Chapter 3 - Adequacy of income support payments
I think that, if the level of student income support, the
infrastructure of it and the systems involved with it were improved, there
would be no question...that the experience of students collectively in the Australian
higher education system would be improved. People would be better prepared.
They would be better engaged with their studies. They would be more motivated.
They would be more successful because they would have received that level of
support. I do understand that there is a balance: students should not get a
free-ride...Students are willing to play their part as well, but at the moment
that balance is way below what it should be.[82]
Income support payments
3.1
A clear message in evidence before the inquiry is that
the current income support structures do not provide an adequate level of
financial support for students. According to the Australian Council of Social
Service (ACOSS), the relative income levels of all income support recipients,
including students, has deteriorated over time. In 1998 over 60 per cent of
income support recipients were in poverty compared to 20 per cent in 1972-73.[83] Of the main types of social security
payment received by households, studies have consistently found that students
in receipt of Youth Allowance and Austudy payments face a relatively high risk
of financial hardship.[84]
3.2
The current maximum live at home rate of Youth
Allowance is $178.70 a fortnight for a person under the age of 18, and $214.90
for a person over the age of 18. The National Union of Students (NUS)
calculated that students eligible for the maximum away from home rate of Youth
Allowance, including Rent Assistance, receive an amount which is 17.5 per cent
below the Henderson
poverty line. Students living in shared accommodation who are ineligible for
Rent Assistance receive an amount which is nearly 30 per cent below the poverty
line. For recipients of Austudy the figures are more alarming. The base rate
for a full-time student aged 25 years and over is a staggering 36.8 per cent
below the poverty line, mainly due to Austudy recipients being ineligible for
Rent Assistance.[85]
3.3
Figures provided by the National Welfare Rights Network
are more alarming. Depending on a person's circumstances, the rates of payment
can be up to 50 per cent below the poverty line.[86] The Network's submission provides a useful
comparison of income support payments with the relevant poverty line for
various social security payments (see Table 1). It shows that adult students
receiving the Austudy payment are 49 per cent below the poverty line. The main
reason why the total weekly payment is substantially less than other social
security payments is that, as previously noted, recipients of Austudy are not
eligible for Rent Assistance. As a consequence, Austudy recipients receive $32
less each week than independent 16 to 24 year old students.[87]
Table 1: Income support payments and the Henderson Poverty Line[88]
|
INCOME UNIT
|
SOCIAL
SECURITY PAYMENT
|
TOTAL
PAYMENT
$ per week
|
POVERTY
LINE
$ per week
|
% BELOW
POVERTY LINE
|
A |
Single unemployed adult
|
Newstart Allowance + Rent
Assistance
|
245.70
|
317.61
|
23%
|
B |
Single, independent
full-time, student 16 to 24 years
|
Youth Allowance + Rent
Assistance
|
211.65
|
317.61
|
33%
|
C |
Single independent
full-time student 16 to 24 years
|
Youth Allowance + sharers'
rate of Rent Assistance
|
195.52
|
317.61
|
38%
|
D |
Single, dependent student
18 to 24 years
|
Youth Allowance
|
107.45
|
213.75
|
50%
|
E |
Single adult student over
25 years
|
Austudy Payment
|
163.25
|
317.61
|
49%
|
F |
Pension (single)
|
Pension + Rent Assistance
|
283.75
|
257.53
|
10% above
|
G |
Pension couple (each)
|
Pension + Rent Assistance
|
242.20
|
182.40
|
33% above
|
3.4
A number of witnesses compared the level of income
support with estimates of students' living costs, to highlight how inadequate
income support payments are compared with payments under other social security
benefits, such as the Newstart Allowance. The Student Financial Advisers
Network (SFAN), for example, estimated that students need approximately $250 a
week or $500 a fortnight in order to meet their living costs. A full Youth
Allowance payment at either the independent rate or the living away from home
rate, with Rent Assistance available in a share house, amounts to $390 per
fortnight, which is a shortfall of at least $110.[89]
3.5
The level of student income support has not kept pace
with either the cost of living, especially spiralling accommodation and
transport costs in the capital cities, or the rising cost of higher education.
The result is that many students find themselves in a precarious financial
situation, struggling to provide themselves with the basic necessities of life.
