Should students be considered ‘independent’ of parents?

A bit of a debate is raging in the Youth Allowance post about how dependent students are on other members of their family. Sinclair points out that most 15-24 year olds live with their parents. Based on a mix of census and DEST data, I have estimated in the past that around 60% of late teen uni students live with one or both parents. Of those at home, they are an affluent bunch: median household income is $104,000 a year.

But how much sharing goes on within the household? The AVCC/Universities Australia student finances survey asked this question, referring to parents and partners. For ‘often’ relying on non-cash assistance, for full-time undergraduates:

Meals: 60%
Accommodation: 58%
Telephone: 53%
Use of car: 31%
Clothing: 20%
Textbooks: 28%

38% of full time undergraduates classed themselves as ‘financially independent’.

The 2006 General Social Survey found that of the people who had children aged 18 to 24 living away from home, 58% provided them with support:

Common types of support provided for children aged 18 to 24 years were money to pay bills or debt (30%), money to help pay rent and housing costs (21%), money for food (19%), driving them places (19%), letting them borrow the car (16%) and paying for educational expenses (15%).

On these figures, it is hard to agree in sociological terms with Conrad’s suggestion that people aged 18 or more be considered ‘independent’, though he wasn’t necessarily suggesting that they get welfare as a result.

Young full-time students, who have not had a chance to build savings, are almost all going to be partially dependent on someone else if they are to avoid severe poverty. The question is whether that someone should be their family, the state, a lender, or some mix of the three.

Sinclair says the solution to poverty is getting a job, but more than that it has been being a member of a family where someone (or several people) worked. I prefer this voluntary arrangement to tax-financed transfers. It’s probably better than lending too, as a sort of intra-family transfer of income around the life cycle.

So I think it is probably ok to abolish the independent living at home category, and only provide welfare to those families that cannot afford these intra-family income transfers.

18 thoughts on “Should students be considered ‘independent’ of parents?

  1. OK – so you think that it is OK if a young person living away from home is deemed to be independent if they have supported themselves for a period (even though you cite evidence that many in this category also receive substantial financial assistance from their parents – perhaps in large part because they can’t receive YA because of their parents’ income). But any young person still living at home should be considered dependent on their parents if they wish to study, even if they have already spent several years working full-time?

    But once a young person has achieved independence in these terms, is it OK to take it away? What if a young person who had been living away from home during the period when he or she was working full-time decided to move back into home when they went back into full-time education? Would it be reasonable to assume that they were again dependent on their parents? I would have thought that both parents and student might have a significant problem with that.

    It’s important to distinguish here between independence, which means that your YA is no longer tested against your parents’ income, and living away from home, which means that you receive a higher rate of payment. It is arguable that the at-home rate of payment already assumes a significant level of parental subsidy (free rent at least), since it is $100 a week or more lower than the level of away-from-home YA plus rent assistance? Don’t you think that this is enough of an assumption of parental support?

    In the end, I think it is easier to administer a system where the maximum rate of payment depends on whether you live in a parental home or not, but the criteria for independence are the same regardless of where you live or have lived. If you don’t agree with the current independence criteria (eg in terms of how long you need to have worked or how much you need to have earned), that would be an interesting discussion.

    For example, people also qualify as independent if they have ever had a child (even if they gave it up at birth) or if they have ever been married (even if they never lived as a couple). I, for one, am more comfortable with independence criteria that are solidly grounded in having earned sufficient money to support oneself.

    In any case, for most people the transition from dependence to independence is a gradual one. But if you are going to draw an arbitrary line or series of lines, once a young person has crossed over that line I would argue that you can’t in all conscience take that status away from them.

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  2. bg – As I noted in the original post, there are no easy solutions because of the difficulty in distinguishing between those who do and do not receive parental support, and the degree of support received by those who do get support. There is also a need for simplicity, so that you don’t already need degrees in law and accounting to work out your entitlements. Attempts to deal with so many variations is one reason we get so much complexity. I’m confident that independent at home YA is largely a rort, and the people for whom it is not a rort will be taken care of by the improved YA based on parental income.

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  3. You could flip it the other way as well – how many students who live away from home are dependent on their parents? While in the 5 metro cities this is probably less common, there are still a large number of students who have come from regional areas or interstate, and all of a sudden have to find $10-$15k to live on, whether this be at a residential college (the university’s preferred option at least for first years), or in the private rental market.
    .
    Which is far more expensive to parents than having the student live at home, and quite a substantial burden a long way up the income ladder.

