Chapter 3

The issues

This chapter outlines the issues raised by submitters and witnesses in relation to the proposed amendments to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018 (the bill). This chapter will also set out the committee's views on the bill.
This chapter will address:
amendments to the student repayment thresholds and rates of repayment of Higher Education Loan Program (HELP) debts; and
the new lifetime loan limits.
Before examining these issues, this chapter will provide some background to the HELP system, the past and projected level of the HELP debt to the Commonwealth budget, and an explanation of the 2017 attempt to change the HELP system to ensure the sustainability of this program for future generations of students.


The HELP loan system

The income-contingent HELP loan system—described by the University of Melbourne (UoM) as 'a real jewel of the public policy crown in Australia'1—was 'designed to make it easier to enrol in university and to reduce the influence of students' financial circumstances in enrolment decisions'.2 Universities Australia (UA) set out the key principles of this scheme:
repayment rates and repayment schedules are based on income, rather than the size of the debt, avoiding excessive and unfair repayment burdens on graduates; and
graduates repay when they realise a return on their studies.3
The UA described the HELP loan system as 'a fundamental part of the policy and funding architecture of the higher education system...genuinely a world-leading policy initiative'.4 The UA noted that Australia was first to establish sectorwide incomecontingent loans, and since that time, several other countries have followed Australia's lead.5
In its evidence to the committee, the UA highlighted how vital it was 'not to lose sight of how important the integrity of the HELP system is', noting that the system:
…underwrote the growth of a mass higher education system in Australia and it continues to support expansion of access and opportunity. In the past decade there has been an historic growth in higher education participation, particularly among groups that are traditionally unrepresented: people from [low-socioeconomic status (low-SES)] backgrounds, from genuine disadvantage, from regional areas and from Indigenous backgrounds—the sorts of people who have all the skills and the aptitude to take on a higher education but have just had less opportunity than those of us in the middle class.6
Although noting that it is an 'essential and intended feature' of the HELP scheme that a proportion of the HELP debt will not be recovered, UA acknowledged that 'there has been a rapid increase in HELP lending in recent years'.7 It considered that the growth experienced in loan categories other than VET FEE-HELP reflects 'inflation and enrolment growth at around the level of population growth'.8
In introducing the bill to the House of Representatives, the Hon Ms Karen Andrews MP, Assistant Minister for Vocational Education and Skills, informed Members of Parliament of the current amount of HELP debt:
As at 30 June 2017, outstanding HELP debt was $55.4 billion and the 'fair value' of HELP—the amount we may expect to be eventually repaid by borrowers—was valued by the actuary at $35.9 billion.9
Indeed, in its submission, the Department of Education and Training (the Department) noted that the 'nominal value of HELP debt has increased from $23 billion in 2010-11 to over $55 billion in 2016-17 and will continue to rise',10 as illustrated by the figure below:

Figure 3.1:  Nominal and expected value of HELP debt ($ billion)

Source: Department of Education and Training, Submission 32, p. 6.
In its submission, the Grattan Institute proffered the two following reasons for the current high level of HELP debt:
…many people who are not poor by the standards of other government income protection programs, and indeed can be well-off by community standards, do not have to repay their student debt. This makes HELP unnecessarily costly to taxpayers.
The other major HELP cost is interest subsidies. Interest subsidies are usually calculated as the difference between the government’s 10-year bond rate and the [Consumer Price Index (CPI)] indexation of HELP debts. A median debtor borrowing $30,000 costs the government nearly $5,000 in interest subsidies, assuming 2 per cent real interest.11
In contrast, the National Tertiary Education Union (NTEU) opined that the rising HELP debt level was a result of:
the increase in the number of Commonwealth Supported Places (CSPs) being offered by our universities and,
significant increases in the contribution students are being asked to make toward the cost of these CSPs and therefore the amount each student is borrowing through HELP to finance those contributions.12
The NTEU considered that the CSP load increase was facilitated by the introduction of the demand-driven system, announced in 2009 and discussed further below, as well as 'a more than doubling of the real amount that each student is required to contribute to the cost of their CSP'.13
The Student Representative Council (Adelaide) suggested yet another reason, citing the 2017 Graduate Outcomes Survey, which 'found the employment rate for graduates is decreasing', and that there was a 'pronounced trend towards part-time employment amongst graduates' leading to fewer graduates meeting the HELP repayment thresholds due to overall lower commencement incomes for graduates.14
Whatever the reason, it is clear that in order to ensure ongoing access to the HELP system by future generations of students, the current escalating HELP debt and growing future projected debt require a measured government response.

The government's response to the sustainability of HELP

On 11 May 2017, and in order to provide targeted support to students and simultaneously ensure that students make a fair and equitable contribution to the cost of their studies, the government introduced the Higher Education Support Legislation Amendment (A More Sustainable, Responsive and Transparency Higher Education System) Bill 2017 (the 2017 bill), the proposed amendments of which were discussed in chapter 2.
The 2017 bill was referred to the committee by the Senate on 11 May 2017, and the committee released its report on 9 August 2017. The committee's report included discussion of Australia's 'relatively new' demanddriven system used to allocate university placements:
A major adjustment to the higher education system was the removal of university fees in the 1970s, which led to a marked increase in university attendance. However, the maintenance of caps in student places meant that the capacity of the free higher education to address social inequality was limited.
More recently, Australia's demand-driven funding model means that the Commonwealth Government will fund every domestic bachelor degree student who has been admitted to a public university, in any course (with the exception of medicine), and without restriction on numbers of students. The Commonwealth Government remains strongly committed to the demand-driven system.15
The report stated that 'the current manifestation of the demand-driven higher education funding model is fiscally unsustainable'16 and that the 2017 bill was an effective way to 'future-proof' the demand-driven model.17 The committee therefore recommended the passage of the 2017 bill.18 The 2017 bill has not yet been considered by the Senate.19

