Introduction
Since its inception in 1989, the Higher Education Contribution
Scheme (HECS) has become an integral part of the Australian higher
education system. By shifting a significant proportion of the cost
of higher education from the Commonwealth to students, it has
enabled the continuing expansion of the sector in an era of
budgetary constraint. Total student payments through HECS in 2002
03 are estimated to be $1177 million, or around 20 per cent of the
funding available to higher education institutions from
Commonwealth programs.
This brief contains information on the development of the scheme
since 1989, its current operation and related issues. Links to
relevant web sites and online documents are provided where
appropriate.
Key
Sites
The principal Internet sites relating to HECS are those
maintained by the Department of Education, Science Training (DEST)
and the Australian Taxation Office (ATO).
The DEST website for
HECS contains:
The Higher Education Report for the 2003 to 2005
Triennium outlines government policy and other developments in
the sector. It has a section
on HECS (pdf file) with a description of the scheme
and statistics.
Under the former provisions of the Employment, Education and
Training Act 1988, the Higher Education Council was required
to produce annual reports on the operation of HECS. The twelfth and
final report in this series was published in June 1998. The reports
contain information on the impact of HECS on enrolments, details of
changes to the scheme, and detailed statistical and financial data.
These reports can be accessed from
this DEST page.
The DEST statistical publications contain some HECS data. The
annual Selected Higher Education Student Statistics has
tables on the HECS liability of students; and the annual
Selected Higher Finance Statistics gives details of the
income from HECS received by each higher education institution.
These publications can be downloaded from
this page.
The DEST Annual Report has an appendix containing
financial data relating to HECS. Current and former Annual Reports
can be obtained from
this page.
The Australian Taxation Office is responsible for collecting
HECS debts. It has a page on
tertiary education and HECS which provides access to
information about HECS indexation rates and repayment formulas.
Recent
Developments
The Government announced major changes to the higher education
funding system in the 2003 04 Budget. Documents detailing these
policies can be obtained from the DEST site, Our Universities:
Backing Australia's Future. This provides a
summary of the reforms, a
policy paper, fact
sheets and other information. For background, reactions and
other information about these developments, see the Parliamentary
Library e-brief on Higher
Education Funding Policy.
The changes to HECS are described below. It should be noted that
these changes will not take effect until Parliament agrees to
amendments of the Higher
Education Funding Act 1988.
From 2005, institutions in receipt of Commonwealth supported
places will determine their own student contribution level for each
course they offer within ranges set by the Commonwealth. Currently
there are three HECS bands, each with a fixed rate of student
contribution. From 2005 these fixed rates will be replaced by
ranges. The top of these ranges will be 30 per cent higher than
the projected level of HECS for each band for 2005 under current
arrangements. The bottom of each range will be $0. Institutions
will be able to set the student contribution at any point within
these ranges. In addition, a fourth band will be established called
National
Priorities, which will consist of education and nursing
courses. The range for this band will be from $0 to the current
level of HECS for Band 1 ($3854).
The minimum repayment threshold for HECS will be raised to
$30 000 by removing the two bottom repayment bands. This means
that those with a HECS debt will start paying 4 per cent of their
income when they reach $30 000, whereas they now pay 3 per
cent when their income reaches $24 365. In addition, the
maximum rate of repayment will be raised to 8 per cent where income
exceeds $60 000 (the top rate is currently 6 per cent where
incomes exceeds $43 859). The Government has also reduced the
discounts for upfront payments (from 25 to 20 per cent) and
voluntary repayments (from 15 to 10 per cent).
The Operation of
HECS
The legislative basis for the scheme is the Higher
Education Funding Act 1988. The Act also provides grants of
financial assistance to higher education institutions. Under
section 38, such financial assistance is granted on the
condition that institutions comply with the requirements of the
HECS.
Chapter 1 defines terms and lists the higher education
institutions which are to be funded through the Act. Chapter 2 sets
out the funding levels and conditions attached to grants for these
institutions. This chapter is amended annually to adjust the level
of grants for cost supplementation and to add each new year to the
rolling triennium.
Chapter 4 and 5 provide the statutory basis for the HECS and the
Open Learning Deferred Payment Scheme (OLDPS), while Chapter 5A
deals with the repayment of loans made under Chapters 4 and 5. The
HECS annual course contribution and the repayment thresholds are
subject to annual indexation, according to formulae defined in
sections 40 and
106Q respectively. This means that annual amendments are not
required to adjust the contribution and threshold amounts.