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  4. The problem with familial transfers is that they basically discriminate against some groups but not others. If I get money from, say, my brother or aunt, I can still collect benefits, but if I get it from my parents (and I’m under a certain age) I can’t — and that’s not because my needs are necessarily different. The other problem is that defining the groups is a mess in itself — at present you can become legally dependent on someone in a marriage like way without even signing any contracts (but only if they are your partner). Do we really want the government giving us implied contracts?

    My suggestion is that the government stop recognizing family units as much as possible, and instead recognize individuals. Obviously that’s a radical step and would need to involve cutting back welfare a lot such that people who are dependant on others can’t claim benefits their entire lives without working.

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  5. Conrad – Indeed a radical step, as the entire welfare system is based on the idea of a household. As a long-suffering financier of the welfare state, I am far from willing to consider inflating its cost even further.

    iamspam – I am willing to class those who move to study as ‘independent’, but to keep the YA rate at a level that requires it to be supplemented from other sources to live on. Whether that is the student’s work, their parents, borrowing or some mix of the three is up to them.

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  6. It’s interesting that in the US, universities ask for and base assistance largely on parental income even though most students live away from home.

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  7. Rajat – forgive my scepticism, but I’m not sure that the US approach to such things is any model to emulate.

    Andrew – you didn’t answer my question about whether you would strip young people of their independent status if for any reason they decided to move back home to live with their parents. You seem to be coming from the simple position that anything that limits people’s access to income support is on balance a good thing. I’m also interested to know why you are so sure that independent at-home YA is such as rort, especially given the current YA settings that we are agreed need fundamental review.

    Conrad – as a long term feminist of one kind or another, I largely share your view that a system based on individuals is preferable to one which presumes financial support where none may be offered. I agree with Andrew that it is a big step, though and one which we are unlikely to see any time soon.

    On balance, I think the current independence criteria provide a necessary safety valve for a parental income test that is far too stringent. In the event that there was a significant redesign of that income test, together with some improvements to maximum rates of payment, I would probably be prepared to live with some tightening of the independence criteria.

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  8. bg – I only have household income figures for 18 and 19 year olds at home, but on a household income basis only about 12% would qualify for YA, while 33% of students in fact get YA. In those lower income groups, the numbers attending university grow only modestly between ages 18 and 19: 4% in the group that would get full YA, and 8% in the group that would get part YA. But in the households not eligible for YA, increases are 20%+, and approaching 30% in the more than $2,000 a week households. I reckon that a good proportion of this is YA rorting. The parents of these kids have a much stronger obligation than I do to support their offspring.

    I am prepared to bring more families into the possibility of receiving YA, but families on $2000 a week don’t need it.

    I do start with an assumption against welfare, while accepting that some assistance should be provided to those who are genuinely in need or who might otherwise have a high probability of making poor decisions with major consequences (eg rural students who need to move to study).

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  9. Andrew – are you really saying that there should be no independent YA category and that all YA entitlements should be tested on the basis of parental income, regardless of a student’s other circumstances? If not, I don’t really see a case for discriminating so fundamentally between two students who are otherwise identical except that one still chooses to live with parents and the other does not. Or, for that matter treating students even more differently from other income support recipients than we currently do.

    Do that you think that all income transfers should be determined on a family household basis ie if you choose to share living expenses with members of your biological family (rather than someone else), they you should be required to depend on them rather than having acces to an income of your own? If so, that would be a shift in current arrangements equivalent in size to with moving to individual entitlement.

    I can’t comment on your statistics because I can’t quite understand what you are saying with them.

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  10. I’m saying that there should be no independent YA for those living with parents. I realise that parents still provide support to those living away from home, but living away is not the free ride that living at home is, and there is more likely to be a genuine need involved.

    Given the characteristics of this population, any rule will create anomalous situations. But what I am suggesting will improve the position of low and middle income families, reduce the cost to students and taxpaypers of unnecessary gap years, and all at I expect little net cost to taxpayers.

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  11. So if someone who had been living away from home and supporting themselves then moved back home you would just take their independent status away? Do you really want to create a strong financial incentive for not making this choice?

    What about people who have a child or a partner but still live with their parents?

    What about people aged 25 or over and still living at home?

    I’m just not sure of the purpose or feasibility of making this a blanket rule. And as I said before, the fact that you get paid a lot less if you live at home than you would if you lived away surely takes account of some of the economies of that situation.

