Student Financial Contributions, Financing and Operations

Caroline PerkinsAustralia

Outline

• Higher Education Loan Programme (HELP)– Background– Recent changes– Student borrowing and debt repayment

• Student assistance and participation from low socio-economic groups

Higher Education Loan Programme - HELP

• Introduced in 1989 as the ‘Higher Education Contribution Scheme’ (HECS) mainly for undergraduate study

• 1997 – Differential HECS• Revamped from 2005 as the Higher

Education Loans Scheme (HELP)

HELP - KEY FEATURES

• Assistance for tuition costs– Separate system for assistance with living costs

• Non means-tested entitlement• Interest-free loans and discounts for up-front

payment• Income-contingent repayment with indexation

of loan balance and bonuses for faster repayment

HELP LOAN TYPES

• HECS-HELP - for Government subsidised university places (mostly undergraduate)– Loans and/or 20% discount for up-front

payment of ‘student contributions’ (including part payments)

– 75% of eligible students take out a loan– Student Learning Entitlement limit (generally 7

years equivalent full-time study).

Resourcing amounts per equivalent full time student load (2008

estimates), prior to 2007-08 Budget

Discipline

Commonwealth contribution

(including 7.5% conditional increase)

Maximum student

contribution

Total maximum funding

Law $1,674 $8,498 $10,172Accounting, administration, economics, commerce $2,757 $7,259 $10,016Humanities $4,647 $5,096 $9,743Mathematics, statistics $5,488 $7,259 $12,747Behavioural science, social studies (incl clinical psychology) $7,377 $5,096 $12,473Computing, built environment, health (incl allied health) $8,217 $7,259 $15,476Foreign languages, visual and performing arts $10,106 $5,096 $15,202Engineering, science, surveying $13,679 $7,259 $20,938Dentistry, medicine, veterinary science $17,146 $8,498 $25,644Agriculture $18,227 $7,259 $25,486Education $8,108 $4,077 $12,185Nursing $11,171 $4,077 $15,248

New Cluster Funding Arrangements Announced in 2007-08 Budget

• Decrease in funding clusters from 12 to 7• Increased Commonwealth funding for:

– Mathematics and Statistics ($2,729; 49.7%)– Behavioural Science and Social Studies

($840;11.4%);– Education ($109; 1.3%);– Allied health ($1,889; 23%);– Clinical Psychology ($2,729; 37%);– Nursing ($109; 1%);– Engineering, Science and Surveying ($684; 5%);– Medicine, dentistry and veterinary science ($1,081;

6.3%).

New Cluster Funding Arrangements Announced in 2007-08 Budget

• Funding for accounting, administration, economics and commerce aligned with the Commonwealth contribution for law ($1674 in 2008, down $1083 from $2757).

• Accounting, administration, economics and commerce will move into the same HECS-HELP band as law (maximum $8498 for 2008, a rise of $1239 from $7259).

New Resourcing Amounts (2008 estimates) (per equivalent full time

student load)

Discipline

Commonwealth contribution

(including 7.5% conditional increase)

Maximum student

contribution

Total maximum funding

Law $1,674 $8,498 $10,172 Accounting, administration, economics, commerce $1,674 $8,498 $10,172 Humanities $4,647 $5,096 $9,743 Mathematics, statistics $8,217 $7,259 $15,476 Behavioural science and social studies (excl clinical psychology) $8,217 $5,096 $13,313 Education* $8,217 $4,077 $12,294 Computing, built environment, other health $8,217 $7,259 $15,476 Clinical psychology $10,106 $5,096 $15,202 Allied health $10,106 $7,259 $17,365 Foreign languages, visual and performing arts $10,106 $5,096 $15,202 Nursing $11,280 $4,077 $15,357 Engineering, science, surveying $14,363 $7,259 $21,622 Dentistry, medicine, veterinary science $18,227 $8,498 $26,725 Agriculture $18,227 $7,259 $25,486

Private rates of return and gain in lifetime earnings for 4 disciplines

Borland, J: New Estimates of the Private Rate of Return to university education in Australia, Melbourne Institute Working Paper No14.02, July 2002.

