Student income support
Michael Klapdor and Dr Matthew Thomas
Concerns over the adequacy of student income support and the
equity and efficiency of the higher education student income support system
have been mounting for some time. For a number of years, students, student
representative bodies, universities and the Australian Vice–Chancellors’ Committee
(now Universities Australia) have been calling for more generous support for
students, and for changes to the income support system that would reflect
changing higher education student profiles.[1]
In 2005, the Senate Employment, Workplace Relations and
Education References Committee tabled the report of its inquiry into student
support measures.[2] In this report, the Committee was critical of the inadequacy of student income
support. Among other things, it found fault with the harshness of Youth
Allowance eligibility criteria relating to the age of independence and the
parental income test threshold. These failings, the Committee argued, both penalised
those students who were most in need of financial assistance and had a
detrimental impact on these students’ academic participation rates and success.
The Committee’s findings found support in the Review of
Australian Higher Education (the Bradley Review), released in December
2008.[3] The main conclusion of the Bradley Review was that there is a need for an
increased number of people with high-level skills in order to ensure
Australia’s competitiveness into the future. If this goal is to be achieved and
progress made towards the goal of a just and equitable society, the Review
argued, then this necessitates the increased participation in higher education
of people from disadvantaged groups, including Indigenous people, people with
low socio-economic status and those from regional and remote areas.[4] These people are currently under-represented in Australia’s higher education
system. A significant barrier to the higher education participation and success
of people from disadvantaged groups is these people’s economic circumstances.
While government income support for students in higher education is currently available
in the form of Youth Allowance, Austudy, ABSTUDY and various Commonwealth scholarships,
the level of support provided through these programs has been criticised as insufficient
and the eligibility requirements for some support too restrictive.
The student income support measures contained in the Budget may
be interpreted as seeking to address some of these issues and to provide
increased support for those students most in need.
Key measures
Reducing the age of independence
The age of independence is the age at which young people are
automatically considered to be financially independent from their parents for
the purpose of determining income support payment rates. The current age of
independence is 25 years. Young people can be considered independent at an
earlier age if they meet certain criteria establishing that they should not be
considered to be dependent upon or able to receive assistance from their
parents. Under this measure, young income support recipients will automatically
be considered independent if they are aged 24 years in 2010, 23 years in 2011 and
22 years from 2012 onwards. The changes are expected to benefit around
24 000 new and existing recipients over the next four years.[5]
Parental income test
The parental income test threshold will be increased to
match that of Family Tax Benefit A (FTB-A). The parental income test is applied
to all students receiving Youth Allowance or ABSTUDY who are not considered
independent. The income test threshold (the parental income amount that can be
reached before payment is affected) will be increased from the current rate of
$32 800 to $42 559. This represents a considerable increase of almost
30 per cent. Under the current arrangement, the parental income test threshold is
increased for each additional child. The new arrangements will simplify this
system by instituting a single threshold, but one that has a lower taper rate. The
taper rate at which the income support payment is reduced will be lowered from
25 cents to 20 cents for every dollar that is earned over the threshold.
According to the Government’s estimates, around $507 million
of the $1.07 billion cost of the parental income test measures over four years
will come from the redirection of funding that would otherwise have gone
towards FTB-A payments. It is estimated that as a result of the changes an
additional 67 800 young people will be able to access income support and
that 34 600 existing income support recipients will have their payments
increased.[6]
Personal income test
Under current arrangements, personal income above $236 per
fortnight result in 50 cents in the dollar being deducted from Youth Allowance
and ABSTUDY payments, and amounts earned over $316 result in 60 cents in the
dollar being deducted. Over the three years from 2010–2011 to 2012–2013, the
personal income test free area for students will increase from $236 per
fortnight to $400 per fortnight. The first $80 earned over $400 will incur a
reduction in students’ income support payments of 50 cents in every dollar. Any
amount earned over $480 will result in 60 cents in every dollar being deducted.
Thus, this measure will enable students to earn much more from work to
supplement their Youth Allowance and ABSTUDY payments.
Abolishing two of the workforce participation criterion for early
independence
A key finding of the Bradley Review was that student income
support was being paid to students living in high income households. Forty-nine
per cent of Youth Allowance recipients who are living at home are living in
households with incomes over $80 000.[7] Under the current work participation requirements for independence, a person
must have:
- worked full-time (at least 30 hours a week) for at least 18
months in the previous 2 years, or
- worked part-time (at least 15 hours a week) for at least 2 years
since leaving school, or
- have been out of school for at least 18 months and earned at
least 75 per cent of the maximum rate of pay under Wage Level A of the
Australian Pay and Classification Scale (that is, $19 532 in 2009) in an 18
month period.
Under this measure, the second and third of the above criteria
will be abolished, preventing many young people who previously took ‘gap’ years
or who were employed after finishing school from claiming independence and
escaping the parental income test on their payments. Young people will still be
able to claim independent status after working 30 hours a week for at least 18
months in a two year period, or if they meet any of the other non-work related
criteria. The Government estimates that around 30 700 of current prospective
recipients will be affected by this measure, and that it will save
$1.8 billion over four years.[8] Generally speaking, the measure will result in some prospective recipients
receiving a lower amount of income support than they would have received under
the current arrangements. Other prospective recipients will lose their
entitlement to Youth Allowance at an independent rate, altogether.
Student start-up scholarship
A new start-up scholarship has been introduced for all
university students in receipt of student income support. The scholarship,
which is to commence from 1 January 2010, will be paid at a rate of $2254 in
2010, and then adjusted on an annual basis by the Consumer Price Index (CPI).
The Government has allocated $1.3 billion towards this measure over the forward
estimates period.
