Bills Digest no. 108 2009–10
Higher Education Support Amendment
(FEE-HELP Loan Fee) Bill 2010
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Higher Education Support Amendment
(FEE-HELP Loan Fee) Bill 2010
Date introduced: 10 February 2010
House: House of Representatives
Portfolio: Education
Commencement: On Royal Assent
Links: The relevant links to the Bill, Explanatory Memorandum
and second reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills have been passed they can
be found at ComLaw, which is at http://www.comlaw.gov.au/.
The Higher Education Support Amendment
(FEE-HELP Loan Fee) Bill 2010 (the Bill) will amend the Higher Education
Support Act 2003 (the Act) to increase the amount of the FEE-HELP debt to
125 per cent of the FEE-HELP loan.
The effect will be to increase the loan fee (sometimes
called the administration fee) for undergraduate students accessing FEE-HELP
from the current 20 per cent to 25 per cent.
From 1989, undergraduate students were required to pay a
contribution towards the cost of their courses under the Higher Education
Contribution Scheme (HECS). Those that did not wish to pay upfront and receive
a discount could elect to have the Commonwealth pay the amount and repay the
loan through the taxation system at an income threshold.
In 2005, the Higher Education Loan Program (HELP) replaced HECS.
HELP was expanded to include FEE-HELP for fee paying undergraduate and
postgraduate domestic students and OS-HELP for Commonwealth supported students
who complete part of their course overseas. In 2007, VET FEE-HELP was
introduced for students enrolled in full-fee Diploma and Advanced Diploma
courses in the Vocational Education and Training (VET) sector. As in the
original HECS scheme all HELP assistance is in the form of an income contingent
loan and all outstanding debts are indexed annually according to the Consumer
Price Index.
The FEE–HELP
scheme is administered by Part 3-3 of the Act. It allows a domestic student enrolled
in a full fee paying course to FEE–HELP assistance of up to $80,000 to pay
tuition fees (or $100,000 for medicine, dentistry and veterinary science
courses that lead to registration as practitioners in those fields).[1]
Part 4-1 of
the Act deals with HELP debt and Section 137-10 specifically with FEE-HELP
debt. The amount of the FEE-HELP debt is an amount equal to 120 per cent of the
loan for an undergraduate course of study. The loan fee is designed to
compensate the Commonwealth for the cost of lending amounts that can be
significantly higher than those loaned to Commonwealth supported students and
therefore may take significantly longer to be repaid.
All categories of HELP debt can incur a cost to the Commonwealth
in the form of an implicit subsidy which may take two forms: an interest rate
subsidy and a doubtful debt subsidy. As there is no interest paid on the debt
and the debt is indexed to inflation, the longer the time taken to repay the
loan the greater the implicit subsidy.[2] Some HELP debt is never repaid due to a range of circumstances including the
death of the debtor, the income threshold for repayment not being met or the
debtor moving overseas. The Government predicts this doubtful debt in annual
reporting of HELP. At June 30 2009, the accumulated HELP debt was $17.82
billion of which $4.25 billion (nearly 24 per cent) was not expected to be
paid.[3]
Analysis by Chapman
and Lounkaew suggests that when individual HELP debt levels are low, as is the
case for most HECS-HELP debt, then the implicit subsidy is low, but when individual
debt levels are high, such as in the upper limits of FEE-HELP debt, then taxpayer
subsidies range from 20 to 30 per cent.[4] Such modelling raises the question of the appropriateness of the 20 per cent
loan fee.
The question
of the appropriate loan fee amount was one item investigated in the Review of
Australian Higher Education chaired by Professor Bradley (the Bradley review).
The panel used Chapman’s research to support the conclusion that the 20 per
cent fee was insufficient to recover the Commonwealth’s costs and recommended
the loan fee for FEE-HELP be increased to 25 per cent.[5] The Government’s response to the Bradley review was largely implemented in the
2009-10 Budget but a decision to increase the loan fee was not made until the
release of the Mid-Year Economic and Fiscal Outlook which outlined policy
decisions taken since the 2009-10 Budget.
There seems
little argument with the need for the Government to recover more of the
taxpayer subsidised cost of providing FEE-HELP loans. A key issue is the
anomalies that arise across the HELP categories. The increase to 25 per cent
will bring FEE-HELP into line with students in the HECS-HELP system who Chapman
and Lounkaew point out implicitly incur a surcharge of 25 per cent.[6] However postgraduate students accessing FEE-HELP pay no surcharge. OS-HELP
students had the 20 per cent fee removed in 2009 and VET FEE-HELP students pay
20 per cent except ‘if the VET FEE-HELP Guidelines specify a lesser percentage
of the loan for the person’.[7]
These
anomalies are further pronounced when a student has a combined debt in
different categories. Academic Andrew Norton argues that the length of course
may not be as important as the ‘total HELP debt actually incurred. Students who
go onto FEE-HELP courses while they still have a HECS-HELP debt will have
larger overall HELP debts than students who just do one undergraduate FEE-HELP
course … the surcharge should be adjusted to the total existing HELP debt,
rather than being based on undergraduate/postgraduate distinctions that
entrench unfair anomalies in the system’.[8] Norton calls for a broad review of the HELP scheme and argues for a system
that would abolish the different HELP categories and have common conditions for
all students.[9] Press coverage suggests there is consensus from stakeholders and analysts for a
comprehensive review of HECS-HELP and the associated allocation of funding for
student places by disciplines in the Commonwealth Grant Scheme.[10]
The Explanatory Memorandum states ‘the estimated financial
impact of the increase in the loan fee is $17.6 million on fiscal balance over
the period 2010-11 to 2012–13’.[11] However the Mid-Year Economic and Fiscal Outlook 2009–10 adds a further saving
of $25.3 million in reduced expenses to the additional revenue of $17.6 million
for a total savings of $42.8 million over three years.[12]
Schedule
1
Item 1 proposes to amend paragraph 137-10(2)(a) of the Act by increasing the amount of the FEE-HELP debt for a unit of study
forming part of an undergraduate course of study to 125 per cent of the
FEE-HELP loan.
Item 2 proposes that the amendment in Item 1 will
apply to debts incurred on or after 1 July 2010 in relation to units of study
whose census dates are on or after 1 July 2010.
Coral Dow
19 February 2010
Bills Digest Service
Parliamentary Library
Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2709.
This work is copyright. Except to the extent of uses permitted by the
Copyright Act 1968, no person may reproduce or transmit any part of this
work by any process without the prior written consent of the Parliamentary
Librarian. This requirement does not apply to members of the Parliament
of Australia acting in the course of their official duties.
This work has been prepared to support the work of the Australian Parliament
using information available at the time of production. The views expressed
do not reflect an official position of the Parliamentary Library, nor
do they constitute professional legal opinion.
Feedback is welcome and may be provided to: web.library@aph.gov.au.
Any concerns or complaints should be directed to the Parliamentary Librarian.
Parliamentary Library staff are available to discuss the contents of publications
with Senators and Members and their staff. To access this service, clients
may contact the author or the Library’s Central Entry Point for
referral.
|