For many full-time students, economic survival has taken over their commitment
to study as the prime motivating factor during their time at university.[90] The Deakin University Student
Association viewed the income support benefits currently paid to students as
nothing more than a 'fortnightly emergency payment' that covers some, but not
all, of the most urgent requirements of students: 'There is no provision for
students to put money aside for expenses such as car registration or repairs,
medical appointments, or large bills'.[91]
3.6
The committee notes that in considering the level of
income support, most submissions established some kind of benchmark in order to
draw attention to the inadequate payments compared with other social security
benefits. The Henderson
poverty line was widely referred to in submissions as a measure of relative
poverty. The National Welfare Rights Network argued that the Henderson
poverty line provides a useful normative benchmark for the adequacy of all social
security payments. The committee accepts that the current level of student
income support is unacceptable and it is sympathetic to the argument that the
base rate of pay should be increased to enable students to earn a decent living
wage to cover the basic cost of rent, food, bills and transport. However, the
committee is unable to make a firm recommendation on this issue before a
proposal to increase the level of payment has been costed and its financial
impact fully assessed.
Student poverty
3.7
The committee is very concerned by mounting evidence of
a significant increase in the incidence of poverty among the student population.[92] A number of submissions expressed the
view that the income support system is narrowly targeted and traps needy
students in poverty by penalising them for earning above the personal income
test threshold of $6100 a year. The NUS, for example, argued:
While designed to facilitate access to the education system for
students who are unable to provide their own financial support, these payments
are currently at such low levels and have such stringent restrictions on
eligibility that they effectively keep people in poverty while they are
studying. It is of serious concern that current levels of income support are a
long way below the Henderson
poverty line. With income support levels so low, many students struggle just to
provide themselves with the basic necessities of life.[93]
3.8
Professor Watts,
RMIT University,
told the committee that he had seen students on campus who appeared to be
suffering from scurvy. Although the problem is not a large one, there are a
small number of students, at least at RMIT
University, whose dietary
deficiencies are great:
They are trying to get by on $30 a week after they have paid the
rent, and it is not going to work. Their skin will start to erupt, they start
to look sick and they start to get sick...It is simply unacceptable...to have
people coming from suburban Melbourne
presenting with symptoms of scurvy.[94]
3.9
The incidence of student poverty is a major concern for
indigenous Australians. The National Indigenous Postgraduate Association
Aboriginal Corporation submission reported anecdotal evidence collected from
the indigenous postgraduate community which shows that low rates of retention
and progress of indigenous students is strongly connected with student poverty.[95] Poverty levels in the indigenous
population are higher because students have a significantly lower income when
compared to the general Australian population. The extent of poverty among indigenous
students is also consistent with broader trends which show that indigenous
Australians are the most disadvantaged and marginalised group in Australia.[96]
Eligibility criteria
Age of independence
3.10
Income support regulations presume that a person is
dependent on their family until age 25. While students over the age of 25 are
not eligible to apply for Youth Allowance, they may apply for Austudy. The
current age of independence was criticised in nearly every submission to this
inquiry. The Australian National University Students' Association described it as
the 'most ridiculous aspect' of the income support system.[97] The main problem is that it assumes parents
are not only able but also willing to support their children at home by contributing
to their living and education expenses. However, the evidence does not support
this assumption. The review of Austudy in 1992 by Bruce
Chapman found evidence of a marked
divergence between families in their preparedness to assist students at
university. Parents or spouses often do not value higher education.[98] Thus the high age of independence was
considered one of the most fundamental flaws in the student income support
system. Dr Ian
Dobson claimed that it is
likely that no one but the Government thinks that the presumption of family
support until age 25 is reasonable.[99] There
was also agreement in submissions that the current age of independence is out
of step with both community expectations and the criteria applied under other
income support payments. Students in receipt of the Newstart Allowance, for
example, are considered to be independent at 21 years of age.
