2012 is the first year of the demand driven funding system in higher education which has ‘uncapped’ university places for domestic students. The demand driven system is part of wide ranging reforms to the sector introduced in the 2009–10 Budget which has increased funding for student places and university research, reformed the student income support system and introduced a more generous indexation formula for higher education funding. This increased funding has been implemented in the transition to the demand driven system. As a result the 2012–13 Budget contains no major measures to increase funding.

However total spending will increase due to increased enrolments resulting from the uncapping of places. An estimated 547 900 Commonwealth supported places (undergraduate and postgraduate) in 2012 will require an increase in appropriations from the Higher Education Support Act (HESA) from $6.5 billion in 2011–12 to $6.9 billion in 2012–13 with similar increases forecast in the forward estimates. The bulk of these appropriations contribute to the costs of educating domestic Commonwealth supported students through the Commonwealth Grants Scheme (CGS).[1]

Higher Education Loan Program (HELP)

The cost of providing income contingent loans to eligible students is expected to increase from $1.5 billion in 2011–2012 to $1.8 billion in 2012–13.[2] Increased enrolments in Commonwealth supported places will see a rise in the number of HECS-HELP loans from 398 000 to 472 000. Vocational Education and Training loans called VET FEE-HELP loans are also forecast to increase from 43 700 to 67 200.[3] A further $60 million over four years will be provided from 2012–13 to extend VET FEE-HELP loans to students enrolled in publicly funded (state subsidised) diploma and advanced diploma courses and to trial an extension of loans for certain high demand publicly funded Certificate IV courses. This measure is part of the National Partnership Agreement on Skills Reform and will require the state and territory governments to contribute 50 per cent of the loan deferral costs.[4]

The Government has taken action to curtail the costs of providing student loans which builds on measures in the past twelve months. Since the 2011–12 Budget it has legislated to reduce the HELP upfront payment discount; reduce the HELP voluntary repayment discount; clarified that Australian students enrolled at an offshore campus of an Australian university are not eligible for loans and that students in dentistry and veterinary science may only access loans for qualifications that lead to the initial registration in their profession.

Similarly in the 2012–13 Budget the Government has announced that Australian citizens enrolled at a domestic campus and who undertake a significant proportion of their higher education course while not residing in Australia will no longer be able to access HELP. This is expected to save $25.1 million over four years.[5] The basis of the measure is to ‘ensure that Government funding is targeted towards students who are more likely to remain in Australia and contribute to Australia’s workforce and economy following graduation’.[6] There are savings in restricting the loans but also in preventing the possibility of unpaid debt due to graduates moving overseas. HECS-HELP debt is recovered by the Australian Taxation Office in tax returns and if graduates move overseas they are not generally required to lodge Australian tax returns. This ‘overseas’ debt is now substantial. Academics Bruce Chapman and Tim Higgins estimate the amount of forgone revenue as a result of HECS debtors going overseas is $400–500 million and could soon exceed $1 billion.[7]

In this budget the biggest saving in HELP will be made from increasing the student contribution for mathematics, statistics and science students whose units, from 1 January 2013, will move from the National Priority band ($4696 per student in 2013) to the Band 2 rate ($8361 in 2013). This measure will save $314.9 million over four years.[8] It will reverse a 2008 Rudd Government decision that reduced the student contribution for mathematics, statistics and science that was aimed at addressing falling enrolments in the mathematics and science disciplines.[9] At the initial announcement of this measure in the Mid-Year Economic and Fiscal Outlook 2011-12 ,the increased contribution was only to apply to new students, but it has now been extended to also apply to continuing students. This measure to increase student contributions might be seen to be at odds with the $54.0 million provided in the Budget to increase mathematics and science participation in schools and universities which is discussed in a separate entry.

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