The HELP loan scheme is very expensive to run. Its estimated program expenses are nearly $1.8 billion in 2010-11, mainly due to lending what I expect now exceeds $20 billion to students at only CPI interest, and annualised estimates of debts that are not expected to be repaid.
One thing that should be examined as a way of reducing these costs are the thresholds for repaying. Under current arrangements, in the financial year just finished HELP debtors will pay nothing if they earn less than $43,151.
Though that catches most new graduates in full-time work, my estimate from collating data from several sources is that at least one-third of HELP debtors in Australia in 2007-08 and not currently enrolled in a course incurring HELP debt did not make a payment that year.
I suspect that this proportion will increase over time because the thresholds are indexed according to movements in average weekly earnings. Over time, this is likely to increase at a higher rate than the earnings of new graduates. This is because AWE is influenced by ‘compositional effects’. For example, as relatively well-paid professional and managerial jobs have increased as a proportion of total employment this has helped push up AWE. Continue reading “HELPing the government to save money”