This chapter outlines the measures proposed by the Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018 (the bill), and related budget measures.
The bill was introduced on 14 February 2018, and follows the 2017 introduction of the Higher Education Support Legislation Amendment (A More Sustainable, Responsive and Transparent Higher Education System) Bill (the 2017 bill), which, having passed the House of Representatives on 13 September 2017, has not been passed by the Senate.
In introducing the bill to the House of Representatives, the Hon Ms Karen Andrews MP, Assistant Minister for Vocational Education and Skills, stated that the government would not be proceeding 'with the previous legislative proposals from the 2017-18 budget' set out in the 2017 bill.
The 2017 bill
The 2017 bill would have amended the Higher Education Support Act 2003 (Higher Education Support Act), Income Tax Assessment Act 1997 (Income Tax Assessment Act), and the VET Student Loans Act 2016 (VET Act), as follows:
Schedule 1 would have adjusted the cost of higher education between taxpayers, higher education providers and students by increasing the student contribution and introducing an efficiency dividend for grants made under the Commonwealth Grant Scheme (CGS);
Schedule 2 would have reformed the CGS to introduce a performance component to CGS funding and a competitive tender process for enabling courses;
Schedule 3 would have amended the Higher Education Loan Program (HELP) eligibility and repayment arrangements, reducing the current income threshold and updating the HELP debt rates of repayment. It would have also altered Commonwealth subsidy eligibility for permanent residents and New Zealand citizens.
Schedule 4 would have changed how other grants under the Act give effect to the Higher Education Participation and Partnerships Program (HEPPP) reforms, securing the funding for this program in legislation and introducing student loadings for low socio-economic (SES) students; and
Schedule 5 would have made two minor amendments to clarify that 'vocational awards' are not higher education awards, and updated two university names.
The 2017 bill was also the subject of inquiry by this committee, which recommended the passage of the bill by the Senate. In the committee's report on the 2017 bill, it was noted that:
Australia's modern and successful system of higher education is world renowned. Six Australian universities are ranked in the top 100 and nearly half of all Australian universities in the top 300. Education is Australia’s third largest export industry, largely due to the contribution made by higher education. In 2016 the value of education export income to the Australian economy was $21.8 billion.
The committee's report on the 2017 bill identified that a significant rise of students in Commonwealth Supported Places (CSPs), particularly since the phasing in of demand driven undergraduate funding in 2009, 'has seen the cost of funding this system rise by 71 per cent, double the rate of growth in Gross Domestic Product (GDP)'.
This underlying context remains relevant to the current inquiry.
The current bill
The provisions in the bill currently before the committee are significantly narrower in scope than the 2017 bill. The current bill aims to introduce a:
…new set of repayment thresholds for student loans, changes indexation arrangements for repayment thresholds, amends the order of repayment of some student loan debts, and introduces a combined lifetime loan limit for HELP.
This gives effect to the policy measures announced in the December 2017 Mid-Year Economic and Fiscal Outlook (MYEFO)—policy measures that were revised from the 2017-18 budget—which 'will ensure that Australia's world-leading, income-contingent student loan system can continue to be available to future generations of students'. Ms Andrews noted that the new measures are proportionate, and will lead to a 'sustainable, responsible path for the future' of higher education.
These changes to higher education were also discussed by the Minister for Education and Training, Senator the Hon Simon Birmingham, who identified that while student debts continue to grow, 'up to one quarter of new student loans are not expected to be repaid'. Senator Birmingham noted that:
The policy measures announced in MYEFO will partially deliver on previous budget decisions that moderate the rate of funding growth, which had contributed to the budget deficit, while still driving universities to focus on the needs of students and ensure Australia’s income-contingent loan system can still be accessed by future generations of students without upfront fees.
There are other notable differences between the bill and the 2017 bill:
The government will not proceed with the previous legislative proposals but will instead, within existing legislation, freeze the maximum amount of funding provided through the [CGS] for bachelor degree courses at 2017 funding levels for 2018 and 2019, with CGS funding increases from 2020 onwards to be linked to performance and national growth in the 18–64 year old population.
Universities will continue to receive the indexed student loan component for every student they enrol. The Government is not capping student places and will continue to fund all student contributions via the [HELP] according to university enrolment decisions, in addition to the maximum CGS payment.
The bill contains three schedules:
Schedule 1 changes the HELP repayment arrangements, replacing the current repayment threshold and repayment rates with new ones, including a new minimum repayment threshold of $45,000. From 1 July 2019, repayment thresholds will be indexed using the Consumer Price Index (CPI).
Repayment thresholds for the Student Financial Supplement Scheme (SFSS) will also be brought 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;
Schedule 2 changes the order of repayment of various student loan debts; and
Schedule 3 introduces 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 will take effect from 1 January 2019.
Schedule 1—Repayment thresholds
Schedule 1 will amend the Higher Education Support Act to introduce a new minimum repayment income of $44,999, and replace the current repayment thresholds—including additional repayment thresholds and rates—with new ones.
Paragraph 154-10(a) of the Higher Education Support Act currently provides that the minimum repayment income for the 2005-06 income year was $36,184. This amount has since been indexed every year against average weekly earnings (AWE), such that the compulsory repayment threshold for 2016-17 was $54,869.
Schedule 1 also amends the Social Security Act 1991 (Social Security Act) and the Student Assistance Act 1973 (Student Assistance Act) such that the new HELP thresholds will also apply to SFSS debts from 2019-20. The 2018-19 income year will be subject to transitional arrangements, under which repayment thresholds applying to the SFSS will be fixed at three specific repayment thresholds and rates, specified in the schedule.
From 1 July 2019, repayment thresholds will be indexed using CPI, rather than AWE. As noted in the report for the 2017 bill, the government's Higher Education Reform Package set out that 'this amendment will reflect National Commission of Audit's 2014 recommendation to improve the sustainability of HELP by reducing the indexation rate for HELP thresholds and indexing using the CPI'.
Schedule 2—Order of repayment debts
Schedule 2 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 such that '[f]rom 2019-20, when the HELP threshold will start to apply to student debts under the Social Security Act and the Student Assistance Act, debts from the SFSS will be repaid after HELP debts are discharged, rather than concurrently'. The second reading speech explains that 'this Schedule of the Bill establishes that HELP debt takes priority over other student loan debts.'
Schedule 3—HELP loan limits etc.
Schedule 3 of the bill amends the Higher Education Support Act to introduce a new, combined, lifetime limit to how much students can borrow under HELP to cover their tuition fees. This measure will be applicable from 1 January 2019. The combined limit is $104,440, except for students studying medicine, dentistry and veterinary science courses who will have a lifetime limit of $150,000, an increase on the estimated FEE‑HELP limit of $130,552 for 2019.
The schedule also amends the Higher Education Support Act and VET Act to broaden the existing FEE-HELP limit and FEE-HELP balance to include HECS-HELP loans for courses commenced after 1 January 2019, except for previously accumulated HECS‑HELP debts. Existing FEE-HELP, VET FEE-HELP or VET Student Loans debts that have already accrued under the existing FEE-HELP limit will be transferred against the student’s new HELP tuition limit, reducing their HELP balance.