Warped HELP priorities

Buried in the Mid-Year Economic and Fiscal Outlook was a change to the FEE-HELP loan system. From July 2010, the ‘administration charge’ (more accurately, debt surcharge) for fee-paying undergraduate students will increase from 20% to 25%. So for example a student borrowing to finance a $10,000 fee would incur a debt of $12,500 rather $12,000.

While I don’t object to the HELP scheme being put on a sounder financial basis – lending money at zero real interest is an expensive business – targeting just this group is highly anomalous.

Since full-fee undergraduate places are being phased out of public universities, this change hits students at TAFEs and private providers. The TAFEs and private ‘feeder colleges’, institutions offering diploma programmes that articulate into bachelor courses, are exactly the kinds of higher education providers a government wanting to improve access to higher education should be encouraging. They give second chances to people who didn’t get the Year 12 scores they needed, or mature age students returning to study after a long absence.

On this year’s estimated FEE-HELP lending to students at TAFEs and feeder colleges, this change will cost them about $1.5 million a year.

Meanwhile students doing postgraduate courses – mostly people who will already have enjoyed significant public subsidy as undergraduates – continue to pay no FEE-HELP debt surcharge at all, and so enjoy significant real interest subsidy.

And the federal government is abolishing the 20% surcharge on money borrowed under the OS-HELP scheme, to finance study overseas.

The government’s policy seems to be to penalise students trying to get a second chance, while giving interest subsidies to middle-class kids enjoying a semester at an overseas university.

The different policies for international travel and postgraduates compared to undergraduates look like warped priorities for any government, but particularly warped for one claiming to be on the egalitarian end of the political spectrum.

My solution is to abolish all the different HELP schemes (HECS-HELP, FEE-HELP, VET-HELP, OS-HELP and if the government has its way SA-HELP) and have one HELP scheme with common conditions for all students.

5 Responses to “Warped HELP priorities

  • 1
    Brendan
    November 3rd, 2009 16:43

    “My solution is to abolish all the different HELP schemes (HECS-HELP, FEE-HELP, VET-HELP, OS-HELP and if the government has its way SA-HELP) and have one HELP scheme with common conditions for all students.”

    Also, I would do away with all the debt surcharges and up-front payment discounts, and charge a rate of interest equal to some benchmark interest rate like the 90-day bank accepted bill swap rate.

  • 2
    Andrew Norton
    November 3rd, 2009 18:52

    Brendan – A career awaits you in the Department of Finance:) The main objection to this has been that this will tend to disadvantage female debtors, as they will often take time out of full-time work to have kids before their debt is repaid, leaving them with the effects of compound interest.

  • 3
    caf
    November 4th, 2009 15:03

    To be at all equitable you’d then have to allow those interest payments to be deductible from salary earned.

  • 4
    Andrew Norton
    November 4th, 2009 18:46

    Unfortunately a technical glitch has cut some of Mark Harrison’s interesting comments, but there is a discussion of tax deductibility of education this post.

  • 5
    Linda
    December 3rd, 2009 14:46

    Hi Andrew,
    I don’t understand the fee help system at all and am wondering if you can help me to?
    My situation is that my son wants to go to a private college at which he self funded a certificate course (he had a small inheritance). The course he wants to do is a three year diploma, the college also has an arrangement with the New /england university (in NSW) such that students who succeed in the diploma gain admission to a one year course to complete a degree (only offered to students of this college)
    The college says their students don’t qualify for fee help even though they do have VET accreditation. All the research I have conducted online only confuses me more! tThe list of qualifying institutions at deewr is extremely small. The latest amendment to the bill seems only to deal with Victoria.
    My son does not want charity, only the ability to get a loan and repay it. My average income over the last five years has been $25,000 pa, as you can imagine I struggle on a day to day basis. It irks me that the children of people much better off can obtain a fee help loan (they could also get student deferred bank loans of which of course I have no hope.)
    Any clarification/help you can give me would be much appreciated.
    If you are interested the college details can be found here http://www.actt.edu.au/welcome-to-actt.
    Thanks for your time Andrew
    Linda