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
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