A high HELP repayment threshold increases pressure to restrict or deny access to HELP

The Department of Education and Training’s 2016-17 annual report announced the first public use of a project to link up the ATO’s HELP repayment data with the Department’s enrolment data:

In 2016–17 the department worked with both the Australian Taxation Office and the Australian Government Actuary to create a database that links education courses with
income and occupation information. In 2018, the QILT website will publish graduate income data sourced from this database, which will inform students of the earning potential in their study area.

This will, of course, be very interesting, and could include income by university attended, as well as by study area. This has been done in the UK, although their QILT equivalent does not use it at this point.

But this data linking work is being done to better understand HELP debt and which factors affect repayment. It has potential uses well beyond student advice, uses that would fit a pattern of the government trying to reduce its risk of bad HELP debt.

The most obvious of these is to restrict access to courses with high rates of non-repayment. This was a feature of the VET Student Loans reform so that

loans are only being provided for courses that are closely aligned to the skills employers need in their workplace, thereby enhancing the opportunities for graduates to work, and to repay the money lent to them by taxpayers. [emphasis added]

VET is, of course, different to higher education. It is supposed to have strong vocational links, while higher education can be about knowledge for its own sake. But the government has already tried to cross this line with its now-blocked reform to higher education sub-bachelor courses, so there is no guarantee that it won’t try again with some data to highlight the problem. There are some higher education disciplines, especially the humanities and creative arts, that on other data sources look like they will have high bad debt.

With more than 20 years of data on some individuals, the ATO analysis should give us a better idea of how much HELP debt is manageable within a working life. We have a recent partial brake on debt levels in the VET Student Loans caps, which limit how much students can borrow for particular courses. But the more important number is how much HELP debt a person has in total. There is already a cap on FEE-HELP borrowing, but by combining different HELP loans students could have total debt well in excess of it. An overall cap on HELP debt is an obvious measure to keep individual debt to levels that can, typically, be repaid.

From the ATO data, we can learn more about one of the hardest to analyse groups of HELP debtors, those who don’t complete their courses. People who drop out accrue less debt in total, but data from one of the rare surveys that asks about incomplete qualifications suggests that their median income is below the current HELP repayment threshold, if they don’t hold another qualification such as a Certificate III/IV or vocational diploma (the good news is that a significant minority do have a tertiary qualification).

In the recent so-called provider integrity legislation, the government removed eligibility for FEE-HELP for students in non-university higher education providers who fail to complete half or more of their subjects. Students with high subject fail rates are less likely to complete their course. But there does not seem to be any good reason for only applying this rule to the small sub-set of students using FEE-HELP in NUHEPs, and the ATO analysis may provide empirical evidence supporting its extension to all HELP borrowers.

The Budget proposal for an initial repayment threshold of $42,000 was another significant measure to minimise HELP bad debt. The government put this up in addition to the other measures, but it can also be seen as an alternative to them. A high threshold greatly increases the risk of non-repayment, because it means that a large proportion of VET debtors, people who don’t complete degrees, and people who take courses in low-paying disciplines won’t repay or won’t repay in full.

If the government cannot protect itself from bad debt via a lower threshold, that increases the pressure to protect itself from bad debt by restricting or denying access to HELP in the first place. We are already seeing the issues this creates in vocational education, with the return of up-front fees in the diploma market. We need to think carefully about which policy measures will reduce HELP bad debt, while preserving HELP’s educational goals.

  1. Consistent HELP arrangements should apply to all students and providers if looking to make sustainable- not just the NUHEPs.

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