And then there were none: HECS discounts

Parliament house flag post

And then there were none: HECS discounts

Posted 16/04/2013 by Leonie Doyle

On 13 April 2013 the Australian government released a Statement on Higher Education. One of the three savings measures announced is ‘removal of the 10 per cent discount on paying university fees upfront and the 5 per cent bonus received for voluntary repayment of HELP debts’. 

This move is the end of the line for two incentives that have been whittled away over the past ten years. Abolishing them is expected to save $230 million.

Higher Education Loan Program (HELP)

The Higher Education Contribution scheme (HECS) was first introduced in 1989. Its purpose was to provide income contingent loans to Commonwealth supported students.

In 2005 there was a major overhaul of the scheme. Additional loans were added to create a stable of loan options under an expanded Higher Education Loan Program (HELP). HECS became HECS-HELP and was joined by new income contingent loans: FEE-HELP for students who pay full fees to study and OS-HELP for students studying overseas for one or two semesters.

These were followed by VET FEE-HELP (in 2007) for students studying higher level vocational education and training courses and SA-HELP (in 2011) for payment of student services and amenities fees (student union fees). The legislative basis for HELP is the Higher Education Support Act 2003.

There are currently two financial incentives to encourage upfront or early repayment of debt:
  • Upfront payment discount
    When HECS was first introduced a 15 per cent discount on upfront payment was introduced with it. The discount was increased to 25 per cent in 1993, reduced to 20 per cent in 2005 and reduced again to 10 per cent from 1 January 2012. That is, if a course costs $10,000 the student (or student’s family) who chooses to pay upfront only has to pay $9,000.
  • Voluntary repayment bonus
    In 1995 the government introduced a bonus for voluntary repayment (of $500 or more) of HECS debt. The voluntary repayment bonus was initially set at 15 per cent, reduced to 10 per cent in 2005 and reduced again to 5 per cent from 1 January 2012. That is, if a student repays $1,000 a loan repayment of $1,050 would be recorded by the Australian Taxation Office.

Upfront payment discounts work, sort of

When the discount for upfront payment of HECS was raised from 15 to 25 per cent, there was a gradual increase in the proportion of students paying upfront from one in five in 1990 to one in four students by the mid 1990s. Then upfront payment commenced a slow but sustained decline.

There was no unusual drop in upfront payment when the discount was reduced from 25 to 20 per cent. But when the 20 per cent discount was cut to 10, the Department of Education, Employment and Workplace Relations anticipated that half of the students paying upfront would commence deferring.

In 2010 less than 17 per cent of students paid upfront (taking advantage of the discount), 80 per cent took out a HECS-HELP loan, and 3 per cent paid upfront and weren’t eligible for the discount.

The case for removing discounts

To some extent, removal of the discounts may be defended on equity grounds. Discounts provide an advantage to those who have the capacity to pay upfront, that is, typically wealthier students or their families. The government wrote in 2011 that ‘These discounts advantage those with the capacity to pay their fees upfront. Analysis of the upfront discounts provided in 2009 showed that only around 12 per cent of these students came from low-SES postcodes.’

Short term solution, long term problem

Removal of the HELP payment incentives doesn’t actually take money out of the higher education system. Some students will, for whatever reason, continue to pay upfront and/or make voluntary repayments. In that sense, removing the discounts is taking money from those (able-to-pay) students, not from higher education. On the face of it, the government saves money.

But many more students will simply defer the entirety of their loan repayments until their taxable income reaches the repayment threshold (in 2012-13 this is $49,095). Converting Student Start-up Scholarships into student loans will also add to HELP debt.

In a recent report, the Grattan Institute reported that by mid-2012 accumulated HELP debt stood at $26.3 billion, or $19.4 billion in ‘fair value’ terms. (The government writes down the value, reflecting the hidden costs of lost interest and doubtful debts. Up to 17 per cent of HELP debt is not expected to be repaid by those whose income is too low, who move overseas, or die.)

The measures announced recently will add to HELP debt that is already high and rising. So what is a savings measure in the short term is something that will ultimately cost quite a lot.


  • 21/01/2014 1:58 PM
    Leonie Doyle said:

    Thanks for this comment Thomas. That's an interesting question. I can refer you to this 21 January article in the Australian Financial Review (paywall): which suggests that the government is looking at ways to recover HECS payments from people living overseas. We should stay tuned I guess.