3.11
While a person can demonstrate financial independence
through their own, rather than their family's, circumstances, by meeting strict
workforce participation criteria, Dr Ian
Dobson highlighted in his
submission that some students are able to prove their independence more easily
than others, with their families exploiting a loophole in the definition of
'work':
A student from a family with its own business could 'work' for
that business, doing real or imaginary work, and easily meet the income
criterion. By being paid about $900 a month for the 18 months after the end of
year 12 by a family business, a student could attain independence in the
minimum time.[100]
3.12
The committee stresses that the definition of
independence has serious implications for indigenous participation rates
because it assumes that families are both willing and able to provide financial
assistance to their children whilst studying. The National Tertiary Education
Union submission emphasised that the indigenous population has a much lower
life expectancy than other Australians and therefore a considerably younger age
structure than the general population.[101]
It is significant that the median age for indigenous Australians in 2004 was
20.6 years compared with 36.1 years for non-indigenous Australians. In
addition, in 2001, 65.5 per cent of the indigenous population, compared with
only 41 per cent of non-indigenous Australians, was under 29 years of age.[102] That Indigenous people assume social
and financial independence at a much earlier age than non-indigenous people was
overlooked in the way the threshold of independence was aligned to Austudy:
That clearly demonstrates that the alignment of the independence
age threshold to the Austudy level is totally inconsistent with the actual
demographics of the Indigenous youth population density and it certainly shows
why a lot of those independent students are now finding themselves in a lot of
financial trouble.[103]
Parental and personal income test
threshold
3.13
The committee accepts that the parental income test
threshold is too low and has not kept pace with wage increases and the cost of
living. The current threshold provides an unrealistic measure of the cost of
living and raising children. The problem is compounded in situations where
financial support from parents is either ungenerous or absent, which can remove
study as an option for many students.[104]
Students eligible for the Youth Allowance do not automatically qualify for the
full rate if their parents' income exceeds the maximum level permitted
(currently $28,850 for an only child student) and if they exceed the maximum
additional income allowed under the scheme (current $236 each fortnight). The
full allowance is only paid to dependent students whose parents are on
extremely low incomes. Recipients of Youth Allowance lose 25 cents for every
dollar above the family income threshold. Student fortnightly income between
$236 and $316 reduces the fortnightly allowance by 50 cents in the dollar,
while income above $316 reduces payments by 70 cents in the dollar.[105]
3.14
The parental income threshold has not changed
significantly since 1991 when it was set at $19,300 per annum. The difference
between the 1991 figure and that for 2005 is only the result of indexation.[106] The National Welfare Rights Network
pointed out in its submission that the current threshold is almost $4000 lower
than the threshold for the Family Tax Benefit. This means that many families
surviving on incomes only marginally above the Henderson
poverty line are ineligible for Youth Allowance, unless a young person can
prove independence.[107] This
observation is supported by academic research from the Centre for Population
and Urban Research at Monash University.
Several studies of the Youth Allowance have shown conclusively that the severity
of the parental income test disadvantages students from households with modest
incomes, particularly those from stable blue-collar and lower white-collar
families where the main breadwinner holds a full-time job earning close to average
weekly earnings, or where both parents work in lowly paid jobs.[108]
3.15
The parental income threshold also acts as a
disincentive for young people who move away from home to study. The committee
heard evidence that students sometimes face a situation where living at home is
not an option because their course is not offered at a local campus. Students
living in the Northern Territory, for example, who choose to study veterinary
science, medicine or pharmacy, to name a few, are required to travel to either
Adelaide or Perth to study. However, in these situations, any Youth Allowance
received is means tested, which puts pressure on students and their families. While
the away-from-home rate of youth allowance is higher than the at-home-rate, the
committee believes that the parental income test prevents people from exercising
the choice to move from home to study elsewhere.
Recommendation 8
The committee
recommends that the Department of Education, Science and Training undertake an
analysis of the costs and benefits associated with:
- reducing
the age of independence from 25 to each of 24, 23, 22, 21 and 18 years;
- increasing
the parental income test threshold to a level that reasonably equates with
annual average earnings;
- increasing
the tax-free threshold for students; and
- increasing
Youth Allowance, Austudy and ABSTUDY payments to the level of the age pension.
Government senators do not agree with this recommendation.
Rent assistance
3.16
Although Rent Assistance has been available to some
income support recipients since 1958, students using the income support system
until 1998 were generally ineligible for Rent Assistance. When the Youth
Allowance was introduced in 1998, young students living away from home for the first
time became eligible for Rent Assistance, which was considered a major advance
on the previous eligibility rules. Students on Austudy, however, were not
eligible for any Rent Assistance, which has been a long standing grievance. Student
bodies told the committee that lack of Rent Assistance for Austudy recipients discourages
full-time entry into higher education and prevents students from undertaking
courses in areas of high rental or transport costs.