Field of study Average private

rate of return (% ) Net lifetime gain (with

a 4% annual rate of discount) ($)

Business and administration 18.0 231,014 Society and culture 11.0 83,774 Science 11.0 132,801 Engineering 19.5 310,257 All fields 14.5 145,638

HELP LOAN TYPES

• FEE-HELP – for domestic fee-paying students (mostly non-research postgraduate at public universities and undergraduate/postgraduate at private higher education providers)– $A80,000 (≈$US62,800) lifetime limit generally and

$A100,000 (≈$US78,500) for dentistry, medicine or veterinary science degrees

– 20% loan fee for undergraduate courses

HELP - KEY FACTS

• Loans in 2005-06– $A2.1 billion (≈$US1.6 billion)

• Persons with a HELP debt– 1.2 million

• Total debt outstanding– $A12.4 billion (≈$US9.7 billion)

• Average debt– $A10,400 (≈$US8,200)

• Average repayment time– 7.4 years (for fully repaid debts)

• Debt not expected to be repayable– 18% of total outstanding debt, $2.4 billion (12.4% of debt on

completion)

Accumulated HELP debts and doubtful debt 1989-90 to 2005-06

Year

Voluntary repayments by students

($m)

Repayments through tax system ($m)

Outstanding HELP debt

as at 30 June ($m)

Accumulated debt expected

not to be repaid (doubtful debt)

($m)

% of total

HELP debt

1988–1989 1 9 216 N/A N/A

1989–1990 2 28 673 N/A N/A

1990–1991 6 49 1,190 N/A N/A

1991–1992 12 57 1,749 N/A N/A

1992–1993 11 72 2,321 386 16.6%

1993–1994 19 133 2,932 438 14.9%

1994–1995 16 169 3,354 541 16.1%

1995–1996 32 218 3,958 687 17.4%

1996–1997 58 262 4,504 607 13.5%

1997–1998 67 472 4,922 700 14.2%

1998–1999 72 497 5,526 953 17.2%

1999–2000 80 532 6,229 1,124 18.0%

2000–2001 97 586 7,162 1,397 19.5%

2001–2002 134 612 8,104 1,723 21.3%

2002–2003 137 638 9,164 2,018 22.2%

2003–2004 156 701 10,185 2,055 20.2%

2004–2005 193 666 11,371 2,166 19.0%

2005–2006* 137 671 12,925 2,501 19.4%

Repayments of HECS debts

0100200300400500600700800900

1000

1988

-198

9

1989

-199

0

1990

-199

1

1991

-199

2

1992

-199

3

1993

-199

4

1994

-199

5

1995

-199

6

1996

-199

7

1997

-199

8

1998

-199

9

1999

-200

0

2000

-200

1

2001

-200

2

2002

-200

3

2003

-200

4

2004

-200

5

2005

-200

6

$ m

illio

n

Voluntary repayments Compulsory repayments Total repayments

Accumulated HECS debts

0

2000

4000

6000

8000

10000

12000

14000

1988

-198

9

1989

-199

0

1990

-199

1

1991

-199

2

1992

-199

3

1993

-199

4

1994

-199

5

1995

-199

6

1996

-199

7

1997

-199

8

1998

-199

9

1999

-200

0

2000

-200

1

2001

-200

2

2002

-200

3

2003

-200

4

2004

-200

5

2005

-200

6

$ m

illio

n

Outstanding HELP debt Doubtful debt

• Repayments are through the Taxation System– Integration with tax payment system– Integrated with tax compliance system

• Students provide Tax File Number (unique lifetime identifier) at time of application

• Loan data are transferred electronically to taxation office

• Compulsory repayments are added to income tax assessment

Taxation System

• Payments are deducted from salary• Voluntary repayments to taxation office• Loan default is not possible unless a

person is a tax avoider• All of the tax compliance processes

apply• Criminal penalties for tax evasion apply

Taxation System

Merit-based Student Aid

• HELP (Tuition assistance) • Scholarships• Income Support

Scholarships

• University Scholarships – may be targeted to students with very high university entrance scores; or to students from low socio-economic backgrounds.

• Commonwealth Scholarships (about 2.5% of full time undergraduates)

– Programme provides support to assist with costs associated with higher education

– Targets students from low socio-economic backgrounds– Open to undergraduate students doing any course (postgraduate

only for nursing and teaching)– Exempt from income assessment for social security purposes

Commonwealth Scholarships

• Commonwealth Education Costs Scholarship - $2,120 a year (2007 prices) for up to 4 years

• Commonwealth Accommodation Scholarship - $4,240 a year (2007 prices) for up to 4 years

• Both available for undergraduate courses, two-year associate degrees, and one-year enabling courses for Indigenous students

• $4,000 one-off scholarship for Indigenous students moving to access university

Income Support

• Youth Allowance, Abstudy and Austudy means and assets tested for people who are studying and can’t support themselves or can’t be supported by their parents (for students under 25).

HELP – Tuition assistance

• Increased participation following the introduction of HECS in 1989.

• Benefited low socio-economic status (SES) students as well, but these students have not increased their share of domestic students.

• Low SES have remained between 14.5 and 15 percent of the total number of domestic students, between 2001 and 2005.

• Low SES tend to fall behind at school.