Persons seeking to enrol in award courses at higher education
institutions are required to complete and return to the institution
a Payment Options Form. This Form nominates if they are going to
pay their HECS up-front and receive a 25 per cent discount, or if
they are going to defer their payment by asking the Commonwealth to
pay their HECS for them. If they pay up-front, then the
Commonwealth pays the remaining 25 per cent to the institution from
the HECS Special Account. If they choose to defer payment, then
they must provide the institution with their tax file number so
that the Tax Office can be informed of their HECS debt.
The HECS debt is indexed using the Consumer Price Index each
year. The adjustment is made on June 1 and applies to that portion
of the debt that has remained unpaid for a year or more. No
interest is charged on HECS debt.
HECS debtors are required to begin repaying their loans when
their 'HEC repayment income' reaches the compulsory repayment
threshold. HEC repayment income is defined as taxable income plus
any reportable fringe benefits and any reductions for net rental
loss (i.e. income cannot be reduced through the negative gearing of
rental property). HECS repayment thresholds are adjusted each year
to reflect changes in average weekly earnings. It is possible to
defer the compulsory repayment if it can be demonstrated that such
payments would cause serious financial hardship.
It is also possible to make voluntary repayments at any time.
For voluntary repayments in excess of $500, a bonus of 15 per cent
is added to the repayment.
Voluntary repayments and payments made through the tax system
are paid into the HECS Special Account. Any shortfall between these
repayments and the payments made out of the HECS Special Account
for loans or discounts is covered by a Commonwealth contribution to
the Account. The DEST Annual Report has an appendix
containing financial data relating to the HECS Special Account.
Current and former Annual Reports can be obtained from this
page.
HECS debts are cancelled at death. There is no requirement for
the deceased person's family or beneficiaries to repay any
remaining debt.
Budget
Treatment of HECS
Major changes to HECS are not necessarily reflected in the
Budget bottom line, because of the treatment of the scheme under
the accrual accounting format currently employed by the
Commonwealth Government. The loans made to students are not
classified as an expense but as an asset, because they will be
repaid. Commonwealth expenses relating to HECS consist of the
following:
The only revenue item associated with HECS is that obtained from
the indexation of HECS debts. This amounted to $252 million in 2001
02.
Tables 1 and 2 give the rate of full contribution (i.e. no
discounts for up front payments) for students since the inception
of the scheme. There are two sets of rates because the introduction
of differential rates in 1997 did not apply to existing
students.
Table 1: HECS contributions
for students who commenced before 1 January 1997
Year
|
HECS
$ pa
|
1989
|
1 800
|
1990
|
1 882
|
1991
|
1 993
|
1992
|
2 250
|
1993
|
2 328
|
1994
|
2 355
|
1995
|
2 409
|
1996
|
2 442
|
1997
|
2 478
|
1998
|
2 520
|
1999
|
2 560
|
2000
|
2 600
|
2001
|
2 644
|
2002
|
2 702
|
2003
|
2 764
|
Table 2: HECS contributions
for students who commenced after 1 January 1997
Year
|
Group 1
($ pa)
|
Group 2
($ pa)
|
Group 3
($ pa)
|
1997
|
3 300
|
4 700
|
5 500
|
1998
|
3 356
|
4 779
|
5 593
|
1999
|
3 409
|
4 855
|
5 682
|
2000
|
3 463
|
4 932
|
5 772
|
2001
|
3 521
|
5 015
|
5 870
|
2002
|
3 598
|
5 125
|
5 999
|
2003
|
3 680
|
5 242
|
6 136
|
Group 1: arts and humanities; justice, legal
studies; social science and behavioural science; visual and
performing arts; education; and nursing.
Group 2: mathematics and computing; other
health sciences; agriculture and renewable resources; built
environment and architecture; science; engineering and processing;
and administration, business and economics courses.
Group 3: law; medicine and medical science;
dentistry and dental services; and veterinary science.
Table 3 gives repayment rates (the percentage of income repaid
through the tax system by those with HECS liabilities) and the
income thresholds (the level of income where a particular repayment
rate applies) for the years since the scheme commenced.