3.17
The damaging effect of this anomaly was highlighted in evidence
provided by a representative of the University
of South Australia Students'
Association. The student told the committee he had commenced full-time study at
age 24 and was receiving Youth Allowance and Rent Assistance. However, illness
resulted in him postponing study and being placed on the Newstart Allowance
which provided sickness benefits. When the student resumed study the following
year, he was only eligible for income support under Austudy because he was now
over 25 and not eligible for Rent Assistance. The student told the committee
that he: '...suffered great financial hardship and...could not afford to live where
I lived before; I had to move out. That was a very difficult time and I felt as
if I was being penalised for having to take time off because I was unwell'.[109]
3.18
This example demonstrates how students may be penalised
financially by the rigidities of the income support system. Centrelink officers
lack the discretion to assess students' eligibility for one form of payment
over another, even in exceptional circumstances. The committee believes that a
person who is required to postpone a course of study due to ill health and who
subsequently loses Rent Assistance by crossing over an arbitrary age threshold,
should not be penalised financially. It is the committee's view that there
should be a process to enable Centrelink officers to exempt students from the
eligibility rules for Rent Assistance, in situations similar to those described
in the previous paragraph and where the parental income thresholds prevent students
from remote and regional areas studying away from home. The committee believes
that Centrelink officers should be able to exercise discretion in circumstances
which deserve a more compassionate response.
3.19
It appears there was little public discussion of the
reasons for Rent Assistance not being extended to recipients of Austudy, when the
Youth Allowance was introduced in 1998. The Tenants Union of Victoria argued
that it could not find any policy rationale for the change. The NUS submission
stated that budgetary considerations aside, the aged-based criterion, which can
be traced to the Commonwealth Scholarship Scheme introduced during the 1950s, was
considered appropriate because it was assumed that students over 25 were better
able to cover the cost of their education as a result of employment, and therefore
were less in need of Rent Assistance than students of a younger age. The
assumption is that students who work for a number of years are able to generate
enough savings to help subsidise the cost of their education. A number of
submissions pointed to empirical evidence which shows how this assumption is no
longer relevant. It became outdated by the late 1990s as a result of changes to
the youth labour market:
The virtual disappearance of the full time youth labour market
means that it is quite wrong to assume that most 25 or 26 year olds in the 21st
century have had seven or eight years of full time work to build up substantial
savings...The empirical evidence shows how outdated this assumption is.[110]
3.20
The committee notes that the submission from FaCS had
very little to say about Rent Assistance, other than the observation: 'Rent
Assistance was not available under the previous AUSTUDY scheme and this has
been the case for many years under successive governments. Austudy Payment
recipients with dependent children may qualify for Rent Assistance with their
Family Tax Benefit'.[111] The department
attempted to explain the policy background on this issue, by advising the
committee that when Youth Allowance was introduced in 1998, the income
threshold under Austudy was also increased, presumably to enable recipients to
earn more money than was then permitted under Youth Allowance before affecting
the level of benefits. This was described as a way of compensating Austudy recipients
who were ineligible for Rent Assistance. The department, however, also told the
committee that recipients of Austudy no longer receive this type of compensation
because the income threshold for both Youth Allowance and Austudy is now the
same, at $236 a fortnight.[112] The
committee notes that previously compensating recipients of Austudy does not
explain why they were ineligible for Rent Assistance in the first place. The
committee concludes that while the policy rationale for excluding recipients of
Austudy from Rent Assistance remains an open question, the explanation provided
by FaCS is no longer relevant. This is because the financial benefit which was provided
initially to recipients of Austudy under a higher income threshold no longer
exists.
3.21
Other witnesses before the committee speculated that
there is a contradictory logic to Austudy recipients not being eligible for
Rent Assistance. The Tenants Union of Victoria argued that Austudy applies to
people who are presumed to have a higher level of independence than people on
Youth Allowance and to have settled their housing circumstances by the age of
25. Yet the evidence suggestsed otherwise: 'All the...indicators are that for
people in the age cohort of 25 to 35 their rates of home ownership have
declined, so by and large they are reliant on the private rental market for
housing'.[113] The committee accepts
the argument of the National Welfare Rights Network that this situation
significantly reduces the opportunity for people over 25 to return to study:
...if someone has been on a disability pension and decides that
they can return to full-time study, they will lose about $150 in their rate of
payment and, on top of that, they will lose any availability of rent assistance
and various other concessions that come with that. This is a real disincentive
for people trying to return to study to get themselves back into the employment
market.[114]
3.22
The committee finds it unacceptable that the Government
will not offer a policy defence of this anomaly which denies Rent Assistance to
Austudy recipients. Students receiving Austudy continue to be ineligible for
Rent Assistance for no apparent reason. The committee supports the position of
NUS that the use of age-based criteria to determine eligibility for Rent Assistance,
based on 50 year old labour market assumptions, is patently absurd and
arbitrary.
