This week Treasury Secretary Ken Henry launched a Treasury Working Paper called ‘HECS for TAFE: The case of extending income-contingent loans to the vocational education and training sector’, by Bruce Chapman, Mark Rodrigues and Chris Ryan. This is an idea I have supported myself; there is no intrinsic reason why where a course is placed in the Australian Qualifications Framework should determine whether a student should have to pay up-front or being able to take out an income-contigent loan. As with many aspects of policy, the difference is due to a quirk of history rather than principle. In the 1970s, the Commonwealth acquired funding responsibility for higher education, but vocational education was left with the states. So HECS was introduced in 1989 to help the Commonwealth discharge its resposibilities, but vocational education was left as a state responsibility.
While I support the principle of not differentiating between vocational and higher education, I would not support the version of income-contigent loans apparently proposed in the Chapman et al. paper. Their calculations seemed to be based on a straight application of HECS, but they are vague (apart from a footnote which only semi-clarifies the situation) on how they would handle the current debt surcharge element of HECS-HELP.
At universities, students paying their student contribution amount up-front get a 20% discount. Or to put it another way, if you don’t pay up-front you pay a debt surcharge of 25%. (eg say a subject costs $1,000. If you pay up-front with a 20% discount you get $200 off, leaving a price of $800. If the real price is $800, $200 extra is 25% more.) For full-fee students, the surcharge is more obvious. If undergraduate full-fee payers take out a FEE-HELP loan, they pay the advertised price plus 20%.
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