Where are the missing HECS debtors?

Today the Australian National Audit Office released a ‘performance audit’ (pdf) of the Higher Education Loan Program, which supports the three types of student loans: HECS-HELP for Commonwealth-subsidised students, FEE-HELP for full-fee students, and OS-HELP, which helps finance study overseas.

The ANAO’s audit was a box-ticking exercise that found little wrong with the administration of HELP. What’s more concerning, as I argued in my paper on FEE-HELP (pdf) last year, is the overall design of the system, which controls losses by setting arbitrary loan limits, while losing or delaying receipt of lots of money that could be recovered with better policy design.

Publications released since then highlight the problem. The DEST Higher Education Report 2005 stated that 1,121,822 people had a HECS debt as at 30 June 2005. Yet the ATO’s personal income tax report reports only 250,085 persons making a repayment through the taxation system in 2004-05. Where are the other 871,737 people?
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