Table 3: HECS Repayment Rates
and Thresholds, 1988 89 to 2002 03
Year
|
Repayment Rates (% of income) and Income Thresholds ($
pa) at which the Rates apply
|
|
Rate
%
|
T'hold
$ pa
|
Rate
%
|
T'hold
$ pa
|
Rate
%
|
T'hold
$ pa
|
1988 89
|
1.0
|
22 000
|
2.0
|
25 000
|
3.0
|
35 000
|
1989 90
|
1.0
|
23 583
|
2.0
|
26 799
|
3.0
|
37 519
|
1990 91
|
2.0
|
25 469
|
3.0
|
28 942
|
4.0
|
40 520
|
1991 92
|
2.0
|
27 098
|
3.0
|
30 794
|
4.0
|
43 113
|
1992 93
|
2.0
|
27 748
|
3.0
|
31 532
|
4.0
|
44 146
|
1993 94
|
3.0
|
26 402
|
4.0
|
30 004
|
5.0
|
42 005
|
1994 95
|
3.0
|
26 852
|
4.0
|
30 516
|
5.0
|
42 722
|
1995 96
|
3.0
|
27 675
|
4.0
|
31 450
|
5.0
|
44 030
|
1996 97
|
2.0
3.0
3.5
|
20 594
28 495
30 050
|
4.0
4.5
|
32 382
37 564
|
5.0
5.5
6.0
|
45 336
47 719
51 293
|
1997 98
|
3.0
3.5
|
20 701
21 831
|
4.0
4.5
|
23 525
27 289
|
5.0
5.5
6.0
|
32 935
34 666
37 263
|
1998
99 |
3.0
3.5
|
21 334
22 499
|
4.0
4.5
|
24 245
28 124
|
5.0
5.5
6.0
|
33 943
35 727
38 403
|
1999
00 |
3.0
3.5
|
21 984
23 184
|
4.0
4.5
|
24 983
28 981
|
5.0
5.5
6.0
|
34 977
36 815
39 573
|
2000
01 |
3.0
3.5
|
22 346
23 566
|
4.0
4.5
|
25 394
29 457
|
5.0
5.5
6.0
|
35 552
37 421
40 224
|
2001
02 |
3.0
3.5
|
23 242
24 511
|
4.0
4.5
|
26 413
30 639
|
5.0
5.5
6.0
|
36 978
38 922
41 838
|
2002
03 |
3.0
3.5
|
24 365
25 695
|
4.0
4.5
|
27 689
32 119
|
5.0
5.5
6.0
|
38 764
40 802
43 859
|
Note: the 2 per cent rate and threshold in 1996 97 were for
voluntary repayments.
HECS Statistics
The most recent financial data relating to HECS can be found in
Table 3.5 of the section
on HECS (pdf file) of the Higher Education
Report for the 2003 to 2005 Triennium. This is reproduced in
Table 4 below.
Table 4: Financial Aspects of
HECS, 1989 1990 to 2003 2004 (estimates)($m)
|
89 90
|
90 91
|
91 92
|
92 93
|
93 94
|
94 95
|
95 96
|
96 97
|
97 98
|
98 99
|
99 00
|
00 01
|
01 02
|
02 03
|
03 04
|
Students' HECS liabilities |
527
|
604
|
763
|
808
|
825
|
888
|
920
|
1099
|
1302
|
1454
|
1593
|
1696
|
1786
|
1846
|
1901
|
Voluntary repayments by students |
2
|
6
|
12
|
11
|
19
|
17
|
32
|
58
|
67
|
73
|
80
|
98
|
135
|
158
|
192
|
Repayments through tax system |
9
|
28
|
49
|
57
|
73
|
304
|
219
|
264
|
472
|
497
|
532
|
588
|
656
|
721
|
806
|
Up front
payments made to institution |
82
|
91
|
125
|
135
|
131
|
157
|
176
|
208
|
226
|
248
|
270
|
287
|
294
|
298
|
306
|
Total
student payments |
93
|
125
|
186
|
203
|
223
|
478
|
427
|
530
|
765
|
818
|
882
|
973
|
1085
|
1177
|
1304
|
Net
C'wealth HECS Outlay |
434
|
479
|
577
|
605
|
602
|
410
|
493
|
569
|
537
|
636
|
711
|
723
|
701
|
669
|
597
|
Accumulated HECS debt as at 30 June |
na
|
na
|
1749
|
2321
|
2932
|
3354
|
3958
|
4504
|
4922
|
5526
|
6229
|
7162
|
8062
|
9057
|
9979
|
Source: DEST, Higher Education Report for the 2003 to 2005
Triennium, Table 3.5. Figures for 2001 02 and later years are
estimates. The 'Net Commonwealth HECS Outlay' is not a Budget item
but simply the HECS liability for any given year minus the student
payments for that year. See the section Budget Treatment of HECS for an explanation
of Commonwealth Budget expenses under HECS.