The government's revised response to the sustainability of HELP

The measures in the bill currently before the committee will ensure that funding can continue to provide affordable access for current and future students to Australia's higher education system. Indeed, the committee heard that almost all of the research suggests that the bill would not affect enrolment rates due to the ongoing availability of income-contingent loans.20
Many submitters and witnesses acknowledged the importance of maintaining a sustainable, accessible and fair HELP system.21 For example, the UoM noted that it understood and supported 'the policy objective of ensuring the long-term sustainability of the HELP system', and recognised that this 'may require changes over time'.22
The objective of the bill is to put Australia's system of higher education 'on a more sustainable, responsible path for the future'.23
The unsustainability of the HELP system was illustrated by Ms Andrews who informed the House of Representatives that '[f]rom 2010-11 to 2016-17, the level of new [HELP] debt not expected to be repaid increased from 16 per cent to 25 per cent'.24
In its submission, the Grattan Institute stated that debt that will not be recovered—or 'debt not expected to be repaid, commonly known as doubtful debt'—is 'HELP’s largest cost', explaining that:
For every $100 lent, $20 is not expected to be repaid. Over time, doubtful debt accumulates. Of the $55 billion outstanding [HELP] debt, nearly $20 billion is doubtful debt. The cost is not counted in the budget until debtors die.25
The Department informed the committee that '[t]he expanding gap between the nominal and fair value…is a policy problem requiring action' and suggested that changes must be made 'in order to sustain the program and ensure that its benefits are available to future generations of students'.26
The benefits of the proposed changes will be discussed in the following sections.

Student debt repayment

Schedule 1 of the bill makes changes to the HELP repayment arrangements, replacing the current repayment thresholds and repayment rates with new ones, including a new minimum repayment threshold. Further, from 1 July 2019, repayment thresholds will be indexed using the CPI indexation, rather than Average Weekly Earnings (AWE) indexation.

New threshold and rates for repayments

The bill amends the Higher Education Support Act 2003 (Higher Education Support Act) to provide that the minimum repayment income for the 2018-19 financial year before a person will be obliged to start repaying their accumulated HELP debts is $44,999, with a commencement repayment rate of 1 per cent.27 The threshold amount is currently $55,874 for the 2017-18 financial year and the repayment rate is 4 per cent.28 The relatively high level of the current threshold, in combination with the 4 per cent repayment rate 'create incentives for some debtors to minimise their reported HELP repayment income to deliberately avoid repayments'.29
The UA considered that the new threshold of $44,999 'may avoid the worst effects of [the proposal of $41,999 in the 2017 bill] on graduates’ disposable income and effective marginal tax rates', but emphasised that 'the income-contingent HELP loan system was originally set up to collect financial contributions from graduates proportionate to the earnings premium accruing from their higher education qualifications'.30
Several witnesses criticised the proposed new repayment threshold. For example the Council of Australian Postgraduate Associations (CAPA) considered that the reduction to the minimum repayment threshold would 'disproportionately impact women and low SES graduates',31 a concern raised by other submitters.32
To illustrate the impact the new repayment threshold would have for individuals with a HELP debt earning $45,000 per annum, the CAPA observed that:
$45,000 is just over half the average full-time wage of an adult in Australia, and is only marginally higher than the national full-time minimum wage. Someone earning $45,000 a year has a take-home pay of $37,928 once income tax and the Medicare Levy are subtracted.33
However, the committee also received evidence that '[a] lower threshold would bring the gender distribution of repaying debtors more into line with the overall debtor population'.34 The Grattan Institute, which supports the measure, noted that 'many women leave full-time work after a few years', and although women make up about 60 per cent of graduates, according to the Australian Taxation Office (ATO), 'less than 60 per cent of currently repaying debtors are women'.35
Of those submitters who opposed the new repayment threshold,36 one labelled the retrospective application of the measure 'unfair', on the basis that current and former students 'never agreed to these new and disadvantageously onerous terms and conditions' when entering the loans;37 a sentiment also expressed by CAPA.38
In its submission, Equity Practitioners in Higher Education (EPHEA) opined that this measure would also disproportionately affect people from low-SES backgrounds; people with disabilities; and Aboriginal and Torres Straight Islanders.39
Many submitters were also concerned about the impact of the measure on current and future students, and graduates. For example, the University of South Australia (UniSA) observed that '[m]any students within the system are struggling financially'40 and noted in particular, the potential impact of the measure on:
…students/recent graduates whose study has been supported through Youth Allowance, Austudy or ABSTUDY Living Allowance and who have also needed to access other loan support such as a Student Start up Loan.41
In speaking on behalf of their students, Charles Sturt University (CSU) suggested that:
…a reduction in repayment thresholds for student loans is likely to have a far greater impact on regional, rural and remote graduates as starting salaries in non-metropolitan Australia are far lower than in our large cities.42
The Curtin Student Guild's submission identified mature age students 'who work part-time to support their families or pay mortgages' as a vulnerable subgroup.43 The Australian Catholic University identified other subgroups that would be particularly affected, namely, students falling between the gaps in respect of financial assistance and support, disadvantaged students, and individuals considering 'upskilling'.44
The impact of the changes to the repayment threshold on individuals who are considering upskilling was discussed by the Queensland University of Technology (QUT):
The cumulative effect is potentially very significant with many graduates in this income range, and these measures can be expected to produce a dampening effect on economic participation by this large cohort. Particularly in light of difficult labour market conditions for young people and a markedly expensive housing market, the likely effect of the new measures at the lower income scale will be a reduction of discretionary spending, further dragging on economic growth.45
In its submission, the Australasian Council of Deans of Arts, Social Sciences and Humanities (DASSH) informed the committee that there is disproportionately higher student HELP debt for humanities, arts and social science students.46 DASSH cited evidence that such students earn incomes that are equivalent to or above science, technology, engineering, and mathematics (STEM) graduates five years after graduating, but 'often have periods of unemployment or employment in positions with low pay for a longer period following graduation than their STEM peers'.47
In respect of the effect of this proposed amendment on STEM graduates, Science & Technology Australia noted that:
To establish a research career, early career researchers must spend a significant amount of time grant writing and publishing research, which is often unpaid time. During this time income is often obtained from sources such as casual teaching and part-time work outside of the research sector.
A decrease in take home income will mean they must spend more time working and less time producing research or applying for the grants needed to establish themselves as a stable and successful researcher. Job insecurity is already a significant issue in the STEM workforce and making it harder for early career researchers to pursue a career in research will risk Australia’s future.48
The Australian Council of Trade Unions (ACTU) had particular concerns with how this measure would affect VET students, 'who are more likely to be from disadvantaged families' and therefore 'are likely to be the hardest hit'.49 The ACTU opined that it was 'unacceptable' to increase the costs for young people to attend university and TAFE, as '[i]t locks them out of education and ensures that those who do manage to enter the system have a harder time starting out'.50
The NTEU recommended that instead of the proposed changes to the rates of repayments in the bill, the 'HELP repayment schedule be totally redesigned so that it is structured as a series of marginal rates as in the income tax schedule', which would 'include new higher marginal rates for people earning above $113,000'.51 The Regional Universities Network (RUN) also suggested that 'an alternative model of increasing the repayment rate for high income earners' should be considered.52
On the other hand, there were numerous submitters who supported the new threshold arrangements. In expressing its support for the measure, the Grattan Institute proffered that '[a] lower initial threshold would bring HELP more into line with other forms of income protection for working-age adults', and noted that:
…the current $52,000 threshold is nearly twice the threshold above which Newstart recipients lose their eligibility and about 50 per cent more than the threshold for the Low Income Healthcare Card. The HELP threshold is also nearly $15,000 more than the minimum wage.53
This is illustrated by the following figure:

