Labor Senators oppose the Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018.
Income contingent loans have been one of the key foundations of the architecture of Australia’s fair and accessible higher education system.
Labor introduced the first income contingent loan scheme, HECS, in 1989. HECS was part of a broader suite of reforms which contributed to a significant expansion of higher education in this country.
More recently, Labor’s demand-driven funding, in conjunction with the HECS-HELP scheme and other equity and participation measures, has transformed our higher education system. As Universities Australia (UA) demonstrated, there has been a significant boost in participation from under-represented and disadvantaged students:
Source: Department of Education and Training 2017, Selected Higher Education Statistics – 2016 student data, Appendix 2.
Labor introduced student contributions because we believed it was fair that students contribute to the cost of their education commensurate with the private benefit they receive.
The HELP system has had several changes over the past three decades, but not all of these have proven successful. The Government did not do enough to respond to instances of unscrupulous behaviour by 'for profit' providers given access to the previous VET FEE-HELP scheme.
Any changes to the HELP scheme need to be considered and evidence-based.
As Ms Catriona Jackson, Deputy Chief Executive of Universities Australia stated:
…the first principle – the first thing you must keep in your mind when you're changing this fundamentally important scheme – is to do no harm.
Labor believes we must have a fair and equitable loans scheme and the changes to repayment thresholds simply do not pass the 'do no harm' threshold.
Labor believes the changes to HELP repayment thresholds are simply driven by budget cuts.
And while Labor accepts the assertion from the Grattan Institute that the loan scheme must encourage more VET students to re-pay their loans, this bill and other Government policies have not done enough to support students who have bad debt from unscrupulous providers.
Lowering of HELP re-payment threshold
Labor opposed the Government’s move to lower the HELP repayment threshold to $42,000 because we recognised that it was unfair. We do not think that $45,000 is fair. As the Australian Council of Trade Unions stated, it is only $9000 a year more than the minimum wage.
The Government has made no sufficient case for changes to HELP beyond budget savings. While Labor is concerned about the size of the HELP debt, we note remarks from Professor Bruce Chapman, an economist and academic who designed the original student loan system:
I think it's unfortunate when people focus on the stock of the debt…It's really not very interesting. What's interesting is the overall amount that is not repaid. If that number is even at 25 per cent there is no crisis here. There is no crisis in the system.
Labor also notes Professor Chapman’s additional answers where he stated that Australia’s income contingent loan scheme is in better financial shape than similar jurisdictions like the United Kingdom or New Zealand.
Labor is deeply concerned that the Government has not fully understood the impact the changes to HELP repayment thresholds will have on women.
As National President of the National Union of Students, Mr Mark Pace stated:
We know from the National Tertiary Education Union's submission to this Senate inquiry that 60 per cent of all Australians with outstanding HELP debt are women and that two-thirds of the Australians who will be dragged into the debt pool with the new proposed repayment thresholds will also be women – therefore this bill should be rejected on that premise as well.
Intersection with the tax and social security system
To better design a HELP system that is fit for purpose, more work needs to be done on the repayment schedules and how they intersect with the tax and social security systems.
In responding to a question over what modelling, information or tables the Department of Education and Training had in relation to how the HELP repayment thresholds will intersect with Australia's social security and taxation systems, the Department directed the committee to the Department of Social Services which:
…has provided the [Department of Education and Training] with analysis on the intersection between [HELP] and Australia's social security and taxation systems based on the HELP repayment arrangements proposed in the 2017-18 Budget.
However, the Department did not provide any detail about that nature of, or results from that analysis.
The case for a scheme across the whole of the post-secondary sector is clear
Labor believes that the time for an inquiry into Australia’s post-secondary education system has come.
We cannot have a system where students are no longer treated equitably.
We need to ensure that our income contingent loans system is designed to best suit the needs of a changing post-secondary education system.
As the Grattan Institute stated, the current system is 'less effective' for students who will want or need to move between vocational and higher education throughout their careers.
The systems in place are not as well equipped for lifetime learning. As UA, NUS and the University of Melbourne observed, the current system and proposed changes will stifle rather than encourage more participation in post-secondary education and lifelong learning.
Lifetime borrowing limit
While Labor is not opposed to sending a price signal through a loan cap (for example, our 2016 federal election policy to cap VET FEE-HELP loan amounts), we believe that the proposal in this bill would have a range of unintended consequences.
Under the current FEE-HELP schemes, there are a range of courses which have fees in excess of $100 000.
Labor fully supports a system that allows Australians to defer the fees for postgraduate and further study. We also acknowledge that in a more dynamic post-secondary system, many students will choose to have both vocational education qualifications as well as higher education.
The current proposal for a 'one-off' borrowing limit is clearly inadequate.
Labor would support a more dynamic model which better aligns to lifelong learning needs.
However, Labor is very concerned about reckless fee setting. This was the case in the VET FEE-HELP market and evidence from the University of Melbourne demonstrates that fees in higher education can easily exceed the current FEE-HELP borrowing limit.
Labor is concerned about a system which encourages maximum fee setting. A price signal needs to be accompanied by further reforms in this area as part of a broader inquiry into the post-secondary education system in Australia.
Labor does not want a system where students have to take out commercial loans to pay for the gap between fees set by universities and the loan borrowing amount. This bill does nothing to discourage reckless high fee setting.
Student debt is a major concern. Australian students already pay the sixth highest contribution to the cost of their university education in the OECD.
As UA and NUS found through a survey of student finances, in 2012 two thirds of Australian students lived below the Henderson poverty line and one in five students would regularly skip meals.
Labor is determined to end the war on young people in this country.
Labor is also concerned that a flexible borrowing limit—where a student can repay and then take on further debt—would do nothing to discourage very high fee setting.
Labor Senators recommend that the bill should not be supported.
Senator Gavin Marshall
Senator Deborah O'Neill
Senator the Hon Jacinta Collins