Updated estimates of future HECS liabilities and other
statistics have also been provided by the Minister in response to a
question on notice. See House of Representatives Hansard, 18 March
2003 (pdf file), Question No. 1284 (p. 12680). This includes a
table showing the number of persons leaving higher education with a
HECS debt in each year since 1989, by the size of their debt.
The annual Selected Higher Education Student Statistics have a
number of tables showing the HECS liability status of current
students. The data for 2002 can be obtained from
this page (see tables 47 to 50).
The
funding tables provided by the Australian Vice-Chancellors'
Committee (AVCC) are particularly useful because they present
figures for the period 1982 to 2005 adjusted for cost factors.
There are also a number of tables which contain per student funding
figures and which separate HECS from other Commonwealth funding.
The AVCC publication,
Key Statistics on Higher Education (November 2002) also
contains statistical data relating to HECS.
The DEST annual publication Selected
Higher Education Finance Statistics gives details of the
income from HECS and other sources received by each higher
education institution. These indicate the growing importance of
HECS and other fees as a source of funds for the system, as
illustrated in Table 1 from the Parliamentary Library e-brief,
Higher
Education Funding Policy.
In December 1987 the Commonwealth Government announced that it
was committed to expanding the capacity and effectiveness of the
higher education sector but that with the current budgetary
circumstances it would be necessary to consider sources of funding
involving the direct beneficiaries of higher education. It
established the Committee on Higher Education Funding (Wran
Committee) to develop options and make recommendations for possible
funding schemes which could involve contributions from students,
graduates, their parents and employers. In April 1988 the Wran
Committee recommended a contribution scheme whereby higher
education students would pay an additional 2 per cent of taxable
income until they met 20 per cent of the cost of their higher
education. The requirement to pay would arise only when the
student's personal taxable income exceeded the average earnings of
all working Australians. The Committee also recommended three
levels of contributions: $1500, $2500 and $3000 pa. (depending upon
the cost of the course). The report canvassed the possibility of
allowing institutions to vary these charges by 15 per cent above
and below the standard. Both the charges and the level of income
contingency were to be indexed to maintain their real value, rather
than imposing any interest payments. The report suggested that a
discount be applied to 'up-front' payments, and that this discount
would need to be around 40 per cent to be attractive in financial
terms.
In August 1988 the Government announced that it had accepted
most of the Wran Committee's recommendations, and that it would
introduce the HECS on 1 January 1989. However, the scheme would
have only one rate of contribution ($1800 in 1989) and an up-front
discount of only 15 per cent. The legislative authority for the
scheme was contained in the Higher Education Funding Act
1988. The Minister's Second Reading Speech can be obtained
here.
Major Changes to
HECS Since 1989
The Scheme has been subject to many changes since its inception.
Proposed measures are generally announced in the Federal Budget and
then incorporated in amendments to the Higher Education Funding
Act in the following Budget Session, although not all such
proposals have been accepted by the Parliament. The table below
summarises these changes.
Glossary
HECS contribution: the annual charge levied on
students for undertaking a course.
Repayment rate: the annual percentage of income
repaid by those with a HECS debt.
Repayment threshold: the level of income at
which a particular repayment rate begins.
Budget
|
Measures
|
1990 91
|
The Budget proposed an increase in the repayment
rates from 1, 2 and 3 per cent to 2, 3 and 4 per cent for 1991. The
Higher Education Funding Amendment Act No. 2 1990
introduced these changes as well as facilitating the reduction and
remission of HECS debts in certain circumstances.
|
1991 92
|
The Budget proposed an increase in the HECS
contribution to $2250, some $144 above the normal indexation
increase. The Higher Education Funding Amendment Act No.2
1992 made this change. The number of postgraduate exemption
scholarships was also increased by 2000.
|
1992 93
|
The Budget proposed that:
- the discount for up-front payments be increased
from 15 to 25 per cent from 1993.