Figure 3.2:  The current HELP threshold cf. other recipients of government income protection

Source: Grattan Institute, Submission 11, p. 4.
La Trobe University also expressed its broad support for the measure, but did recommend that there be further consideration and modelling of suitable measures in order to address:
the potential risk of a disproportionate impact on students with low incomes, including regional and female students
the potential risk of slowing the rate of repayment for graduates earning between $60,000 and $90,000 (see Figure 1) [at page three of the submission] as a result of the new proposed repayment thresholds in this Bill.54
Schedule 1 of the bill also proposes amendments to the thresholds of repayments and corresponding rates of repayment, with the lowest rate—$44,999 in 2018-19—commencing at 1 per cent, and with increases of 0.5 per cent increments, peaking at 10 per cent for annual incomes above approximately $132,000.55 The Department provided the following explanation:
From the second income threshold each progressive threshold is set at six per cent higher than the preceding threshold, while repayment rates increase in 0.5 percentage point increments. There are 18 repayment thresholds in the proposed Bill, up from only 10 thresholds currently. The lower minimum repayment threshold will increase the number of HELP debtors who will be required to make repayments. The higher repayment rates for those at the higher end of the income scale will ensure more rapid repayment rates for those who can afford it. These changes will thereby improve the sustainability of the scheme and ensure it remains available for future generations of students.56
As of 1 July 2018, when the new HELP repayment thresholds and rates will come into effect, the new debt not expected to be repaid will drop from 25 per cent to 17 per cent.57 As noted above, the Grattan Institute informed the committee that 'nearly $20 billion' of the $55 billion HELP debt is debt not expected to be repaid, otherwise known as 'doubtful debt'.58 This reduction in the percentage of doubtful debt would have a significant, positive impact to the overall HELP debt, and the ongoing sustainability of the scheme.
The following table illustrates the existing and proposed repayments for 2018-19:59

Figure 3.3:  The proposed HELP repayment thresholds

Source: National Union of Students, Submission 22, p. 5 citing: Department of Education and Training; The New Daily
As this table illustrates, and as observed by Mr Andrew Norton of the Grattan Institute, even though there is a lower threshold for repayment of HELP debts:
…the way it has worked with the upper thresholds—the $52,000 one and above—is going to mean a lot of people between the $52,000 threshold and about $95,000 a year are actually going to repay less per year under the government's proposed legislation.60
The QUT supported the revised repayment profile,61 and while TAFE Directors Australia did not support the lowering of the minimum threshold for repayments, it noted that it 'would support the introduction of the new brackets with the current repayment threshold, and with higher repayment rates in the top brackets'.62
Professor Bruce Chapman—an economist and academic who designed the original student loan system—also expressed support for the government's measures in schedule 1, commenting that he would not have the repayment threshold below $45,000 and 'would be keen to have the first rate of repayment at one per cent and then leading up to four per cent, to the current first threshold', in line with the government's intention.63 Indeed, in speaking of the access by disadvantaged students to university, Professor Chapman remarked that he did not 'see anything in the data that is consistent' with these students being unable to access student loans.64
In its submission, Innovative Research Universities (IRU)—which had questioned the minimum repayment threshold of $41,999 in the 2017 bill—supported the proposed threshold and the rates of repayment in the current bill.65 The IRU noted that, with these changes HELP can 'remain an effective part of the Australian higher education system'.66
The UA also supported the revised repayment rate schedule, describing it as 'clear, transparent and progressive', and proffering that '[s]etting slightly higher repayment rates at higher income levels is a progressive initiative that recovers loan debt faster without disadvantaging less well off graduates'.67