3.23
The committee emphasises that the issue of Rent Assistance
has become critical for increasing numbers of students who are finding it
difficult to afford housing, the cost of which has risen sharply over recent
years with the property market boom.[115]
The Tenants Union Victoria told the committee that not only is the current
inequity between Youth Allowance and Austudy surrounding Rent Assistance
unacceptable, the level of Rent Assistance payable to recipients of Youth
Allowance is inadequate. This is mainly because housing has become less
affordable in the capital cities and many regional centres. It was argued at a
public hearing that Rent Assistance is not meeting the needs of students who
rent. It was described by the Tenants Union of Victoria as an inadequate
payment operating in a poorly functioning market. There are many thousands of
students in Victoria
who receive the maximum Rent Assistance but who pay more than 30 per cent of
their income on housing costs. This figure is supported by evidence which shows
that increasing numbers of students are forced to live in boarding houses and
caravan parks, often at locations distant from where they have to study and
work, which adds considerably to the cost of transport.
Recommendation 9
The committee recommends that Rent Assistance be made available for all
recipients of Austudy, but not before a costing is undertaken by the Department
of Education, Science and Training. The committee recommends that the costing
be completed before the end of 2005 and reported to the Parliament.
Other issues
Indexation
3.24
The committee accepts the assessment of the National
Welfare Rights Network that there is a major, unjustifiable inconsistency in
the method of indexation for different social security payments. There does not
appear to be a logical or fair reason why Youth Allowance, Austudy and ABSTUDY
payments are not indexed as favourably as other social security payments.[116] Newstart and other pension payments
are indexed twice yearly in line with either the CPI or male total average
weekly earnings (MTAWE), which ever is higher. Youth Allowance, Austudy and ABSTUDY
payments, however, are indexed only once a year, on 1 January, based on the CPI
for the previous 12 months and pegged to the previous June
quarter. This means it may take up to 18 months after a specific cost of living
increase for the various income support rates to be adjusted. The committee
notes that the shift away from calendar year annual entitlement calculations
has removed the primary administrative barrier to aligning the indexation of
student income support schemes with other pension payments. According to the
National Welfare Rights Network, because the MTAWE has generally been higher
than the CPI since 1998, the fortnightly increase in the pension has been $116
compared with $61 for Youth Allowance.[117]
3.25
Students who qualify for Youth Allowance are permitted
to earn only $6,100 a year before their payments decline. The committee is
concerned that whereas the value of Youth Allowance and the family income
limits are indexed against inflation each January, as described above, the
recipient's permitted earnings are not. The committee does not understand why
the $6,100 figure has not been indexed against inflation since 1993. Had it
been indexed each year, the value of current earnings would be in excess of
$8,000.[118] The committee believes
that students are at a disadvantage as a result of this anomaly. If this
indexation is not addressed by the government, income support payments for
students will continue to fall as a proportion of average weekly earnings.
Recommendation 10
The committee recommends that the Department of Education, Science and
Training undertake an analysis of the costs and benefits associated with making
the method of indexation for student income support payments consistent with
the indexation of the pension.
Postgraduate students
3.26
Postgraduate student bodies raised a number of concerns
with the level of financial support available to postgraduate research and
postgraduate coursework students, which are often overlooked in discussions
about student income support. According to the Council of Australian
Postgraduate Associations (CAPA), approximately 34,000 research students,
70,107 coursework masters students and many other postgraduates studying other
degrees receive no Commonwealth financial support. Austudy is only available
for students studying graduate or postgraduate diploma courses. The CAPA
submission argued: 'This is a disgrace for a country which purports to see a
future for itself in the knowledge economy. Students studying at the highest
levels should not be those receiving least support'.[119]
3.27
Other postgraduate associations which provided evidence
to this inquiry agreed that the most glaring weakness in the current financial
support for postgraduate students is the gap between the average time a student
takes to complete a postgraduate degree and the duration of an Australian
Postgraduate Award (APA) scholarship. The APA is the main form of income
support available to postgraduate students, supporting 4,500 of Australia's
38,640 domestic research students.[120]
While the duration of an APA scholarship is currently three years, government
funding to universities for their postgraduate doctoral researchers is for four
years. This means that students are told they have four years to complete their
degrees but are funded for only three. This leaves a gap of up twelve months
where a student is ineligible for any income support, usually during the most
crucial time in the student's candidature – the writing up stage.[121]
3.28
Survey responses presented as evidence to this inquiry by
CAPA show that the current funding arrangements for APA scholarships hinder,
rather than encourage, timely completion of courses. When scholarship funding
ceases, some students take leave to seek employment while others fail to
complete their course. President of the University
of Melbourne Postgraduate Association,
Mr Matthew
Belleghem, told the committee:
Every time we get a research report back from our university or
from other universities, the average time [of] completion and the point in the
candidature at which those students who do not complete decide to discontinue
indicate that the gap between the average completion time and the duration of
the APA is a very significant hindrance to students finishing their studies in
a timely manner.[122]
3.29
The committee heard evidence that full-time coursework
degrees have become popular over the last five years. However, domestic students
completing Masters or postgraduate coursework degrees are ineligible for income
support under Youth Allowance and Austudy. According to the Flinders
Postgraduate Students' Association, there is a myth that students undertaking
postgraduate coursework degrees are already working professionals who are able