- New Zealand citizens resident continuously in
Australia at enrolment for less than two years, or studying from
outside Australia, and permanent residents whose term address is
overseas, would be required to pay HECS upfront from 1993. Such
students would still be entitled to the 25 per cent
discount.
|
1993 94
|
The Budget proposed the following changes to
HECS:
- an increase to one and a half times the standard
rate of HECS contribution for students taking more than a minimum
load for a course plus the equivalent of one semester's load to
complete their courses. This proposal was dropped as part of the
Budget negotiations.
- double HECS contribution for undergraduate
students undertaking a second qualification at the same level. This
proposal was rejected by Parliament.
- increasing the rate of HECS repayments and
rebasing repayment thresholds. Repayment rates increased from 2, 3
and 4 per cent to 3, 4 and 5 per cent. The HECS repayment threshold
was rebased to $26402 to reflect current Average Weekly Earnings,
as the existing threshold (based on 1988 AWE adjusted by annual CPI
movements) had diverged from the current level.
- introduction of PAYE for persons who have chosen
deferred payment. This meant that employees liable for HECS
repayments could have PAYE deductions rather than facing a single
large payment each year.
- integration of HECS exemption scholarships into
the Australian Postgraduate Awards.
- HECS arrangements for Open Learning students,
called the Open Learning Deferred Payment Scheme
(OLDPS).
The approved changes were contained in the
Higher Education Funding Legislation Amendment Act
1993.
|
1994 95
|
The Budget proposed one change to HECS. This was
to bring forward the repayments by those leaving full-time
education for the first time. This was not passed by the Senate and
was thus not implemented.
|
1995 96
|
The Budget proposed the following
changes:
- new repayment rates of 3.5, 4.5, 5.5 and 6.0 per
cent, while maintaining the existing 3, 4 and 5 per cent
rates
- a voluntary 2 per cent rate of repayment when
income reaches $20000 (this would attract a 10 per cent discount on
the total HECS debt)
- a 15 per cent discount for voluntary repayments
of lump sums of $500 or more
- a redefinition of taxable income to reduce the
opportunity of tax minimisation to delay or avoid
repayments
- abolition of HECS exemption scholarships for
teachers
- mandatory up-front payments of HECS by
non-citizens and New Zealand students
- removal of the 25 per cent discount when
up-front payments are mandatory
These changes were incorporated in the Higher
Education Funding Amendment Bill No. 2 1995. A number of
Senate amendments to the Bill were accepted by the Government.
These had the effect of restricting the provisions relating to New
Zealanders and non-citizens to those who:
- became permanent residents after 1 January
1996
- commenced their courses after 1 January
1996
- would not experience hardship as a result of the
measures
The Senate also attempted to amend the Bill so
that the new repayment rates would only apply to those commencing
their courses after 1 January 1996, but this was not accepted by
the Government.
|
1996 97
|
The Budget contained a number of major changes to
HECS for 1997. These were foreshadowed in the
Higher Education Budget Statement of 9 August 1996. They
included:
- new differential HECS contributions for
different courses based on the cost of courses and the earning
capacity of graduates. The new levels were $3300 (Arts, Humanities,
Social Studies, Behavioural Science, Visual/Performing Arts,
Education, Nursing); $4700 (Mathematics, Computing, other Health
Sciences, Agriculture, Architecture, Sciences, Engineering,
Administration, Business and Economics); $5500 (Law, Legal Studies,
Medicine, Dentistry, Veterinary Science). The new contributions
applied to students commencing a course in 1997; continuing
students continued to pay at the old level.
- lowering of income thresholds for repayments
(see tables below).
- the end of the 2 per cent voluntary repayment
arrangements.
- exemption from HECS repayments for persons with
dependents and income low enough to qualify for Medicare levy
exemptions and reductions.
- the introduction of 1000 undergraduate HECS
exemption merit-based equity scholarships.