The Student Financial Supplement Scheme

Schedule 1 of the bill also amends the Social Security Act 1991 (Social Security Act) and the Student Assistance Act 1973 (Student Assistance Act) to bring the repayment thresholds for the Student Financial Supplement Scheme (SFSS) 'into line with the HELP repayment thresholds from 2019-20 and the current three-tier repayment threshold for SFSS retained with the existing indexation for 2018-19'.68
The committee received evidence from some submitters that the SFSS debt should be written off. For example, while the NTEU did not object to the proposed changes 'per se', it considered the SFSS 'grossly unfair', submitting that 'it encouraged the most disadvantaged students to “trade-in” their income support entitlements to borrow a larger amount'.69 The NTEU provided the following example:
…a student could forgo $5,000 of Austudy for a $10,000 SFSS loan, all of which had to be repaid. Over three or four years this could add $30,000 to $40,000 to a student’s debt just to cover their living expenses while studying. The scheme was taken up in disproportionately high numbers by the most disadvantaged students, including Aboriginal and Torres Strait Islander students.70
The NTEU stated that this scheme 'was unconscionable in that it induced the most disadvantaged students to pursue a course of action that was often not in their best interests',71 a position supported by the ACTU.72
However, a number of submitters also supported this measure.73 For example, the IRU considered that, on balance, the proposed changes were appropriate, as:
Under current arrangements students who have used the Student Financial Supplement Scheme repay it in parallel with HELP repayments. The threshold for repayment is different from that used for HELP being 2% for income above $56,000 reaching 4% at income over $97,000. The proposal would integrate the Scheme with HELP. This would remove making two similar payments in parallel but would bring in repayment earlier should a person hold a Student Financial Supplement Scheme debt only.74

New indexing of repayments

Schedule 1 of the bill also amends the Higher Education Support Act to provide that, from 1 July 2019 onwards, all HELP thresholds will be indexed at the CPI instead of AWE.75 The Explanatory Memorandum explains that, while 'this measure makes the overall scheme more affordable for Government in the long-term', it 'does not result in an overall increase in costs for students'.76 Further:
Indexing the HELP repayment thresholds at CPI will ensure the value of the thresholds is maintained in real terms, as the thresholds will increase in line with consumer prices rather than average wages. With AWE being typically higher than CPI, indexation by CPI will slow growth in repayment thresholds, bringing more individuals into the repayment scope over time.77
Several submitters opposed this measure,78 some considering that it would have a disproportionate effect on lowearning graduates.79 For example, the Southern Cross Postgraduate Association (SCPA) considered that the move to CPI indexation 'will place new hardship upon many HELP debt holders in times of combined stagnant wages growth and rising costs of living', identifying that the impact will be particularly felt by low-income earners from regional Australia.80
In its submission, the QUT opined that:
…it stretches the coherence of the system’s logic to link indexation of an income-contingent liability to anything other than the movement of incomes, particularly since increases in the cost of living tend to be factored into mechanisms that determine income.81
Similarly, the National Union of Students did not consider CPI to be 'the appropriate indicator' for indexation, commenting that:
…indexing thresholds to the CPI will have the effect of forcing an increasing number of individuals to repay loans before their earnings reflect the benefits of a qualification. It is particularly concerning that this would disproportionately impact mature age students, who are more likely to both be earning incomes close to the repayment thresholds and, as noted in Doubtful Debt, already have ‘pre-existing financial commitments that constrain their ability to take on additional expenses’.82
However, in the committee's report on the 2017 bill, it was noted that Professor Chapman did not consider that this change would cause debts to rise in real terms.83
Indeed, not all submitters to the current inquiry opposed this measure.84 For example, UniSA accepted the proposed replacement of AWE with CPI for the purposes of indexation of HELP repayment thresholds.85 Further, in supporting this measure IRU stated that the change to indexation:
…mimics the index applied to increase the student contribution rates. In the current period of low wage growth the change may advantage those with HELP balances. If wage growth returns to previous levels the additional income ought to cover the slightly higher level of repayments.86
The CSU also supported this measure, for the reason that:
…salaried wages rise more slowly in regional Australia compared to our metropolitan cities, meaning that overtime graduates obtaining employment in metropolitan areas will repay more of their student debt faster, that is a greater percentage of their income will be hypothecated to reduction of their student loan balance.87
While the Grattan Institute noted that 'a move from AWE to CPI probably will not deliver major savings in the near future' due to the 'subdued wage growth in recent years', the measure:
…will mean that a consistent indexation system is used throughout the Higher Education Support Act 2003, and protect the repayment system from becoming less effective due to periods of high wage growth.88

Order of repayment of debts

Schedule 2 of the bill amends the Social Security Act, the Student Assistance Act and the Trade Support Loans Act 2014 to change the order of repayment of various student loan debts. Currently, debts under the SFSS are collected concurrently with HELP debts.
The committee did not receive a large amount of evidence addressing this proposed change, but of those submitters who did discuss the measure, all were supportive of it.89 For example, the UoM, stated that the measure:
…adds clarity to loan repayment obligations, and ensures that those with debts across multiple programs are not burdened with excessive repayment liabilities.90

Lifetime loan limits

Schedule 3 of the bill introduces into the Higher Education Support Act a new, combined HELP lifetime loan limit of $104,440, with an exception for students of medicine, dentistry and veterinary science who will have a $150,000 lifetime limit. The changes are due to take effect from 1 January 2019.
The Department informed the committee that the lifetime loan limit 'has the capacity to support nine years of full-time higher education, which for most people is two degrees worth of choice or a degree and some future study worth of choice'.91
The rationale for this measure, as articulated by the Department, is to 'encourage students to select courses carefully and the cap will thereby act as an incentive to complete a course of study'.92 The Department provided additional reasoning:
To go beyond that to participate in full fee paying higher education is frequently a choice made by people who have had the benefit of a publicly supported higher education. The situation we face though is that that loan that we give is not a free good. It does involve cost to the taxpayer to deliver the loan. There has to be some choices at some point in the system about how far you extend the loans to either an individual or in total, and the situation where a student can study full-time for nine years in pursuit of one or two career changes doesn't appear to be an exorbitant limit on their choices.93
Many submitters opposed this measure.94 For example, the University of Notre Dame Australia (UNDA) described the measure as a 'significant and fundamental change' that may have the effect of, for example, '[e]roding the underlying objective of the deferred payment scheme of universal access, which has been a key principle of Australia’s Higher education system that has been enhanced by successive governments since its introduction'.95
However, the committee also received evidence in support of this measure. For example, the Grattan Institute stated that although it expects the measure will 'deliver only modest net savings', the measure 'is worth doing as one of a range of measures to reduce HELP’s cost to taxpayers, while still achieving the [HELP] scheme’s policy goals'.96
In support of this argument, it is worth noting the figure below provided by the Grattan Institute which illustrates that the number of people with HELP debts exceeding $100,000 is growing, and an increasing rate. The Grattan Institute sourced its information from the ATO which found that, from 1989 to 30 June 2016, just under 11,000 people had HELP debts exceeding $100,000, with the figure of $121,300 the average amount these debtors owe.97