to recoup the costs of their courses, many of which are fee paying courses:
'The reality is many of these students—nurses, teachers—are required to pursue
these coursework awards as a part of their employment, just to stay where they
are'.[123]
3.30
Other problem areas with the income support
arrangements for postgraduate students were brought to the committee's
attention. First, a serious inequity in the income support system is created by
part-time APA scholarships being subject to income tax under the ss.51-10 of
the Income Tax Assessment Act 1997, whereas
full-time APA scholarships are not. This situation is based on an assumption, rejected
by CAPA as a red-herring, that part-time scholarship recipients should pay tax
because of their potential to earn additional income. CAPA maintained that
taxing part-time APA scholarships is unreasonable because they are only
available to students with carer responsibilities or an incapacitating medical
condition.[124] Second, a number of professional
postgraduate degrees, particularly in medicine and psychology, take four years
to complete because they include a mandatory work placement and coursework
components. If the degree is funded through an APA, income support will cut out
after three years even though the degree will take a minimum of four years to
complete. The committee also heard that as a result of changes in the way DEST
allocates funding for postgraduate research, some universities have reduced the
standard six month extension of the APA to three months, while other universities
have withdrawn the extension altogether.
3.31
A final area of concern relates to a general perception
that students striving for an undergraduate qualification are deserving of Commonwealth
financial assistance whereas students who stay at university and commence a
postgraduate degree should be prepared to cope financially without the same
level of assistance. The committee accepts the view of CAPA's President, Mr
Stephen Horton,
that students who try to improve their qualifications and improve their
employability are being placed in a financially difficult situation:
If the current situation continues we will end up with an underclass
of highly qualified people. This is a situation that exists in the United
States...It places being able to borrow for
home-ownership schemes out of people's range. The assumption that they have
been helped through their undergraduate degree exists, but it is erroneous.[125]
Scholarships
3.32
The committee is concerned that some scholarships are
subject to the social security income test arrangements while others are not.
The Commonwealth Learning Scholarships, for example, which were included as
part of the Government's reform package in 2003 under the Higher Education
Support Act, are exempt from the social security test as are fee paying and fee
waiver scholarships. However, most university-funded scholarships, as well as those
provided by benefactors and philanthropists, are subject to the income test
arrangements. The Department of Family and Community Services told the
committee that the policy reason for exempting certain scholarships from the
social security test is that the benefit of these scholarships is not
discretionary cash for the use of the student:
The broad rationale is that where fees are being waived or
exempt the student is not able to use that as they would income that they had
earned or received for another purpose. They do not have discretion in the use
of that income, whereas scholarships which provide cash to a student are
considered more like income that another student may earn and are treated in
the same way as earned income.[126]
3.33
This is a serious concern for vice-chancellors and
students who have difficulty accepting the discretionary argument.[127] Some discretionary scholarships,
such as the Commonwealth Learning Scholarships, are not subject to the income
support test. The Australian Vice-Chancellors' Committee claimed that the Government's
failure to exempt other scholarships from income tax arrangements has discouraged
people from making donations to universities: 'It is a ludicrous situation
where scholarships offered by universities are...taxed to the extent that some
universities question what benefit there is in giving the scholarships, given
that the students lose a large part of the money through taxation'.[128] University
of Canberra Vice-Chancellor, Professor
Roger Dean,
expressed concern that creating exemptions for certain scholarships and not
others undermines their primary purpose, which is to enable students to
undertake scholarship 'for the development of the economy and...society'.[129] Similar concerns were expressed by
the University of Sydney
submission which noted that students who receive an Access Scholarship funded
by the University have their scholarship assessed as income compared to students
holding a Commonwealth Learning Scholarship: 'The existence of two schemes side
by side creates an inequitable situation'.[130]
3.34
The Group of Eight also voiced its concern about the
taxation of scholarships and its impact on students from low socio-economic
backgrounds. In 2005, it awarded 96 Equity Scholarships, worth $3000 per annum,
directly to students to assist with living costs. However, the scholarships
will lose much of their impact because they are assessed as income under the
social security means test: 'The vast majority of students from low
socio-economic backgrounds are still burdened by an income test which
effectively taxes scholarship income and income earned from employment at up to
70 cents in the dollar'.[131]
3.35
In March 2004, Flinders University Vice-Chancellor, Professor
Anne Edwards,
wrote to the Minister for Family and Community Services, the Hon. Kay Patterson
MP, seeking an amendment to income test regulations to exempt from income
testing not only the Commonwealth Learning Scholarships but all scholarship
income for university students. The university argued that taxing
university-sponsored scholarships 'contradicts the Government's stated goal of
increasing higher education participation by students from low socio-economic
backgrounds'.[132] It could see no
policy justification for treating low income students who receive university
scholarships to assist with living and education costs any differently from low
income students who receive Commonwealth Learning Scholarships.[133] The Minister's response of 6 May 2004 advised that the Government
had initiated a review of the social security treatment of scholarships and
that the review would consider issues raised by the Vice-Chancellor.[134]
Recommendation 11
The committee recommends that the Department of Education, Science and
Training undertake an analysis of the costs and benefits associated with
exempting university-funded scholarships and scholarships funded by benefactors
and philanthropists from the social security personal income test.