The Government subsequently decided to move Legal
Studies courses (but not Law) from the $5500 to the $3300 band. The
changes to HECS were contained in the Higher Education
Legislation Amendment Bill 1996 which was passed by Parliament
in December 1996. The Bill was the subject of a
Senate Committee report.
|
1997 98
|
The Budget proposed a number of minor changes to
take effect from 1 January 1998. These included a 25 per cent
discount for partial up-front payments of more than $500 and a
streamlining of administrative processes relating to the remission
of HECS debts. These changes were included in the Higher
Education Funding Amendment Act (No.1) 1997.
|
1999 2000
|
The Budget announced the phasing out of the
Higher Education Equity Merit Scholarship Scheme. No new
scholarships were awarded from 2000, although those who already had
scholarships would continue to be exempt from HECS.
In January 2001 the Government's Innovation
Statement, Backing
Australia's Ability introduced a HECS-style scheme for
postgraduates, the Postgraduate
Education Loans Scheme (PELS).
|
2001 2002
|
The Budget introduces a HECS-style scheme to
assist overseas trained permanent resident professionals who have
to undertake bridging courses, the Bridging for Overseas-Trained
Professionals Loan Scheme (BOTPLS).
|
2002 2003
|
Eligibility for PELS is extended to students
attending a number of private institutions, such as Bond
University.
|
2003 2004
|
Major changes to HECS are announced in the Budget
as part of the reform of the higher education funding system. These
are described in the section Recent
Developments above.
|
In October 1988 the Government announced that it would provide
19 000 HECS exemption scholarships: 15 000 for allocation
by higher education institutions for postgraduate study, and 4000
for allocation by State and Territory teacher education authorities
for teachers' professional development. The number of postgraduate
exemption scholarships was increased to 17 000 in 1992.
From January 1994 the Australian Postgraduate Research Awards
and the Australian Postgraduate Coursework Awards were combined
with the HECS exemption scholarships for postgraduates to form a
new scheme, the Australian Postgraduate Awards. Holders of the
awards would not be liable for HECS.
The exemption scholarships for teachers were abolished in the
1995 96 Budget.
The Higher Education Equity Merit Scholarship Scheme (HEEMSS)
was announced in the 1996 97 Higher Education Budget Statement to
take effect from 1997. The scheme was to further encourage the
participation of equity groups by exempting one thousand new
students each year from the HECS charge, building up to a pool of
4000 students by the year 2000. Scholarships were allocated to each
university on the basis of the number of Australian undergraduates
at each institution. The scholarships were awarded by universities
in accordance with guidelines which specified that:
- recipients should be commencing students belonging to at least
one of a number of equity groups (women in non traditional areas,
indigenous Australians, people with a disability, from non-English
speaking or low socioeconomic backgrounds, or from rural and
isolated areas) and who had suffered educational and financial
disadvantage
- institutions should award the scholarships on the basis of
merit, with merit being determined by each institution having
regard to the academic potential and level of disadvantage of
applicants
DETYA has claimed that an informal survey of university equity
officers revealed that:
- 85 per cent of respondents claimed that the scheme was
ineffective in attracting people into higher education who might
otherwise not undertake university study because young people did
not value an exemption from HECS and because the universities did
not advertise the scheme properly
- there was no agreement on whether the scholarships improved
retention
- HECS exemptions are more attractive to mature age students and
single parents, rather than school leavers, and
- the scheme is administratively expensive for the
universities.
The scheme was abolished in the 1999 2000 Budget.
HECS and the GST
The GST does not apply to education payments such as tuition
fees or the HECS contributions made by students to institutions.
However, the GST had a considerable impact on the repayments made
by students who have HECS liabilities.
Under the scheme, the Commonwealth Government pays the
contributions of those students who do not wish to pay 'up-front',
then recoups the money through the tax system when the student
begins to earn taxable income. Students do not pay interest on
their HECS liabilities. Instead, their outstanding HECS debt is
indexed each year on the basis of movement in the All Groups
Consumer Price Index (CPI). Because the GST caused many prices to
rise, it had an impact on inflation as measured by the CPI and this
in turn increased the level of HECS liabilities.