Figure 3.4:  HELP debtors owing more than $100,000

Source: Grattan Institute, Submission 11, p. 14.
Further, the Grattan Institute submitted that '[t]he fields of education causing large debts also suggest that median bachelor degree repayment forecasts are too pessimistic' and that most HELP debtors owing more than $100,000 studied fields with above average earnings, as illustrated by the following figure.98 The figure shows that medicine and law, professions which typically yield earning capacities well above the average, are the two courses where average debt significantly exceeds the proposed thresholds.

Figure 3.5:  Average total debt for selected higher education fields between 2005 and 2016

Source: Grattan Institute, Submission 11, p. 16.

Lifelong learning

In the context of the lifetime loan cap, a number of submitters discussed the importance of lifelong learning, including that workers should have the ability to 'upskill'.99 For example, the UoM stated that:
While there is considerable uncertainty concerning what the future workforce will look like, we can be confident that there will be a greater need for workers to continuously update their skills to keep pace with the demands of a changing workforce. Workers in the future will enjoy lower levels of job security than those in the past, and will need the adaptive skills to cope with a changing labour market. Advances in automation in the workplace is predicted to bring large shifts in labour composition and demand overtime, and an increased need for workers to upgrade skills to support changing occupations…
Engagement with tertiary education will increasingly become the norm throughout one’s adult life, rather than something limited to the beginning of it. In a recent report, the OECD underscored the importance of policies that “give all workers the opportunity to continuously maintain their skills, upskill and/or reskill throughout their working lives.”100
The UoM considered it 'essential…that students do not face unreasonable financial barriers at the point of access to education and training', and noted that 'HECS-HELP and FEE-HELP have operated effectively to mitigate this risk'.101
The UoM also discussed the success of the 'Melbourne Model', which it considers is under threat by successive changes in the policy and funding environment for higher education, including the proposed HELP lending limit in the bill.102 However, in its evidence, the Department noted that it is:
…supporting their model [the Melbourne Model] as we have always done through the provision of public places and through access to a loan scheme. To say that, because a particular institution wants to create a structure in their degrees and the public purse should fund that ad infinitum, I think, is a luxury that relies on presuming that those loans are free goods, and we know that they're not.103
The UoM also highlighted the effect of this measure over the 'extent to which the university sector responds to the skills needs of Australia’s labour market', noting the importance of courses 'in strategically important areas that already suffer skills shortages, such as expensive-to-run Engineering programs' and other STEM programs.104
The University of Newcastle (UON) also identified the importance of individuals retraining in STEM programs, particularly for regional areas:
…it will be important to ensure that individuals in regions undergoing structural and economic transition – such as Newcastle and the Hunter – are not prevented from engaging in crucial retraining and reskilling (particularly in high cost, knowledge-intensive disciplines such as STEM and health which may require specialist postgraduate qualifications).105
CAPA provided an example of how this measure would 'disproportionately impact future postgraduates' and 'effectively end equitable access to higher education':
For example, a student at the University of Melbourne who studies a Bachelor of Arts with a Commonwealth Supported Place pays approximately $20,000 for their undergraduate degree. If they were then to study a Juris Doctor degree at the University of Melbourne, at a full-fee cost of $124,385, the student’s total contribution would be $143,717. This exceeds the proposed loan cap by $39,277. Therefore, only students who could afford to pay $39,227 upfront would be able to undertake this degree pathway.106
The Monash Postgraduate Association also provided the committee with examples of how the lifetime loan cap would affect undergraduates who wish to pursue further study, noting that 'situations where students have only studied one undergraduate degree from start to finish, without failing and having to repeat any units…and without making any changes to their studies' are 'ideal and unrealistic conditions':
1. A Bachelor of Laws degree at Monash is 4 years long, costing at present a minimum of $43,016 on a CSP, which would leave prospective postgraduate students with $61,424 left until reaching their cap.
A Master of Laws degree at Monash is 2 years long at a full-fee cost of $31,7003 per year, total cost $63,400, leaving students $1,976 to pay upfront.
2. A Bachelor of Engineering degree at Monash is 4 years long, costing at present a minimum of $36,740 on a CSP, which would leave prospective postgraduate students with $67,700 left until reaching their cap.
A Master of Advanced Engineering degree at Monash is 2 years long at a full-fee cost of $35,300 per year, total cost $70,600, leaving students $2,900 to pay upfront.107
Similarly, Bond University also identified that the lifetime cap may be problematic for 'midcareer individuals returning to study to gain new knowledge and upskill'.108
However, Professor Chapman opined that the cap, in principle, 'is probably the best of a bad world when it comes to limiting excess debt'.109 Professor Chapman also proffered that '[t]he loan cap has to be sufficiently generous to accommodate people who might make one or two not successful attempts at undergraduate and to take into account the postgraduate degrees'.110

