Changes to student loan schemes

Loan fees have been canned for Australians studying overseas – but cost hikes are planned for fee-paying domestic undergraduates. Fee-paying domestic undergraduates in private institutions could find themselves paying more from July, after another Higher Education Amendment Bill was introduced into the House of Representatives this month. The Bill, if passed, will raise the Fee-Help loan fee from 20 to 25 per cent for any debts incurred from next financial year. Fee-Help is an interest-free income-contingent loan (ICL) scheme for fee-paying domestic higher education students. It works in much the same way as the HECS-HELP scheme for government-supported undergraduates. The Commonwealth pays the tuition fees up-front, and students repay the government through their tax once their income reaches a threshold amount – currently around $43,000. However, Fee-Help covers the entire tuition fee – not just the non-government-supported component as with domestic students in public institutions – and the tuition fees are uncapped. Nevertheless the government still subsidises the loans to an extent, because it wears the cost of the forgone interest and the risk of the student never repaying the loan. Postgraduate Fee-Help students pay no loan fees, but undergraduates are liable for a 20 per cent loan fee on top of their accumulated tuition fee debts – and the Bradley review questioned whether this was enough. With debts that can exceed $100,000, the Bradley review found, the Commonwealth effectively subsidises up to 30 per cent of the loan. “The loan fee is intended to recover some of the costs to the Commonwealth,” the report said. “The question is whether the loan fee is sufficient to achieve this when tuition fees are uncapped.” Bradley recommended an increase to 25 per cent. Parliamentary secretary for employment, Jason Clare, said this was still a good deal. “Even with a 5 per cent increase, the conditions continue to provide an extremely favourable ICL for students,” he told Parliament earlier this month. “If students do not repay their loan, the government meets the cost.” The change, if passed by Parliament, is expected to save the government around $17.5 million over the next three financial years. Meanwhile, the government has already implemented another Bradley recommendation – to remove the loan fee on the OS-Help scheme for Australian students who undertake part of their courses overseas. OS-Help loans cover tuition fees for up to two overseas stints of up to six months each, capped at around $5000 a pop. The Bradley review found that the loan fee – also 20 per cent – was limiting take-up of the scheme and recommended its removal. While the government accepted this recommendation, effective from the start of this year, the jury is still out on another loans issue – the difficulty of getting former students to repay their HECS debts after they move overseas. “Even if students return to Australia and eventually repay all of their outstanding HELP debt, Australian taxpayers still bear the cost of the real rate of interest subsidy on the unpaid debt while the former student is overseas,” the Bradley review found. Bradley suggested two ways of solving the problem: by requiring people to repay loans while they’re living and working overseas, or through mutual tax arrangements with other countries. The Bradley report said more work was needed to work out which option was more feasible – but that the issue needed to be addressed.