On 1 June 2000, an official of the Department of Education,
Training and Youth Affairs (Mr Mutton) told the Senate Employment,
Workplace Relations, Small Business and Education Committee that
the increase in HECS and Abstudy loans debts caused by inflation in
2000 01 would be 5.4 per cent and that this would deliver an
additional $323 million to the Government next year. As the
government estimated that the increase in the CPI in 2000 01 caused
by the introduction of the GST was around 2.75 per cent, it would
seem that around $160 million of this additional revenue was due to
the impact of the new tax system. Around 975 000 Australians
had HECS liabilities at the time and were thus affected by this
increase.
On the 2 June 2000 the Minister for Education, Training and
Youth Affairs, Dr David Kemp, issued a
press release on this subject.
HECS Related
Issues
HECS and
Participation in Higher Education
In 1988, parliamentary concern about the possible impact of the
HECS on access to higher education resulted in an amendment of the
Employment, Education and Training Act 1988, requiring the
Higher Education Council to produce regular reports on the
operation of HECS. The reports contain information on the impact of
HECS on enrolments, details of changes to the scheme, and detailed
statistical and financial data. All of these reports can be
accessed from
this DEST page.
The Employment, Education and Training Amendment Act
(No.10 of 2000) abolished the Higher Education Council and removed
the requirement for regular reports on HECS. The twelfth and final
report in the series was published in June 1998.
In most of its reports the Higher Education Council concluded
that HECS was not deterring students from participating in higher
education. However, it also noted that it was not possible to draw
conclusions relating to the precise impact of the scheme from
general enrolment statistics because demand fluctuated over time
and enrolments were influenced by factors other than HECS. To
obtain more information, the Council commissioned a number of
surveys. The conclusions of these are presented in the Sixth
Report (March 1992) and the Seventh
Report (May 1993).
DEST has produced a number of papers relating to HECS and its
impact on participation. These include:
These and other studies were summarised in the DEST Occasional
Paper by Les Andrews, Does
HECS deter? factors affecting university participation by low SES
groups, August 1999. Andrews concluded that 'HECS does not
appear to have substantially affected the level of applications or
enrolments of students in general although little can be said
concerning students from low SES backgrounds' (p.25). It considered
that the main determinants of university participation were values
and attitudes towards higher education rather than financial
considerations. However, these conclusions were predominantly
derived from an examination of the literature before 1998, and thus
could not assess any longer term impact of the 1997 increases to
HECS.
Chapman and Ryan, Income contingent financing
of student charges for higher education: assessing the Australian
innovation (May 2002) surveyed more recent studies and
analysed data from the Youth in Transition Survey. They also
concluded that the introduction of HECS did not adversely effect
participation. In particular, it did not result in decreases in
participation by prospective students from relatively poor
families.
However, a recent survey by Richard James, Socioeconomic
background and higher education participation: an analysis of
school students' aspirations and expectations, (April
2002) has indicated that concerns about costs may adversely affect
participation by the socioeconomically disadvantaged. The study
surveyed over 7000 Year 10 12 students from three states (Victoria,
NSW and Western Australia) in 1999. The survey did not specifically
address HECS issues.
In August 2003 DEST released two more papers
on factors affecting access to higher education, including the
effect of the Higher Education Contribution Scheme:
The former report concluded that the 1996
changes to HECS had the effect of reducing demand for higher
education among school leaver applicants by around 9 000
students per year, and among 'mature age' applicants by around
17 000 persons per year. The paper concluded that HECS had not
discouraged overall participation in higher education among persons
from a low SES background, although the share of males from a low
SES background in HECS Band 3 (the most expensive) courses declined
by 38 per cent following the introduction of the differential HECS
charges.
The main findings of the Martin and
Karmel report were:
- for the period 1989
to 1997, the number of students (non-overseas) grew rapidly, but
has subsequently levelled off
- access to
university in terms of the proportion of a cohort going to
university peaked in 1996
- there has been a
significant increase in the duration of study over the decade,
and
- the evidence that the academic quality of students
has declined over the decade is very weak.
Statistics on participation in higher education by persons with
socioeconomically disadvantaged backgrounds are published by DEST
in the annual Selected Higher Education Student
Statistics. The most recent data (2001) can be obtained from
these tables (XL file).