VET pathways

Another way in which workers can 'upskill' is through further studies via a VET pathway. The EPHEA opined that the VET pathway to higher education is utilised in particular by 'students from equity backgrounds and recently arrived migrants', and considered that the proposed changes appear 'inequitable' insofar as the changes make VET debts 'retrospective, in terms of counting towards their lifetime limit'.111 In practice, this could have an adverse effect on people who wish to pursue STEM careers following graduation from a VET program; a necessary workforce for Australia 'moving forward'.112
The UNDA illustrated how the proposed legislative changes would affect students who enter into higher education via nontraditional education pathways—such as via VET training—which would particularly affect those students 'from rural, indigenous, low SES and culturally and linguistically diverse backgrounds':
According to modelling undertaken by Notre Dame, the total cost to a student to complete a Masters of Business Administration at a public university by undertaking this pathway would be ~$114,000, in excess of the proposed loan limit of $104,440. This would effectively impose a requirement of an upfront payment of ~$9,500 to complete the program. This compares with students who progress via more traditional pathways; the total cost for the School Leaver/Bachelor of Nursing /Masters of Business Administration pathway would be ~$99,000, and could be met within proposed loan cap.113
The same point was made by the UON, which 'enrols a significantly higher proportion than the sector of students coming to university via non-traditional pathways'.114 The UON informed the committee that:
These may include VET and sub-bachelor pathways, or may include students returning to university to retrain after previous tertiary or university study. Students coming to university via these pathways may take longer to complete their degrees and – due to a lack of family support for higher education or challenges in completing their education – accrue higher HELP debts than peers entering university from more traditional pathways. In combination with prior debts from VET or other study, there is the possibility that a proportion of these students may be affected by the lifetime loan limits.115
However, UniSA also acknowledged the government’s 'desire to manage the extent of the national HELP loan debt through the introduction of a combined, lifetime limit on HELP borrowings by students', and considered the limits 'appear reasonable for students who may follow a VET pathway before entering higher education and entering a professional career', as long as the loan amount was able to be 're-set' following 'a specified level of loan repayments'.

Alternatives to the lifetime limit

Some submitters acknowledged the government's efforts to mitigate increasing student debt by imposing a lifetime limit, but did not agree with the specifics of the measure. For example, Charles Darwin University expressed its opposition to the lifetime loan limit, but recognised 'the need for the Commonwealth to address the rising costs of supporting tertiary study in Australia, whilst still ensuring access and affordability', and therefore proposed a number of alternatives, including resetting the cap for students who have made HELP repayments.116
In its submission, the NTEU recommended that, rather than imposing a lifetime limit, 'government consider imposing caps on fees and the number of eligible courses for which HELP loans are available'.117
The RUN considered that '[a] cap on student loans is a disincentive for life-long learning', and rather than this cap, suggested that there be a cap on the outstanding debt, such that '[i]f someone has paid off part or all of their loan, they can borrow again',118 a suggestion also made by a number of other submitters.119 Further, the UA considered that '[a] limit on outstanding debt – rather than gross lifetime borrowing – would be better targeted at managing the Commonwealth’s credit risk while maintaining the integrity of the HELP scheme'.120

Committee view

The committee acknowledges the strong level of interest in this bill, and thanks the submitters and witnesses who participated in this inquiry, particularly in light of the short timeframe available.
The committee strongly supports Australia's demand-driven higher education funding model, which it considers has made higher education opportunities more equitable, and provided greater access to universities for students across Australia.
However, the committee recognises that the demand-driven funding model entails significant increased costs to the Commonwealth, which are increasing at an unsustainable rate under the current arrangements. This is demonstrated by the Department's evidence that the HELP debt has more than doubled from $23 billion in 2010-11 to its current level of over $55 billion, a sharp increase which has coincided with the introduction of the demand-driven model introduced in 2009.
The committee therefore considers that, given Australia's current fiscal position and to ensure long-term sustainability of the HELP scheme, the model must be adjusted to ensure that future students are protected and can be assured of access to affordable, world-class higher education supported by the Commonwealth. Further, the system must protect current and former students from unreasonable and adverse changes to the debts that they are incurring or have incurred through the HELP system. The committee believes that the bill currently the subject of the inquiry strikes the right balance: it is the reasonable and equitable way by which the government can achieve this end.
While the committee recognises that some submitters and witnesses opposed some measures in the bill, the committee notes that a number of these submitters and witnesses agreed with the objective of the bill; that is, the need to ensure the sustainability of the HELP system.
The committee acknowledges in particular the concerns raised by a number of submitters and witnesses that some groups may be disproportionately affected by the lowering of the repayment threshold and the move from AWE indexation to CPI indexation. It is not the committee's intent to support a bill that is disadvantageous to people from low-SES backgrounds; people with disabilities; Aboriginal and Torres Straight Islanders; and women. Indeed, the committee considers that the measures in the bill are advantageous for these groups as they ensure the continuation of the HELP system, and therefore improved access to higher education qualifications for future generations of Australian students.
Indeed, the committee refers to the evidence received from various submitters and witnesses in support of these measures. This support includes the creator of the HELP system, Professor Chapman, who backed the revised repayment thresholds and the corresponding rates of repayment, and commented that the change of indexation would not cause debts to rise in real terms, and would not change the current high number of students accessing higher education.
The committee also acknowledges that there was some opposition to the introduction of a lifetime loan limit in schedule 3 of the bill. The committee notes that there were a number of submitters and witnesses who supported some form of loan limit in order to discourage an unnecessary accrual of very high levels of debt. The committee also recognises that some of these submitters and witnesses suggested ways in which the policy could be executed more fairly, especially in light of the need for some individuals to 'upskill'.
The committee therefore considers that it may be appropriate to adopt the recommendation put forth by many submitters that loan limits should be capped such that students who have reached the cap, but begin to repay their debt, may again access Commonwealth assistance up to the cap amount. The committee considers that this would enable the government to recover debt as HELP loans are repaid, but will not impede on the ability of students to pursue lifelong learning. Indeed, the committee acknowledges that lifelong learning is particularly important in the context of workers needing to 'upskill' and retrain to suit the changing economy.

