James Griffiths
Since the introduction of the demand-driven system for
bachelor degrees in 2012, successive governments have made policy decisions
aiming to improve the fiscal sustainability of the higher education system. This
Budget marks a continuation of this approach, with the Government sticking with
its policy of fee deregulation under the Higher Education Loan Programme (HELP,
also known as HECS-HELP), and announcing that it will seek to recover HELP
debts from people who have moved overseas.
In considering the Government’s treatment of HELP in this
Budget it is necessary to recognise that the past two years of HELP reforms
remain unlegislated. This Brief sets out proposed HELP changes as a guide to
the assumptions in this year’s Budget.
Background
2013–14 Budget
In the 2013–14 Budget, the then Labor Government announced a
series of higher education savings measures, including the removal of the incentives
for voluntary and upfront payment of HELP debts, in order to assist with the
funding of the then Government’s Better Schools Plan.[1]
This policy was not legislated prior to the 2013 federal election.
The Abbott Coalition Government presented the savings
measures to Parliament as part of the Higher Education Support Amendment
(Savings and Other Measures) Bill 2013.[2] In his second reading
speech, the Minister for Education, Christopher Pyne, stated that the Bill’s fiscal
savings would ‘ensure the sustainability of funding for the higher education
sector’.[3] However, as the Coalition
Government proposed not to fund the last two years of the Better Schools Plan, the
Labor Opposition reversed its position and did not support the legislation.[4]
As a result, this Bill did not pass the Parliament.
2014–15 Budget
The 2014–15 Budget proposed wholesale changes to the higher
education sector, including:
-
an average 20% cut to funding through the Commonwealth Grant
Scheme (CGS), the deregulation of undergraduate student fees and a new fee for
those embarking on a PhD
-
a real interest rate for HELP debts and a lower income threshold
for repayment and
-
loan fees would be removed as the FEE-HELP and HECS-HELP schemes
were amalgamated.
The policy rationale for the average 20% cut in Commonwealth
contributions to the funding for each student place was that it would rebalance
the system and ensure it was ‘fair and sustainable’.[5]
It would also likely assist in containing the cost of extending the demand-driven
system to private providers and sub-bachelor tertiary qualifications. The 2013–14
HELP measures were also included in this package.
The initial higher education reform legislation, the Higher
Education and Research Reform Amendment Bill 2014, did not pass the Senate.[6]
Following negotiation with the Senate, the Abbott Government presented a series
of policy compromises to the Parliament in the form of the Higher Education and
Research Reform Bill 2014.[7] These proposals also failed
to receive legislative assent.
2015–16 Budget
The Budget does not change the mix of measures contained in
the Higher Education and Research Reform Bill 2014 and confirmed in MYEFO. The
spending and performance data is predicated on the basis that student
contributions will be deregulated, the demand-driven system extended, and HELP
debt repayment will start at a lower income threshold.[8]
Higher Education Loan Programme — recovery
of repayments from overseas debtors
This revenue measure will extend the HELP repayment
framework to debtors residing overseas from 1 July 2016.[9]
HELP debtors residing overseas for six months or more will be required to make
repayments of their HELP debt at the same repayment rates as debtors in
Australia if their worldwide income exceeds the minimum repayment threshold. This
measure was proposed by the peak universities body, Universities Australia, in
August 2014. [10]
Minister Pyne formally announced the policy change prior to the Budget on 2 May
2015.[11]
The implementation of this measure will require legislative
change to include debtors residing overseas in the current repayment framework
and include any associated penalty provisions in cases of debts continuing to
go unpaid. Both England and New Zealand have income-contingent loan schemes to
cover tuition fees—both schemes apply to overseas debtors and both are
administratively complex. However, a quarter of England’s overseas student
debtors were in default as of 2013, while 60% of overseas debtors in the New
Zealand system have overdue payments.[12]
The measure is expected to recover $26.0 million over four
years. This should be considered within the context of a HELP loan total
projected to be at $62.7 billion by the end of the same period.[13]
The measure may be able to pass the Senate as long as it is
not included in the overall higher education reform package. The relevant
Shadow Minister, Senator Kim Carr, stated that the Opposition would support
measures ‘to protect fairness and integrity in universities, including the HECS
system.’[14] Liberal Democrat Senator
Leyonhjelm has previously labelled the HECS scheme as ‘generous’ and so could support
measures to ensure repayment of outstanding debt.[15]
Comment
The last three Budgets have included measures to shift the
burden of payment for higher education, by ensuring that students contribute
more and taxpayers contribute less. The overall aim is to make the programme
more fiscally sustainable. However, it should be noted that there is no general
consensus about what constitutes ‘sustainability’ in the context of an
income-contingent loan programme such as HELP. In the absence of an agreed
definition of what sustainability is, it is difficult to evaluate the likely
success of proposed changes to the system.
[1].
C Emerson, (Minister for Tertiary Education, Skills, Science and
Research), Statement
[Higher Education], media
release, 13 April 2013; Australian Government, Budget
measures: budget paper no. 2: 2013–14,
p. 216.
[2].
Parliament of Australia, ‘Higher
Education Support Amendment (Savings and Other Measures) Bill 2013 homepage’,
Australian Parliament website.
[3].
C Pyne, ‘Second
Reading Speech: Higher Education Support Amendment (Savings and Other Measures
Bill) 2013’, House of Representatives, Debates, 21 November 2013, p.
973.
[4].
C Ey and C Dow, Higher
Education Support Amendment (Savings and Other Measures) Bill 2013,
Bills digest, 23, 2013–14, Parliamentary Library, Canberra, 2013.
[5].
Australian Government, ‘Higher
Education’, Budget 2014–15 website, p. 1.
[6].
Parliament of Australia, ‘Higher
Education and Research Reform Amendment Bill 2014 homepage’, Australian
Parliament website. The Bill was negatived on the second reading.
[7].
Parliament of Australia, ‘Higher
Education and Research Reform Bill 2014 homepage’, Australian Parliament
website. The Bill was negatived on the second reading. For analysis of the Bill
see J Griffiths, Higher
Education and Research Reform Bill 2014, Bills digest, 69, 2014–15,
Parliamentary Library, Canberra, 2014.
[8].
See Australian Government, Portfolio
budget statements 2015–16: budget related paper No. 1.5 – Education and
Training Portfolio, p. 37. The Outcome
2 Strategy includes ‘continued pursuit of reforms to the provision of
Commonwealth subsidies for students undertaking higher education to ensure that
students have a choice of course and higher education provider and that these
providers can perform at their best’ and ‘strengthening the Higher Education
Loan Programme’.
[9].
Australian Government, Budget
measures: budget paper no. 2. 2015–16, p. 9.
[10].
See Minister Pyne’s comments in M Knott, ‘Graduates
abroad should repay HECS, sector says’, The Sydney Morning Herald, 5
August 2014, p. 7.
[11].
C Pyne (Minister for Education and Training), New
plan to recover HECS debt from Aussies living abroad, media release, 2nbsp;
May 2015.
[12].
A Norton, Doubtful
debt: the rising cost of student loans, Grattan Institute, pp. 31–3, April
2014.
[13].
Australian Government, Budget measures 2015–16, op. cit., p. 9;
Australian Government, Budget
strategy and outlook: budget paper no. 1 2015–16. p. 6-23.
[14].
K Carr (Shadow Minister for Higher Education, Research, Innovation and
Industry), HECS
crackdown—Here we go again, media release, 2 May 2015.
[15].
P Coorey, ‘University
deregulation looks doomed’, Australian Financial Review, 15 March
2015, p. 4.
All online articles accessed May 2015.
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