About a year ago, I called the ATO. Unlike most people who call the ATO, I was hoping I could pay them some money – albeit not because I wanted to give the ATO revenue, but in order to make a political point about the absurdities of the HELP loan scheme.
This is the interaction between the bonus for repaying ‘early’ (to be cut from 10% to 5% as a result of the Budget) and the arrangements for FEE-HELP applying to students who enrol through Open Universities Australia (as I had) and postgraduates. Undergraduates taking out FEE-HELP loans have to pay a 25% debt surcharge/loan fee, but OUA and postgraduate students do not.
The incentive that creates, of course, is to take out a FEE-HELP loan whether you need it or not and then repay ‘early’ and get the bonus. For people like me, rather than this being a bonus for repaying early, it is a discount for paying late.
Last year when I rang the ATO they couldn’t help. In late April 2010, they had no record of a debt incurred earlier that year. Yesterday, 15 months after I first enrolled, I rang the ATO again. This time they did have a record of my semester 1 2010 HELP debt, though not of the two subsequent debts incurred later than year. The very helpful lady I spoke to told me that with my bonus for ‘early’ repayment I could clear my $895 debt for $813, giving me a saving of $82. I transferred my payment last night.
The reason I was keen to pay now was that otherwise my debt would be indexed on 1 June. If that happened, the ATO would recover a good proportion of the estimated $58 in interest I have cost the government since my debt was first incurred (the actuary’s report on the HELP debt assumes 5.2% interest).
So all up I have transferred about $140 in costs to my fellow taxpayers – not counting the $1,800 or so I still owe but the ATO doesn’t know about yet. Admittedly as I have had the money sitting in an interest-bearing account all this time they will recover some of it via income tax, but as a matter of principle I should not be allowed to do what I have just done.
A debt surcharge/loan fee should be imposed on OUA and postgraduate students. And how hard could it really be to start charging interest on a loan as soon as it is taken out? Every credit institution in the country manages to do it, so I don’t see why it should be beyond DEEWR/the ATO.