Recommendation 1

The committee recommends that the government consider amending schedule 3 of the bill to introduce a cap on outstanding HELP debts, rather than a lifetime loan limit.
The committee recommends that the Senate otherwise pass the bill.
Senator Lucy Gichuhi

  • 1
    Professor Carolyn Evans, Deputy Vice-Chancellor, Graduate, and Deputy Provost, The University of Melbourne (UoM), Proof Committee Hansard, 5 March 2018, p. 10.
  • 2
    Universities Australia (UA), Submission 34, p. 1.
  • 3
    UA, Submission 34, p. 1.
  • 4
    Ms Catriona Jackson, Deputy Chief Executive, UA, Proof Committee Hansard, 5 March 2018, p. 9.
  • 5
    Ms Jackson, UA, Proof Committee Hansard, 5 March 2018, p. 9.
  • 6
    Ms Jackson, UA, Proof Committee Hansard, 5 March 2018, p. 9.
  • 7
    UA, Submission 34, p. 2.
  • 8
    UA, Submission 34, p. 3. VET Student Loans, which replaced the VET FEE-HELP scheme, commenced on 1 January 2017 and 'offers income contingent loan support to eligible students studying certain diploma level and above vocational education and training qualifications. Eligible students are entitled for loans up to a capped amount' – see, Department of Education and Training (the Department), VET Student Loans, (accessed 8 March 2018). In contrast, the HELP scheme is a loan scheme offered to eligible students enrolled 'in Commonwealth supported [higher education] places to pay their student contribution amounts' – see, Australian government, HECS-HELP, (accessed 8 March 2018).
  • 9
    The Hon Karen Andrews MP, Assistant Minister for Vocational Education and Skills, House of Representatives Hansard, 14 February 2018, p. 9.
  • 10
    The Department, Submission 32, p. 5.
  • 11
    Grattan Institute, Submission 11, p. 2 (citations omitted).
  • 12
    National Tertiary Education Union (NTEU), Submission 6, pp. 4–5.
  • 13
    NTEU, Submission 6, p. 5.
  • 14
    Student Representative Council (Adelaide) inc., Submission 23, p. 4 (citations ommitted).
  • 15
    Senate Education and Employment Legislation Committee, Report: Higher Education Support Legislation Amendment (A More Sustainable, Responsive and Transparent Higher Education System) Bill 2017, 9 August 2017 (2017 Report), pp. 13–14 (citations omitted).
  • 16
    Senate Education and Employment Legislation Committee, 2017 Report, p. 14.
  • 17
    Senate Education and Employment Legislation Committee, 2017 Report, p. 14.
  • 18
    Senate Education and Employment Legislation Committee, 2017 Report, p. 31.
  • 19
    See, Parliament of Australia, Higher Education Support Legislation Amendment (A More Sustainable, Responsive and Transparent Higher Education System) Bill 2017, (accessed 20 February 2018).
  • 20
    Professor Bruce Chapman, private capacity, and Ms Ittima Cherastidtham, Fellow, Grattan Institute, Proof Committee Hansard, 5 March 2018, p. 5.
  • 21
    See, for example, Bond University (Bond), Submission 7, p. 2; Science & Technology Australia (STA), Submission 10, p. 1; University of Divinity, Submission 17, p. 1; Ms Jackson, UA, Proof Committee Hansard, 5 March 2018, p. 9.
  • 22
    Professor Evans, UoM, Proof Committee Hansard, 5 March 2018, p. 10.
  • 23
    The Hon Karen Andrews MP, Assistant Minister for Vocational Education and Skills, House of Representatives Hansard, 14 February 2018, p. 8.
  • 24
    The Hon Karen Andrews MP, Assistant Minister for Vocational Education and Skills, House of Representatives Hansard, 14 February 2018, p. 9.
  • 25
    Grattan Institute, Submission 11, p. 2 (citations omitted).
  • 26
    The Department, Submission 32, p. 5.
  • 27
    Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018, Statement of Compatibility with Human Rights, schedule 1, item 1.
  • 28
    Higher Education Act 2003, para. 154-10(a).
  • 29
    The Department, Submission 32, p. 7.
  • 30
    UA, Submission 34, p. 3.
  • 31
    Council of Australian Postgraduate Associations (CAPA), Submission 5, p. 5.
  • 32
    See, for example, NTEU, Submission 6, pp. 14–15; Equity Practitioners in Higher Education (EPHEA), Submission 8, p. 2; Curtin Student Guild (CSG), Submission 15, pp. 2–3; Australasian Council of Deans of Arts, Social Sciences and Humanities (DASSH), Submission 20, p. 1; Student Representative Council (Adelaide) inc., Submission 23, p. 6.
  • 33
    CAPA, Submission 5, p. 4 (citations omitted).
  • 34
    Grattan Institute, Submission 11, p. 5.
  • 35
    Grattan Institute, Submission 11, p. 5.
  • 36
    See, for example, Southern Cross Postgraduate Association (SCPA), Submission 2, p. 2; CAPA, Submission 5, p. 4; University of Canberra, Submission 9, p. 1l; NTEU, Submission 6, pp. 11–12; University of Technology Sydney Students Association, Submission 13, p. 3; NUS, Submission 22, p. 6.
  • 37
    SCPA, Submission 2, p. 2.
  • 38
    CAPA, Submission 5, p. 4.
  • 39
    EPHEA, Submission 8, p. 2.
  • 40
    University of South Australia (UniSA), Submission 3, p. 1.
  • 41
    UniSA, Submission 3, p. 2.
  • 42
    Charles Sturt University (CSU), Submission 28, p. 2.
  • 43
    CSU, Submission 13, p. 3.
  • 44
    Australian Catholic University, Submission 14, p. 3.
  • 45
    Queensland University of Technology (QUT), Submission 16, p. 2.
  • 46
    DASSH, Submission 20, p. 1.
  • 47
    DASSH, Submission 20, p. 1.
  • 48
    STA, Submission 10, p. 3.
  • 49
    Australian Council of Trade Unions (ACTU), Submission 21, p. 2.
  • 50
    ACTU, Submission 21, p. 2.
  • 51
