On 13 May 2021, the Minister for Education and Youth, Alan Tudge, introduced the Higher Education Support Amendment (Extending the Student Loan Fee Exemption) Bill 2021 (the Bill) to the House of Representatives.
The purpose of the Bill is to extend the FEE-HELP loan fee exemption, which is currently in place until 30 June 2021, to 31 December 2021. The loan fee exemption was initially introduced as part of the Higher Education Relief Package in response to COVID-19.
The decision to extend the exemption to the end of 2021 was announced on 30 April as part of a $53.6 million support package for international education providers, and detailed in Budget Measures: Budget Paper No. 2: 2021–22 (pp. 7–8).
The international education support package was the most significant higher education measure in the 2021–22 Budget. It focused on support for English Language Intensive Course for Overseas Students (ELICOS) providers and non-university higher education providers (NUHEP), which generally have a higher proportion of international students compared with universities. In 2019, international students made up approximately 53.5 per cent of enrolments at NUHEPs, compared with 30.6 per cent at universities. Part of the package was concerned with supporting domestic students to enrol or continue enrolling with NUHEPs, and that is the purpose of this Bill.
FEE‑HELP is one of the income-contingent higher education student loans administered under the Higher Education Support Act 2003 (HESA). It allows Australian citizens and permanent humanitarian visa holders enrolled in full fee-paying places at approved higher education providers to defer the cost of their course fees until their income reaches a minimum threshold. Repayments are then required through the Australian Taxation Office (ATO).
The loan fee
Currently, under section 137-10 of HESA, using FEE-HELP to pay for undergraduate study at a NUHEP or overseas university incurs a 25 per cent loan fee, unless:
Who pays the loan fee?
Payment of the loan fee is relatively rare, as most full fee-paying students are in postgraduate courses—postgraduate students can use FEE-HELP without incurring a loan fee.
Most undergraduate students receive a subsidised Commonwealth supported place (CSP), and can use a different student loan scheme, HECS-HELP, to defer the cost of their course fees. HECS-HELP does not attract a loan fee. However, indexation is added to a HECS-HELP debt on 1 June each year.
In 2019, 4.6 per cent (35,332) of all domestic bachelor students (775,500) were full fee-paying. In most cases, such students are studying at specialist NUHEPs, such as the National Institute of Dramatic Art (NIDA). Because such institutions do not usually receive funding for CSPs (except for the small number funded to deliver courses in priority areas of study such as teaching and nursing), they can charge undergraduate students full fees, whereas public universities, which receive the bulk of funding for CSPs, are required under section 36-30 of HESA to enrol their undergraduate students in CSPs (with very few exceptions).
A loan fee is also incurred by students in the vocational education and training (VET) sector who use VET Student Loans to defer their course fees. Under section 23BA of the VET Student Loans Act 2016, the VSL student loan fee is 20 per cent, unless the student is in a course subsidised by their state or territory government (see Part 3A of the VET Student Loans Rules 2016).
Items 1 and 2 of the Bill amend paragraph 137-10(2)(b) of HESA to change the end date of the exemption period for the FEE-HELP loan fee to 31 December 2021, and the date on which charging the fee will re-commence to 1 January 2022.
These amendments mean the loan fee would not apply to any unit with a census date between 1 April 2020 and 31 December 2021. When the loan fee re-commences from 1 January 2022, it will be 20 per cent.
The Explanatory Memorandum to the Bill (p. 3) indicates that the extension of the loan fee will cost $43.9 million in fiscal balance terms and $0.5 million in underlying cash over the period 2021–22 to 2024–25.
Stakeholder reaction and concluding comments
Representative bodies for NUHEPs, including the Independent Tertiary Education Council Australia and Independent Higher Education Australia (IHEA), have welcomed the extension of the loan fee exemption period, while noting that they believe the fee should be permanently abolished. IHEA states:
Further deferral of the FEE-HELP loan fee which serves as a tax on student’s choice of education opportunity is welcomed. To fully support the participation of all Australians in higher education price barriers and inequitable taxes need to be abolished.
VET Student Loans—no fee exemption
TAFE Directors Australia, the representative body for TAFE providers, notes that although the COVID-19 loan fee exemption originally included VET Student Loans, this exemption has not been extended, leaving students in the VET sector as the only current payers of a student loan fee.
This may represent a misalignment with the significant skills training focus elsewhere in this year’s budget.
Ongoing policy evolution and debate
The loan fees, which are intended to account for the higher predicted cost of lending in some schemes, have long been controversial. As the number of schemes has expanded and borrowing has increased, with many students accessing multiple schemes, the original policy rationale for differential fees has largely been lost. As a consequence, the FEE-HELP loan fee was abolished for students at Australian private universities from 1 January 2019.
As an alternative to abolishing the fees, 2016 Grattan Institute research suggested a universal loan fee could be applied to remove the distortions created by the differential application of fees, while allowing the Government to continue recovering some of the cost of lending.