Should permanent residents lose their higher education tuition subsidies?

Under current law, access to the HELP loan scheme is a rare government financial benefit linked to citizenship rather than permanent residence. It may be the only benefit in this category.

Under the government’s proposed higher education reforms, permanent residents would become entitled to HELP.* But access to tuition subsidies under the Commonwealth Grant Scheme would instead be restricted to citizens, and permanent residents put in full-fee places. For undergraduates especially, this could cost them tens of thousands of dollars.

No universally applied rules govern who is entitled to what in Australia. But there are patterns of eligibility that suggest some broad principles. Generally speaking, longer and stronger connections to Australia lead to wider eligibility for government-financed benefits. Underlying this is the idea of a reciprocal welfare state; paying tax and receiving benefits are linked over a lifetime. People who aren’t committed to Australia, and who probably won’t finance as well as receive government benefits, have restricted entitlements.

The clearest example of this idea in practice is the distinction between temporary and permanent migrants. Temporaries are eligible for few benefits, while permanents get almost all. It would be unreasonable to require people to make long-term taxation contributions to Australia without making them eligible for the benefits those taxes finance. But people present in Australia for only short periods should not receive benefits they haven’t financed. The temporary/permanent distinction is not as robust as it once was because of the rise of long-term but legally temporary migrants. But that is a problem with the visa categories more than the underlying principle.

The Australian welfare state also makes sharp distinctions between residents and non-residents. Regardless of citizenship status, Australians living overseas generally aren’t entitled to social security benefits (or any higher education benefits; Australian citizens studying at the overseas campuses of Australian universities generally don’t get subsidies or loans). The main exception is the aged pension, but that is linked to past residence. Again, full legal membership of the Australian community through citizenship isn’t counting for much; being within reach of the Australian taxation system matters more.

Why are citizenship and higher education benefits linked in an unusual way? It might be because permanent resident students potentially resemble temporary visa holders. Often they are relatively recent arrivals (in 2015, more than half had arrived in Australia in 2010 or later) who have not had time to secure citizenship, or to put down deep roots in Australia. They may be with their parents rather than having made a personal choice to live in Australia long term. Or if permanent resident students have been in Australia for many years but not taken out citizenship perhaps they are not strongly committed to Australia.

In any case, permanent residents typically retain the right to live and work in another country. So the danger is (from the government’s fiscal perspective) that they will receive an expensive higher education and then leave without ever having paid much tax, and without having provided the benefit of their education to the Australian workforce and community.

The problem of people with permanent residence rights but only temporary loyalties is a case against both subsidies and loans for post-school education (and perhaps post-compulsory education; but school education is often conceptualised as a transfer to parents). But now that HELP debtors overseas have to repay the logic changes. At least in theory, HELP loans are recoverable so only subsidies are at risk (in practice, the English and New Zealand experience is that overseas student loan debtors often don’t pay what they owe).

I think this is the best possible case for the government’s proposal. But I think the stronger argument is that we should not make any distinction between permanent residents and citizens in higher education policy.

One reason is that the practical differences between citizens and permanent residents are not that large. Becoming a citizen of Australia does not necessarily extinguish the rights of a migrant to live and work in their home country, and as the section 44 parliamentary eligibility cases have highlighted many people who have always been Australian citizens may also have rights to live and work in other countries.

Annual net migration data compared to population suggests that about 0.5 per cent of the citizen population leaves Australia annually for 12 months or more. Departure rates of permanent residents are harder to calculate since, surprisingly, nobody reports on how many permanent residents Australia has in total. But based on a partial ABS count, the permanent resident departure rate is less than 4 per cent a year.

Over a longer time period, some previously reported HILDA data shows that between 2001 and 2010, 4 per cent of people with university degrees whose parents were both born in Australia left the country, compared to 13 per cent of graduates whose parents were both born overseas in a non-English speaking country (not all of whom necessarily had a subsidised education).

But the vast majority of people remain. Far more permanent residents become citizens each year (133,000 in 2015-16) than leave long-term (21,550 in 2015).

Effectively, the Commonwealth wants to avoid losing reciprocated tax payments from those who get a subsidised higher education, but to do so it would break the reciprocal deal of a larger number of permanent residents who will be long-term taxpayers, and often become citizens as well. They are likely to pay as much tax as their classmates, but get fewer benefits. The resentment this causes can be seen in the tone of submissions on this topic to the Senate inquiry into the higher education package.

I accept the need to make savings in higher education. But this should be done in a way that is fair between students, without making citizenship distinctions that don’t fit with Australian social policy more generally. That means leaving tuition subsidies for permanent residents, and adding eligibility for HELP.
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* New Zealand citizens are also affected by these provisions, but there is a more complex policy and political dimension to their case. To keep the post to a reasonable length, I have restricted it to permanent residents, although there are many parallel issues.

  1. I agree. Furthermore, the difference in benefits will cause another unintended effect: a greater proportion of permanent residents taking up citizenship. I think permanent residents should take up citizenship when they feel (and maybe show!) attachment to Australia, and not to become eligible to benefits.

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