.
- There
is a 20% discount on the outstanding loan upon successful completion of
training.
Repayment
of debts
Student loans are interest-free loans, but the outstanding
amount is indexed annually by the Consumer
Price Index (CPI).
All student loan debts are managed by the Australian
Taxation Office (ATO). An individual commences repaying
their loan debt when their taxable income reaches the repayment threshold. For
the 2022–23 income year, the compulsory repayment threshold is $48,361.
The rate
at which the debt is repaid rises according to adjusted
taxable income, up to the value of the debt. For example, a person earning
$60,000 in 2022–23 will pay a maximum of 2.5% of their income (or $1,500); a
person earning $100,000 will pay a maximum of 7% (or $7,000); and someone
earning $150,000 will pay a maximum of 10% (or $15,000). The exact amount is
calculated by the ATO and added to the income tax assessment.
For those with multiple forms of debt, there is a hierarchy
in which compulsory repayments are applied:
- HELP
- VSL
- former
Student
Financial Supplement Scheme (SFSS)
- Student
Start-up Loans
- Trade
Support Loans.
Voluntary
repayments can be made in addition to income-linked repayments.
Overseas repayments
Prior to the 2016–17 tax year, those living overseas (and
not Australian residents for tax purposes) who had a HELP or related debt were
not required to repay the loan regardless of their income. Since
1 January 2016, anyone with a HELP, VSL or Trade Support Loan debt is
required to notify
the ATO within 7 days of leaving Australia if they intend to reside
overseas for 183 days or more in any 12-month period. This involves updating their
contact details, including international residential and email addresses. Those
already living overseas had until 1 July 2017 to update their contact
details.
From 1 July 2017, non-residents with a HELP, VSL
or Trade Support Loan debt have been required to declare their worldwide income
to the ATO annually. If the assessed annual income in Australian dollar terms
is above the compulsory repayment threshold, an overseas levy is raised,
equivalent to the tax debt for Australian residents.
Doubtful debt
A significant proportion of HELP and VSL debt is regarded as
‘doubtful
debt’, or ‘debt not expected to be repaid’ (DNER). This includes the debt
of those who die before repaying their loan. A proportion of the doubtful debt
is written off each year. Bankruptcy does not discharge HELP or VSL debt.
According to the then Department of Education, Skills and
Employment 2021–22
Annual Report, the amount of HELP debt incurred in 2021–22 not expected
to be repaid was 11.8% (p. 57). As VSL loans have only been available for a few
years, the extent of DNER is still unknown. However, the Australian Government
Actuary has estimated
that the DNER for VSL debt is 30% (p. 12).
Reduction of debt for those working
in rural and remote areas
Since February 2019, those teaching
in a very remote area can apply to have indexation of their HELP debt
waived while they continue to teach at a school in a very remote area. Those
who work in such schools for 4 years out of 6 may have their outstanding debt
reduced up to the value of the cost of obtaining their initial teaching
qualification.
Similar
provisions for waiving indexation and debt reduction for certain medical
professionals working in rural and remote locations have recently been legislated. The
detailed guidelines on these arrangements have not been published at the time
of writing.
Budget treatment of student loans
Student loan debt is considered a government asset, not an
expense, for budget purposes, and is included under ‘advances
paid’ (p. 347). However, it is included at a discounted rate, known as its
‘fair value’. The ‘fair value’ takes into consideration DNER and that debts are
only indexed in line with CPI. This means the value of the debt is discounted
to reflect the opportunity
cost (p. 1) to the Government of investing in these loans as against other
investments, such as bonds. For a detailed discussion of the methodology
involved in calculating the fair value of the debt, see the Australian
Government Actuary’s Reporting
of HELP Receivable at 30 June 2021.
In the October
2022–23 Budget, the fair value of the various schemes was as follows:
- HELP
debt was an estimated $47.4 billion (p. 309).
- Post-2019
VSL debt was estimated at $431.4 million (p. 309).
- Debt
from the former VET FEE-HELP scheme and pre-2019 VSL debt was valued at $2.5
billion (p. 310).
- SFSS
debt was valued at $225.8 million (p. 312).
- Student
Start-up Loan debt was valued at $682.1 million (p. 313).
No estimate was provided for the fair value of Trade Support
Loans (p. 309).
In total, student loans were valued at $52.0 billion in 2021–22
(p. 347).
There is also a direct cost to Government in providing these
programs. The expenditure covers things such as exemptions for students in
Commonwealth supported places undertaking enabling subjects under HELP, and
administration costs. This expenditure in 2022–23 is estimated at $4.0 billion
for HELP
(p. 65), $292.4 million for VSL
(p. 38) and $97.2 million for Trade
Support Loans (p. 38).
Statistics
Statistics on current year HELP debt
can be found in the Department of Education’s Student
Data collection. In 2021,
$4.6 billion was taken out in HELP loans by Commonwealth supported students,
and $1.9 billion by domestic fee-paying students, while Commonwealth supported
students paid $485.7 million up front (rather than take a loan) and domestic
fee-paying students paid $55.7 million up front.
DEWR’s VET
Student Loan Statistics provide similar information in relation to VSLs. In
2021,
$257.7 million was taken out in VSLs, while $12.2 million in fees were
paid up front.
The ATO provides a comprehensive series
of tables on HELP debt, including data back to the 2005–06 financial year.
In 2021–22:
- outstanding
HELP debt totalled $74.4 billion, and there were 3.0 million debtors
- since
1989, 2.2 million people had repaid their debt in full, while 19,307 debts had
been written off due to death
- on
average, the time to repay the debt in full was 9.5 years.
The Department of Education has produced an analysis
of HELP debt and repayments in 2018–19, which includes breakdowns such as by
gender, socioeconomic status, regionality and Indigenous/non-Indigenous.
Taxation
data also provides information on outstanding debt and repayments. Repayments
in the 2019–20 tax year included:
- $3.5
billion in HELP debt repaid by 1.0 million Australian residents
- $68.5
million in HELP debt repaid by 13,125 Australians overseas
- $46.5
million in SFSS debt repaid by 17,313 people
- $57.0
million in Trade Support Loans repaid by 31,003 Australian residents
- $27,300
in Trade Support Loans repaid by 10 Australians overseas
- $1.7
million in Student Start-up Loans (shown as Student Support Loans), including those
by ABSTUDY recipients, repaid by 1,327 people.