Alternative student income support measures
A single income support system
3.36
The committee's terms of reference require that it
examine alternative student income support measures. The Australian Vice
Chancellors' Committee (AVCC) and the National Union of Students (NUS) submissions
supported fundamental change to the structure of the student income support
system. They argued for an adequate level of financial support for the duration
of a student's course, and improvement in the level of access to higher
education for students from disadvantaged backgrounds. The NUS submission
presented its case for an overhaul of the student income support system in the
following terms:
If a future government were to get serious about creating a
level playing field of education opportunity for all it would have to look at a
comprehensive overhaul of student income support and be prepared to back it up
with the additional budgetary measures. Tinkering at the edges of what is
essentially a mean and narrowly based system will not do much to address the
overall problems of educational inequality.[135]
3.37
Professor Roger
Dean told the committee
that the AVCC had developed an alternative which not only enhances diversity,
access and participation in higher education, but also provides incentives for
people to enter post-secondary education. The alternative involves development
of a comprehensive student income support payment which is separate from the
existing Youth Allowance and structured to support students over the course of
their studies. According to the AVCC submission: 'This would provide
significantly higher rates than Youth Allowance and be available to a wider
group of students. Its purpose would be to support students over the period of
a degree [and] not cover a period of temporary unemployment'.[136] The AVCC believes that a parallel
scheme for indigenous students should also be created. At a public hearing,
Professor Dean clarified how the new payment would work: 'It would be somewhat
analogous [to Youth Allowance] but it would be a higher level of support and
the criteria would be the educational ones and less the conventional income
testing or other criteria that apply'.[137]
3.38
The idea of a separate payment scheme floated by the
AVCC is designed to ensure that students can pay for household goods and
equipment such as computers. Students would not have to rely on loan schemes
such as the former Student Financial Supplement Scheme. The AVCC believes that
the cost of such a scheme would be more than returned to the economy through
students' future incomes and the reduced likelihood of them requiring Government
assistance later in life. The idea of a new income support payment separate
from Youth Allowance was supported by the University
of South Australia.[138]
3.39
The Student Financial Advisers Network suggested that
the committee might consider two modest alternatives. The first approach would apply
the rules that are available for Youth Allowance recipients to students
receiving Austudy, although this could undermine the rationale of Youth
Allowance if it was accessed by people 45 years and over. The second
alternative would expand the Newstart Allowance which currently provides a rate
of pay higher than for Youth Allowance, and Rent Assistance. The Newstart
legislation would have to be amended to provide more flexibility in the range
of eligible student activities. It would then be possible for Newstart to
resemble Youth Allowance. It would be applied with the same degree of
flexibility for students who are under 25 and over 25.[139]
3.40
The committee heard from Professor
Robert Watts,
RMIT University,
that it was time to think outside the 'conventional framework' which has
characterised the income support debate. He argued that the government should
consider a radical cost-saving and simplified approach which is currently on
the agenda in the European policy community. The approach is widely referred to
as the basic income model.
