This weekend the Fairfax broadsheets have been pushing student welfare issues. The SMH focuses on the issue of accommodation:
HUNDREDS of university students are living in conditions so poor they are technically homeless, although they remain hidden in statistics on youth homelessness.
Though the reason they are not appearing in the homelessness statistics is that ‘technically’ there are not homeless at all, but instead lack a permanent home. It doesn’t make for quite as good a media beat-up, but a problem nonetheless.
The Age looks at some possible solutions to the issue of student income, including paying students the same as the unemployed, and HECS-like loan.
Having spent some time this week examining these issues, I agree entirely that the student income support system is a shambles. In fact, it is a far bigger mess than the media is reporting. There are at least five different programs supporting students: Youth Allowance, Austudy, Abstudy, FTB A and Commonwealth scholarships.
Youth Allowance and FTB A both provide welfare for families with full-time students aged 24 or under, with the student getting the entitlement under YA and the parents under FTB A. The same household cannot claim both. Though eligibility for YA stops at much lower household income than FTB A, for families earning $50-60,000 a year the student would be better off forfeiting his or her YA, and getting FTB A cash from his/her parents instead. This would also let them take advantage of the FTB A child earning threshold being much more generous than the YA personal income test, where effective marginal tax rates of at least 50% start at $118 a week.
As we have discussed before, many students by-pass the YA parental income test by qualifiying as ‘independent’, which can be done fairly easily. According to figures published in the DEST annual report, in 2006 68% of YA recipients were classed as ‘independent’.
This results in very anomalous outcomes. While students living with their genuinely poor parents start losing benefits when their folks earn about $700 a week, ‘independent’ students living at home get full YA benefits no matter how much their parents earn. I have census data showing very suspicious increases in university attendance rate between ages 18 and 19 in higher-income households.
Given varying family income and expense sharing there is no easy way to deal with this problem. However, I would suggest that in this case FTB A student support and independent living-at-home YA both be abolished, and replaced with a parental income means-tested YA that better supports young people in genuinely low income households.
Then there is the issue of the adequacy of benefits. I don’t agree with the suggestion in The Age that students be paid the equivalent of unemployment benefits. For a single person age 21 or unemployment benefits are worth about $40 a week more than YA. Most students are perfectly capable of working, and the benefits system should assume that they do. There is no convincing evidence that current average student working hours are causing too many academic problems.
However, $118 a week maximum earnings before losing benefits, a figure that is the same as it was in the early 1990s, is too low. That plus full YA and rent assistance still leaves students $35 a week short of the relevant Henderson poverty line. Yes, I know there are long debates about the meaning of ‘poverty’. But however we define it, someone receiving $378 a week isn’t going to be living it up.
Improving this system could be financed at least in part by abolishing the Commonwealth scholarships. While most of these are reasonably well targeted on poor people, they are not an entitlement. This means that receiving one is a lucky bonus, rather than an assumption young people can build in when they are deciding whether or not to go to university. If improving low SES university attendance is a goal, entitlement programs are more effective than bonus systems.
The idea of a loan is appealing, in principle. It recognises that most uni students don’t come from poor families, and even fewer of them will end up in poor families. In a lifetime sense, they don’t need welfare. Their problem is a temporary cash flow one.
But it’s not clear that an income support loan should be tacked on to the existing loan scheme. This could create another middle-class rort. The problem is that students aren’t charged real rates of interest on their debt. The temptation would be to borrow money they don’t need and invest it at a real rate of interest. If added to existing student tuition debt, it could easily be a decade or more before they repay it, by which time they could have made a considerable profit at taxpayer expense. So while I think cash flow smooothing is a good idea for students, it should be done on a commercial basis.