    NTEU, Submission 6, p. 14.
  • 52
    Regional Universities Network (RUN), Submission 1, pp. 1–2. This was also discussed by the Australian Technology Network of Universities (ATN), Submission 24, p. 2, and TAFE Directors Australia (TDA), Submission 27, p. 1.
  • 53
    Grattan Institute, Submission 11, p. 3.
  • 54
    La Trobe University (La Trobe), Submission 33, p. 1.
  • 55
    Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018, Statement of Compatibility with Human Rights, schedule 1, item 2.
  • 56
    The Department, Submission 32, p. 6.
  • 57
    The Department, Submission 32, p. 6 (citations omitted).
  • 58
    Grattan Institute, Submission 11, p. 2.
  • 59
    National Union of Students (NUS), Submission 22, p. 5.
  • 60
    Mr Andrew Norton, Higher Education Program Director, Grattan Institute, Proof Committee Hansard, 5 March 2018, p. 2.
  • 61
    QUT, Submission 16, p. 1.
  • 62
    TDA, Submission 27, p. 1.
  • 63
    Professor Chapman, Proof Committee Hansard, 5 March 2018, p. 1.
  • 64
    Professor Chapman, Proof Committee Hansard, 5 March 2018, p. 1.
  • 65
    IRU, Submission 18, p. 2.
  • 66
    IRU, Submission 18, p. 2.
  • 67
    UA, Submission 34, p. 3.
  • 68
    Explanatory Memorandum, p. 1.
  • 69
    NTEU, Submission 6, p. 3.
  • 70
    NTEU, Submission 6, p. 3.
  • 71
    NTEU, Submission 6, p. 3.
  • 72
    ACTU, Submission 21, p. 1.
  • 73
    See, for example, UniSA, Submission 3, p. 1; QUT, Submission 16, p. 2.
  • 74
    IRU, Submission 18, p. 3.
  • 75
    Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018, schedule 1, part 2.
  • 76
    Explanatory Memorandum, p. 5.
  • 77
    Explanatory Memorandum, p. 5.
  • 78
    See, for example, University of Canberra, Submission 9, p. 1; University of Technology Sydney Students Association, Submission 13, p. 4; CSU, Submission 15, p. 4; TDA, Submission 27, p. 2.
  • 79
    See, for example, CAPA, Submission 5, p. 8.
  • 80
    SCPA, Submission 2, p. 2.
  • 81
    QUT, Submission 16, p. 2.
  • 82
    NUS, Submission 22, p. 7, citing: Andrew Norton, Doubtful Debt: The rising cost of student loans, (Grattan Institute: 2014), p.26.
  • 83
    Senate Education and Employment Legislation Committee, 2017 Report, p. 18, citing: Professor Chapman, Proof Committee Hansard, 24 June 2017, p. 3.
  • 84
    See, for example, ATN, Submission 24, p. 2.
  • 85
    UniSA, Submission 3, p. 2.
  • 86
    IRU, Submission 18, p. 3.
  • 87
    CSU, Submission 28, p. 2.
  • 88
    Grattan Institute, Submission 11, p. 11.
  • 89
    See, for example, UniSA, Submission 3, p. 2; Grattan Institute, Submission 11, p. 11.
  • 90
    UoM, Submission 12, p. 10.
  • 91
    Mr Dom English, Group Manager, Higher Education Group, the Department, Proof Committee Hansard, 5 March 2018, p. 29.
  • 92
    The Department, Submission 32, p. 9.
  • 93
    Mr English, the Department, Proof Committee Hansard, 5 March 2018, p. 29.
  • 94
    See, for example, University of Canberra, Submission 9, p. 1; Monash Postgraduate Association (MPA), Submission 19, p. 2; CSU, Submission 28, p. 3.
  • 95
    University of Notre Dame Australia (UNDA), Submission 4, p. 2.
  • 96
    Grattan Institute, Submission 11, p. 18.
  • 97
    Grattan Institute, Submission 11, p. 13. Information provided by the Department in response to questions on notice indicated that, as at 30 June 2017, there were 14,046 HELP debtors with a debt exceeding $100,000: see, Department, answers to questions on notice, 5 March 2018 (received 15 March 2018), p. 16. This figure was based on Australian Taxation Office data from 2017, rather than the 2016 data cited by the Grattan Institute.
  • 98
    Grattan Institute, Submission 11, pp. 15–16.
  • 99
    See, for example, UNDA, Submission 4, p. 2; University of Technology Sydney Students Association, Submission 13, p. 7; NUS, Submission 22, p. 7; University of Melbourne Graduate Student Association, Submission 26, p. 3.
  • 100
    UoM, Submission 12, p. 5.
  • 101
    UoM, Submission 12, p. 5.
  • 102
    UoM, Submission 12, pp. 5–6 (citations omitted). The UoM explained that: '[t]he "Melbourne Model" is defined by generalist bachelor degrees that are combined with specialised Masters programs, many of which are required for entry into the professions'—see, UoM, Submission 12, p. 2.
  • 103
    Mr Damian Coburn, Branch Manager, Student Information and Learning Branch, the Department, Proof Committee Hansard, 5 March 2018, p. 29.
  • 104
    UoM, Submission 12, p. 8.
  • 105
    University of Newcastle (UON), Submission 31, p. 4.
  • 106
    CAPA, Submission 5, p. 6 (citations omitted).
  • 107
    MPA, Submission 19, pp. 1–2.
  • 108
    Bond, Submission 7, p. 2.
  • 109
    Professor Chapman, Proof Committee Hansard, 5 March 2018, p. 2.
  • 110
    Professor Chapman, Proof Committee Hansard, 5 March 2018, p. 8.
  • 111
    EPHEA, Submission 8, p. 4.
  • 112
    STA, Submission 10, p. 4.
  • 113
    UNDA, Submission 4, p. 2.
  • 114
    UON, Submission 31, p. 3.
  • 115
    UON, Submission 31, p. 3.
  • 116
    Charles Darwin University, Submission 29, p. 3.
  • 117
    NTEU, Submission 6, p. 8.
  • 118
    RUN, Submission 1, p. 2.
  • 119
    See, for example, Bond, Submission 7, pp. 2–3; UniSA, Submission 3, p. 2; University of Divinity, Submission 17, p. 2; IRU, Submission 18, p. 3; ATN, Submission 24, p. 2; La Trobe, Submission 33, p. 3.
  • 120
    UA, Submission 34, p. 4.

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