Comment
The rate of Youth Allowance has not changed (apart from
indexation increases) since it was introduced in 1998. The decision not to
increase the rate of Youth Allowance as a part of the Budget means that many
students will be obliged to continue to balance work with study in order to
make ends meet. Given that the highest rate of payment that can be attained by
singles on Youth Allowance ($371.40 per fortnight) currently falls well short
of Newstart Allowance for singles ($453.30 per fortnight), it may be argued
that this discrepancy provides a disincentive for young people (and especially
disadvantaged people) to participate in higher education rather than seeking full-time
employment.
A Universities Australia survey conducted in 2006 indicated
that the average undergraduate student receives $2170 a year in income support.[9] Thus, while the student start-up scholarships will make a considerable
difference to these students’ total income, the level of support provided to
students nevertheless falls short of that provided under other benefits.
The changes to the eligibility criteria for proof of
independence for the purposes of determining income support will have major
implications for many prospective students.[10] Although the measure is primarily aimed at reducing access to income support
for those living in high income households, it will also affect many students
from families on middle incomes and students who move away from home in order
to study. Students may delay tertiary study for at least 18 months in order to
meet the full-time work criterion for independence. This could prove to be a
difficult task in what is a highly competitive job-market for low-skilled
workers. Others may be forced to remain at home in order to reduce costs for
their families, and this could limit their study opportunities, especially in
the case of young people in rural and regional areas. A large number of
students currently taking a ‘gap’ year in order to meet the criteria for
independence face an uncertain future and potentially difficult choices; they
need to determine how they are going to support themselves whilst studying,
whether or not to delay their studies and whether or not they wish to, or are
able to, remain dependent on their families. These disincentives to pursue
tertiary studies would appear to run counter to the stated aims of the
Government in increasing participation in higher education.
Overall, the measures will help to provide greater assistance
to those students who are most in need through more progressive targeting of those
students who require support. The measures will also allow students to
supplement their student income support payments with more income from work,
and the new scholarships will be especially welcomed. There is, however, a
large pool of students from middle income families who will be negatively
affected by the independence requirements. The measure will affect this group
in terms of their ability to demonstrate independence from their families, their
freedom to move away from home in order to study the course of their choice and
their being forced to compete in the job market so as to qualify as independent
for the purposes of income support, when they decide to study.
It is worth noting that it is unclear just how the new ‘Jobs
and Training Compact with Young Australians’ measure will interact with the
student income support measures.[11] Under the compact, those students who choose to delay tertiary study and
compete in the job market will no longer be entitled to Youth Allowance whilst they
are unemployed. The stricter independence requirements will also mean that many
of those who take up one of the training places being offered under the compact
will remain dependent on their families for support.
[1]. Students are coming from
increasingly diverse social backgrounds and are working more hours than was
previously the case.
[2]. Senate Employment, Workplace
Relations and Education References Committee, Student Income Support,
Commonwealth of Australia, Canberra, June 2005.
[3]. Department of Education,
Employment and Workplace Relations (DEEWR), Review of Australia higher
education: final report, D Bradley (chair), DEEWR, 2008, pp. xi–xii.
[4]. DEEWR, Review of Australia
higher education: final report.
[5]. DEEWR, Student income
support – age of independence, fact sheet, DEEWR, viewed 14 May 2009, http://www.deewr.gov.au/HigherEducation/Documents/PDF/Pages%20from%20A09-303%20Budget%20Fact%20Sheets-16_webaw.pdf.
It is worth noting that the Bradley Review estimated that 64 000 new and
existing Youth Allowance recipients would benefit in the first year if the age
of independence was lowered to 22 immediately rather than gradually. The reason
for the discrepancy between the Government’s and the Bradley Review’s figures
is not clear. DEEWR, Review of Australia higher education: final report,
p. 247.
[6]. DEEWR, Student income
support – parental income test, fact sheet, DEEWR, viewed 14 May 2009, http://www.deewr.gov.au/HigherEducation/Documents/PDF/Pages%20from%20A09-303%20Budget%20Fact%20Sheets-15_webaw.pdf
[7]. DEEWR, Review of Australia
higher education: final report, p. 53.
[8]. DEEWR, Student income
support – workforce participation criterion, fact sheet, DEEWR, viewed 14
May 2009, http://www.deewr.gov.au/HigherEducation/Documents/PDF/Pages%20from%20A09-303%20Budget%20Fact%20Sheets-22_webaw.pdf;
Australian Government, Budget measures: budget paper no. 2: 2009–10, p.
159.
[9]. Universities Australia, Australian
university student finances 2006, Universities Australia, August 2007, p.
5, viewed 15 May 2009, http://www.universitiesaustralia.edu.au/documents/publications/policy/survey/AUSF-Final-Report-2006.pdf
[10]. Those most obviously affected are
the estimated 30 700 people who deferred a place at university this year in
order to meet the existing independence criteria. These people will not have
qualified before the January 2010 cut-off date. Senator Gary Humphries is
reported as having called on the Government to delay the commencement date of
the measure until July 2010 to ensure that those people currently taking a
‘gap’ year will not be adversely affected. Based on a report of Minister Julia
Gillard’s response to such a request in the Canberra Times of 15 May, it
would appear that the Government is reluctant to do so. Minister Gillard is
reported as having stated that ‘many of the students who would have gained
eligibility through the old independence criterion will automatically be
eligible as a result of the increases to the parental income test’. E
Macdonald, ‘Youth Allowance concern mounts’, Canberra Times, 15 May
2009, p. 5.
[11]. See Council of Australian
Governments, Communiqué, Hobart, 30 April 2009, p. 3, viewed 15 May
2009, http://www.coag.gov.au/coag_meeting_outcomes/2009-04-30/docs/20090430_communique.pdf
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