    It also seems to me that if you think people are taking gap years now for the primary purpose of qualifying for YA, that is still going to happen in families that don’t think they have the resources to support their kids at uni. And if you make people live away from home in order to be ‘independent’ you are likely to end up spending more money on that group than you do at present.

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  12. Ask me at 15 and at 24 and you would have gotten very different answers about how dependent I was financially.

    Because I wasn’t officially able to access Austudy due to my parents earnings, even though they didn’t find it terribly relevant and weren’t giving me any money, i found two solutions:
    1) study more slowly, at less than 75% load, so I could get the dole and/or work
    2) be ‘entrepeneurial’ with some victimless crimes.

    neither of these responses (which are hardly uncommon) would be ideal policy responses, surely? I did learn an early lesson that government rules are capricious and made to be broken…

    Suggestions I should have just gotten a job don’t gel with the economic conditions in melbourne in the early 90s.

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  13. Thanks, Wilful, for pointing out another possible outcome of tightening up access to YA (parentally means tested or not), which is that people can reduce their study load sufficiently to enable them to qualify for unemployment benefits. This is not currently possible for people under the age of 21, where unemployment benefit entitlement is exactly the same as for student assistance, but from 21 to 24, unemployment benefits are not parentally means-tested, while student payments are.

    I have heard in the past that one of the main activities of student financial counsellors in universities is advising students on how to structure their study in order to achieve this aim.

    My take on this is that if people feel they need income support in order to study, they will do what they need to in order to receive it. So if you tighten up on the financial criteria for independence, but let people qualify as independent by other means (eg marriage or de facto partnering or having a breakdown in the relationship with their parents) many will do so. Ditto if the values underlying the policy settings (eg that parents should be fully responsible for supporting their children up to the age of at least 25) don’t gel with with values commonly held in the community.

    I actually like the financial independence criteria because a) they are based around what I regard as useful productive activity (ie working for a living) and b) they are nowhere near as intrusive into people’s private lives as criteria based around intimate and family relationships.

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  14. It’s true that people can reduce their study load to get unemployment benefits, but this is not likely to be a major issue since the opportunity costs of delayed completion of degrees and having Centrelink continually hassling you about your job search activities are high. The AVCC student finances survey suggested that few people were receiving other Centrelink benefits.

    There used to be TEAS marriages (a YA predecessor scheme) in the 1970s and 1980s, but again this is a big complication and few people would do it. When I was an undergrad, I only heard of it between gay people who could not get a marriage they’d want anyway.

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  15. I don’t know about the veracity of what students tell the AVCC survey (there are lots of people who don’t own up to receiving unemployment benefits in all other surveys that ask the question). From my experience there has always been pressure on unemployment benefits from students who don’t qualify for YA or who want the higher payment rates under Newstart Allowance. And since qualifying for Newstart requires you to study part-time, the taxpayer could potentially end up paying people for twice as long before they finish their degree. Not a good outcome really.

    I’m sure you are right that not everyone would change their behaviour to fit in with whatever the new criteria are, so there would probably be net savings at the end of it all. But if people (parents and students) don’t think they are being treated fairly they are less likely to go along with the rules and will look to find ways around them, even to the extent of colluding to misrepresent their circumstances. I don’t think that would be a desirable outcome either.

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  16. What Backroom Girl says is on the money, I know of this happening quite a bit, particularly in regards to postgraduate students where there is no Austudy qualification.

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  17. I have one son 18 in university and one son 16 in year 11 who also is looking at going to university.They are both fully dependent on us. Between my husband and I our combined income is $ 60,000. this works out to be about $900 a week. after paying $300 a week Mortgage, $180 food, $210 to cover bills,rates, gas .etc…$50 for petrol (we only have one car), $20 for 2 student bus tickets, and $10 each pocket money for the boys. this leaves us $120 a week to cover clothing and shoes for 4, medicines if sick,dentist. Uni books(this year so far has cost over $800)Birthdays , Christmas etc… it does not leave much, yet our income is too high for youth allowance or for the boys to get a health care card. I wish we were on the $104000 stated above. My eldest is trying to get part time work to fit around study, but part time jobs aren’t that easy to find. I walk around Salisbury and see dole bludgers and youths hanging around smoking who are on payments,and in many cases will be most of there lives. yet my boys who have studied hard (in public schools as we have never been able to afford private ) and will one day be tax payers just as my husband and I have always been are not entitled to a thing. The government should look at all income levels not just the lowest or the highest. Not all parents who support there children through university are well off or live in the country.

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