Category: Higher education

How expensive is student lending for the government?

~ Andrew Norton ~ 7 Comments

The HELP student loans scheme involves significant expense to government. One of these is the cost of carrying around $20 billion in accumulated debts while only getting CPI indexation. Figures DEEWR gave me put this cost at $650 million for 2009-10.

The discount for paying upfront and the bonus for voluntarily repaying early are designed in part to help minimise this cost (their other purpose is to avoid the risk of non-repayment).

The discount especially has sometimes been criticised as an ‘unfair’ lower price to ‘rich’ people who can afford to pay upfront, as one commenter on another post did. While we can sensibly debate the level of the discount, which is now 20% but has been 25% and 15% in the past, the idea of the discount is sound. Given the cost of the interest subsidy, it can be cheaper to write off the discount now than to carry the debt. This either saves money for taxpayers or makes more money available for other government purposes.

Using the same male arts and law graduates in professional jobs on median earnings examples in an earlier post, I compared the cost to government of the different payment and repayment options. I assumed that the government borrows money at 6% and lends at 2.5%. Continue reading “How expensive is student lending for the government?” →

Should student contributions be paid upfront?

~ Andrew Norton ~ 18 Comments

In starting work on a paper about the student loans scheme, one thing I wanted to investigate was a finding of a survey of first-year students (pp.71-72) that a significant minority – ranging from 23% of those aged over 25 to 38% of 19 year olds – work while studying ‘to save for repaying future HECS-HELP or FEE-HELP debts’.

I wasn’t sure that this would be the right financial strategy for students with cash to spare while studying. The apparent incentive in the HECS-HELP scheme is to pay on enrolment. If a student pays at least $500 upfront, he or she will get a ‘bonus’ of 25% on the amount paid. In one of the examples I use below, an Arts student with an annual charge of $5,310 who paid $2,000 upfront would have $2,500 wiped from their balance, leaving $2,810 to be paid off through the tax system.

If a student makes a later voluntary repayment using their savings they get a bonus of 10%. For example, once they already had a debt they could pay $2,000 and get $2,200 taken off their balance. Could the benefits of saving the money and accruing interest compensate for the bonus shrinking from 25% to 10%? Continue reading “Should student contributions be paid upfront?” →

Let students decide how much their education is worth

~ Andrew Norton ~ 13 Comments

The UK’s public sector financial crisis is putting university tuition fee deregulation on the political agenda there in a way that it is not here. The Browne review of higher education funding, set up by the previous Labour government, is widely expected to recommend at least some deregulation of tuition fees.

This has of course set off the usual worries about affordability and access. In this context a survey of how much existing students are willing to pay by the Opinionpanel organisation is particularly interesting. It asks two questions, one about what price the student would think so cheap that they would doubt the course’s quality, and another about what price would be so expensive that they would not consider paying it at all. They respond by dragging a marker on their computer screen in £100 increments.


Continue reading “Let students decide how much their education is worth” →

Investing in students

~ Andrew Norton ~ 10 Comments

I’m hoping to soon get started on a paper about reforming Australia’s shambolic student loans system, so I was interested in a Marginal Revolution link to Lumni human capital financing.

Lumni invests in students in exchange for a share of their future earnings. Joe Clark wrote a Policy article on this a few years ago. From a student’s perspective, it has these differences from our HELP scheme:

1. With Lumni, the graduate provides an agreed % of his or her income for a fixed period of time rather than a fixed % of his or her income until the debt is paid off or the graduate dies. Successful graduates could end up paying much more under Lumni, while unsuccessful students will have their debts written off more quickly.

2. Lumni will only invest when it believes a return is likely – so presumably it will not invest in risky students (eg older students, those with weak prior results) or low-return qualifications (eg Arts). HELP will lend to anyone regardless of risk. As Joe points out in his article, one advantage of seeking a return on investment is that there will be more research into the prospects of different degrees, institutions, and types of student. This could help guide students even if they don’t take out a loan. Continue reading “Investing in students” →

A hopelessly flawed university ‘equity’ policy

~ Andrew Norton ~ 19 Comments

Alas, the government’s equity funding policy announced today is no better than the draft version released late last year. Here’s a quick summary of what’s wrong with it:

1) It is based on an arbitrary definition of low SES – people living in the lowest 25% of postcodes – slightly alleviated by a formula that includes means-tested student payments. It’s arbitrary because people outside the definition are for all practical purposes no different from people inside the definition. The definition may change in future, but we are off to a bad start.