  • 21/01/2014 1:57 PM
    Thomas Luckey said:

    This is a very good analysis of the issue. Has there ever been a parliamentary or department review/position on closing the 'loophole' that allows people to avoid repaying their HELP debt by permanently moving overseas? The system as it stands effectively provides you with a free tertiary education, on the condition that you don't work in Australia. It seems a bit counter-intuitive.

Thank you for your comment. If it does not require moderation, it will appear shortly.
Facebook LinkedIn Twitter Add | Email Print


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Parliamentary Library Logo showing Information Analysis & Advice




refugees asylum immigration Parliament Australian foreign policy elections climate change social security women welfare reform taxation Indigenous Australians Australian Defence Force welfare policy school education higher education private health insurance health financing emissions trading Senate Australian Bureau of Statistics employment people trafficking Asia statistics Middle East illicit drugs gambling health reform federal election 2010 income management Medicare disability Sport United Nations industrial relations constitution transport Australian Public Service politics criminal law Afghanistan health forced labour environment aged care aid Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget Carbon Pricing Mechanism dental health regulation food Fair Work Act voting law enforcement electoral reform public service reform OECD Australian Electoral Commission WADA child protection poker machines Australia in the Asian Century steroids National Disability Insurance Scheme detention 43rd Parliament slavery health system domestic violence parliamentary procedure International Women's Day accountability defence capability multiculturalism ASADA Australian Federal Police governance labour force people smuggling debt international relations New Zealand Australian Crime Commission pharmaceutical benefits scheme Human rights crime China leadership Census election results UK Parliament Papua New Guinea banking corruption pensions children's health Aviation federal election 2013 foreign debt gross debt net debt Senators and Members ALP Newstart Parenting Payment Youth Allowance sea farers Australian economy violence against women vocational education and training military history by-election political parties High Court skilled migration mental health Federal Court terrorist groups science social media Higher Education Loan Program HECS federal state relations youth paid parental leave same sex relationships coal seam gas customs planning doping health risks Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy Rural and regional trade unions Foreign affairs election timetable Indigenous royal commission Productivity United Kingdom firearms public policy Population ADRV terrorism transparency research and development welfare ASIO intelligence community Australian Security Intelligence Organisation carbon tax mining employer employee renewable energy regional unemployment fishing European Union family assistance United Nations Security Council forestry food labelling Drugs welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report energy social inclusion paternalism nutrition ODA Defence sitting days electoral divisions Southeast Asia administrative law universities TAFE Ireland citizenship asylum seekers early childhood education Canada Financial sector national security fuel disability employment Tasmania integrity standards NATO Australian Secret Intelligence Service sexual abuse World Trade Organization Australia public health housing affordability bulk billing water health policy Governor-General US economy export liquefied natural gas foreign bribery question time speaker superannuation public housing expertise climate Intergovernmental Panel on Climate Change Department of Agriculture Fisheries and Forestry Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare constitutional recognition of local government referendum consumer laws PISA competition policy US politics language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage alcohol entitlements ministries Hung Parliament social citizenship maritime Iran ANZUS regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution marine pollution sustainability prisons police deaths in custody electoral margins electoral pendulum electoral redistribution redistribution NSW redistribution WA redistribution ACT electoral boundaries ASEAN Sustainable Development Goals Double dissolution Senators safety vehicles MYEFO Pathology tertiary education Taiwan Xi Ma meeting family violence government financial advisers financial planners Financial System Inquiry Murray Inquiry China; Economic policy; Southeast Asia; Africa housing Speaker; House of Representatives; Parliament High Court; Indigenous; Indigenous Australians; Native Title ACT Indigenous education Norfolk Island External Territories emissions reduction fund; climate change child care funding refugees immigration asylum procurement Indigenous health e-voting internet voting nsw state elections 44th Parliament 2015 ABS Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade EU China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation Members of Parliament Scottish referendum Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Israel Palestine asylum refugees immigration political finance donations foreign aid Economics efficiency human rights; Racial Discrimination Act employment law bullying Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct retirement Parliament House standing orders prime ministers First speech defence budget submarines workers Somalia GDP world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC anti-dumping Rent Assistance obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing Victoria astronomy resources sector YMCA youth parliament Korea rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra environmental law federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office work-life balance

Show all
Show less
Back to top