It replaces the plethora of means tested, targeted income
support schemes with a single payment tied to a somewhat rethought and reworked
taxation system to ensure that all the issues of transition, from school
through to work, family and university...can be supported by a single payment
that all citizens receive as a matter of right, which underwrites their
capacity to make these transitions in and out of family, school and work and
combines these elements of activity in the way that we now understand is
actually the case, and does so on a cost-effective and administratively far
cheaper basis.[140]
3.41
Echoes of this radical proposal are found in the ACOSS
submission. It too adopted a broader approach by acknowledging the Government's
Youth Pathways Action Plan Taskforce which found in 2001 that young people face
a bewildering number of services that are difficult to negotiate, particularly
in the transition from school to work or when facing special problems such as
homelessness: 'Young people who are in neither education nor employment are especially
at risk of falling through the cracks and facing long-term unemployment and a
future of ongoing employment disadvantage'.[141]
The ACOSS submission supported the establishment of a National Youth Transition
Service, the cost of which would be shared by the Commonwealth and the states,
to provide comprehensive transition support for students who are at risk of
leaving school early. It is envisaged that implementation of the service would
be phased in to provide:
- 'transition brokerage' for government and
non-government schools which might include case management and personal
support, mentoring and peer supported programs;
- additional funding to extend the Jobs Pathway
program; and
- access to employment at a level appropriate to
the person's education, skills training and linkages to employment networks and
job opportunities.[142]
Coverage of scholarships and loans
3.42
The committee has already noted that a number of
student associations and the Australasian Campus Union Managers Association
(ACUMA) argued that higher education should be viewed by the Government as an
investment in the knowledge capital of the nation and not as a financial drain
on the public purse. This was a dominant theme underpinning evidence by the
Australian National University Students' Association. The ACUMA submission recommended
extending a slightly modified Australian Postgraduate Award (APA) scheme to
undergraduate and postgraduate coursework scholarships. Using the guidelines
for the existing APA, Australian undergraduate scholarships would provide a
liveable income, allow limited working hours during day-time, be tax free,
include leave provisions and be for a limited duration.[143]
3.43
The AVCC submission raised the possibility of the
Government creating a new set of scholarships to supplement existing income
support payments under Youth Allowance, Austudy and ABSTUDY. These new
scholarships would be based on the Commonwealth Learning Scholarships and would
be exempt from income testing. The AVCC submission argued that:
To make the scholarships effective they should cover at least
all students from economically and culturally disadvantaged backgrounds. This
would require at least a further doubling of the program. The target should be
to provide a scholarship to all students receiving a Government income support
benefit and provide others for universities to allocate to students that miss
out on income support benefits but who are clearly in financial need to
complete their studies.[144]
3.44
The AVCC raised another alternative at a public hearing
which was not canvassed in its written submission. Professor
Roger Dean
expressed the view that it would be possible to consider extending the HECS
loan to cover specific student expenses such as university contracted
accommodation and book purchases. This alternative, which the AVCC claimed is a
favoured position of many students, is based on the view that there is no
evidence that HECS deters students from enrolling in university: 'The principle
of extending HECS beyond simply paying tuition fees is already in place through
the OS-HELP scheme, and this suggestion is a modification and extension of it
which would be very practical'.[145]
The committee notes that student associations are unlikely to support income
contingent loan schemes with deferred payment, as is currently the case with
HECS, because they place students further in debt. A representative of the
Australian National University Students' Association stated:
I would have thought that students would prefer to have the
current system where they get the money—that is, they are entitled to income
support rather than a loan that will add to everything else they have...I would
expect that most students would be opposed to the idea of a carrot being
offered to them that actually plunges them deeper into debt. They would prefer
income support that comes directly rather than as a loan.[146]
3.45
Notwithstanding this opposition to loan schemes, the
Association submission saw merit in the concept of an income contingent 'living
expenses' loan of approximately $8000 per annum which would be paid in addition
to the deferred HECS liability.[147]
This was also raised as a possibility by the University
of Adelaide submission.[148] Such a scheme would relieve the
extreme financial pressure which students face because of their living
expenses, especially for students who struggle financially in the first few
weeks of their course. This may reduce the incidence of students dropping out
of their course because of insufficient funds.[149] The committee is sympathetic to the
idea because, as Dr Ian
Dobson noted in his
submission, it is not possible for students to defer their living expenses.[150] While university fees are
increasing, such a loan scheme would allow repayment of fees to be deferred
until the student has entered the workforce, which is the principle behind HECS.
Yet the committee is mindful of the argument of the Students' Association of
the University of Adelaide
that alternative student income support schemes that increase the level of
student debt are not the answer. The committee agrees that students should not
begin their working life with extreme levels of debt.
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