2) An arbitrary definition would not necessarily matter much if it was merely a driver of funding to universities. But the money is supposed to be targeted on official low SES students, and so unjustly discriminates against people outside the definition.

3) As we have been reminded this week, the core assumption of the policy, that low SES students are particularly in need of additional help, is weak at best. Even if future low SES students are less capable than the low SES students of today and the recent past, it’s not clear why the money should not be spent on general support services available to all students who need it, regardless of where they live or their Centrelink status. Continue reading “A hopelessly flawed university ‘equity’ policy” →

Class effects on class performance?

~ Andrew Norton ~ 16 Comments

The latest results of the Australasian Survey of Student Engagement were released today, and like previous research finds very little evidence that socioeconomic status matters much once students arrive at university.

On various learning outcomes, low SES students – defined in this case as being from a low SES area and being the first in their family to attend university – rate themselves slightly more favourably than middle or high SES students.


(click on image for clearer view)
Source: figure 40, ACER, Doing more for learning: Enhancing engagement and outcomes
Continue reading “Class effects on class performance?” →

Private higher education providers growing rapidly

~ Andrew Norton ~ Leave a comment

In line with the practice of producing higher education statistics very slowly, DEEWR has recently put first semester 2009 enrolment figures on its website.

These show that the private providers are continuing to grow quickly. After taking out new institutions for comparative purposes, their overall enrolments are up 19% on first semester 2008, with commencing students up 22%. This is fast growth off a modest base, with total domestic enrolments now just over 40,000 and total international enrolments of just under 19,000. These figures understate the actual total, as only those institutions making FEE-HELP loans available to their students report enrolments. (Based on an inquiry, just to clarify that these institutions report all their students, not just FEE-HELP students. The point I was making is that there are a number of higher education providers that receive no Commonwealth money and report nothing to the Commonwealth.)

Public universities are also growing, with their overall numbers up 5% to 919,000, and commencing students up 7%. The ‘pipeline’ effects of high commencements (ie most first years will be there for at least two more) help explain why the student subsidy bill is growing more quickly than forecast. It may also help explain why the government is reluctant to accept the Bradley report recommendation to include private provider students in the public subsidy system. Despite the current government’s anti-full-fee rhetoric, it is fiscally very convenient for them that tens of thousands of students are willing to forgo tuition subsidies.

The not-quite-nothing higher education budget

~ Andrew Norton ~ 5 Comments

Last night’s budget is widely perceived as having delivered nothing for higher education. But if DEEWR’s portfolio budget statements are compared to last year’s, we can see that this isn’t quite true.

The relaxation of rules on how many students can be enrolled on full government funding rates is having more of an effect than the government anticipated last year. The extra students will cost the taxpayer $600 million more over the next three years than originally forecast. HELP lending will go up even more, with an extra $650 million in outlays if current predictions are right (this includes people borrowing full fees under FEE-HELP, as well as the HECS-HELP money associated with more Commonwealth-supported students).

Reaction has been neutral to negative because apart from full-fee students facilitated by FEE-HELP this money doesn’t solve the problems universities face of costs increasing more quickly than revenues. The would-be students who have missed out in the past due to quotas on university enrolments have never had much of a political voice, and so can neither praise nor condemn government policy on this matter. Continue reading “The not-quite-nothing higher education budget” →

ATO unable to HELP

~ Andrew Norton ~ 18 Comments

I’ve spent part of my long-service leave doing a subject through Open Universities Australia. But as well as learning more about statistics, I thought I could use my enrolment to make a point.

Though lending students money for their fees on an income-contingent basis is a good idea, as I have complained before the HELP scheme is now too complex, anomaly-ridden, and expensive for taxpayers.

The particular absurdity I wanted to highlight was that if you do a subject through Open Universities Australia, there is no charge to borrow money under FEE-HELP (students at private providers and TAFEs pay a 20% surcharge). But OUA students still get a 10% bonus on any repayments they make.

I thought I would be able to would be able to take out the FEE-HELP loan, and using the bonus clear my approximately $900 in debt for about $820. I’d then write a newspaper article criticising this free money scheme and call for it to be fixed.

As it turns out, I haven’t been able to do this. Continue reading “ATO unable to HELP” →