Despite the growth in the system over the last 15 years,
participation in higher education is restricted to a relatively
small part of the population. In 2001 only 6.4 per cent of persons
aged 15 to 64 were studying for a bachelor or higher degree. For 20
24 year old persons, the figure was 22.3 per cent (23.7 per cent
for females, 20.8 per cent for males). In terms of educational
attainment, in 2001 17.1 per cent of the population aged 15 64 had
a bachelor or higher degree (17.7 per cent for females, 16.4 per
cent for males). The level of attainment declines with age: 22.1
per cent for 25 34 year olds, 20.6 per cent for 35 54 years, and
12.8 per cent for 55 64 years. See the ABS publication,
Education and Training Experience 2001 (May 2002) for more
details.
Student Costs and
Finances
In September 2001 the Australian Vice-Chancellors' Committee
(AVCC) published M. Long and M. Hayden, Paying Their Way: A
survey of Australian Undergraduate
University Student Finances, 2000 (available from
this page). The survey had 34 752 respondents from twenty
universities. According to the authors, the survey provides strong
evidence to support concerns that students' financial circumstances
are preventing them from gaining optimum value from their studies.
HECS received considerable support among students as an alternative
to the payment of upfront fees, even though it could result in
levels of debt that many students considered worrying. The students
who were most likely to make use of the deferred HECS option were
those with relatively disadvantaged financial circumstances.
The AVCC
Submission on Welfare Reform (June 2003) makes
reference to a number of other studies regarding the financial
situation of higher education students.
The International
Comparative Higher Education Finance and Accessibility Project
is a three year, Ford Foundation-financed project to study the
worldwide shift in higher education costs from taxpayers to
students. The
section on Australia contains much useful information on higher
education costs, including both fees and living expenses.
Benefits of Higher Education
One of the justifications for increasing the cost of higher
education for students is that they obtain substantial lifetime
benefits from such education. Others argue that the social benefits
of higher education are sufficient reason for a greater public
contribution. There have been a number of attempts to quantify the
returns to investment in higher education in the Australian
context. The recent work by J. Borland, P. Dawkins, D. Johnson and
R. Williams, Returns to Investment in Higher Education
(Melbourne
Institute of Applied Economic and Social Research, 2000),
surveyed this literature and calculated rates of return using 1997
data. Its conclusions were as follows:
- On average, the total gain in earnings over a working lifetime
that a graduate can expect is estimated to be $300 000.
- However, allowing for the cost of the education and applying a
four per cent real rate of interest, as the rate of discount, the
present value of the net monetary benefit of the higher education
over a lifetime is estimated to be about $90 000.
- Earlier studies using 1976 data indicated that the private rate
of return was 21.1 per cent and the social rate was 16.3 per cent
(i.e. individuals were gaining more from the investment than
society).
- Using 1997 data, the private rate was 15.0 per cent and the
social rate 16.5 per cent. This suggests that the introduction of
HECS has reduced the private rate of return so that it is now
similar to the social rate.
- A balance sheet approach to government expenditure on higher
education (i.e. comparing how much the government spends with how
much it gets back in the form of higher taxes from the higher
earnings of graduates) indicates that $5.3 billion spent on
university teaching in 1997 98 (excluding research) would
ultimately generate about $8 billion in additional receipts from
the taxes of graduates.
- The average rate of return to government from their investment
in higher education is estimated at 11 per cent.
Borland has recently produced new
estimates (pdf file) of the private rate of return for an
Australian university degree: 14.5 per cent, with a lifetime gain
in earnings of around $380 000.
The benefits of higher education for the individual in terms of
employment and income are also evident from the surveys of the
Australian Bureau of
Statistics (ABS). The unemployment rate for bachelor degree
graduates is 2.7 per cent, compared to 9.1 per cent for those
without non-school qualifications. The table 'Labour Market
Outcomes' on
this ABS page contains comparable figures for the last ten
years.
The employment rates and starting salaries for recent graduates
can be obtained from the annual surveys conducted the Graduate Careers Council of
Australia. These are summarised in the publications, The
Grad Files and GradStats, which can be downloaded
from this
page.
The ABS also publishes earnings figures for higher education
graduates and persons with other educational qualifications: see
ABS, Education and Training Indicators Australia 2002
(December 2002) for a summary of these results. In 2001 the average
weekly earnings of a bachelor degree graduate were $1108 (full
time) and $555 (part time). The figures for a person who only
completed Year 12 were $737 (f/t) and $277 (p/t). The average
weekly earnings for all persons were $854 (f/t) and $342 (p/t).
Index and Tables
Introduction
Key Sites