Please study at home

The bill introduced last month to reduce the discounts for up-front payment of student contribution amounts or early repayment of HELP debts (discussed here and here) contains a previously unannounced policy: to stop Australian students getting tuition subsidies or HELP loans if their course of study is primarily at an overseas campus of an Australian university.

Peter Garrett’s second reading speech explained the rationale:

As students are only required to pay back their HECS-HELP debt if they file an Australian tax return, there is a higher risk that HECS-HELP debts incurred offshore will not be repaid, or not repaid for a longer period of time.

I’m not sure how big a problem this is in itself, but it is a sign that the government is concerned about HELP debt held by people not living in Australia. That the government makes no attempt to recover HELP debt from Australians working overseas is one clear design flaw in the income-contingent loan scheme.

It’s a flaw that has been exacerbated by other changes to law and policy. As dual citizenship has been permitted by Australia and other countries, the number of people with work rights in multiple countries has increased. More people can work overseas, and it would be very surprising if we did not see more people doing so.

The source countries of migration to Australia have also shifted towards the Asian countries in which Australian universities have their overseas campuses. According to the 2010 enrolment data, nearly 7% of domestic students speak an east or south-east Asian language at home (and probably more can speak one, but tend to speak English at home). A similar proportion were born in those countries. It would presumably be relatively easy for them to return to Asia to study at an Australian campus.

The flow of people between Australia and other countries is not a problem it itself. But it becomes a problem when it interacts with a debt recovery system designed for a less mobile world.

6 thoughts on “Please study at home

  1. So what’s the solution? No more loans?

    Perhaps we could perhaps get big credit companies like VISA to manage the debt? They might be able to collect repayments internationally, also if people didn’t pay their debts back they would get a bad credit rating.

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  2. In England and NZ there is a legal requirement for students to repay when overseas. I plan to look at the options in more detail in a Grattan Institute paper.

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  3. People are getting more and more mobile. So agreed this will get to be a bigger problem. But not just with HELP debt, but also with income taxes more generally.
    Why pay 45 cents in the dollar tax, when you can go to HK or Singapore for 10% tax ? Living in Aus is good, but not that good ! the conundrum is even worse in Europe, where the ‘Boomers’ are retiring and the women have gone on a baby strike. Government spending is up, and there are no workers to pay for it. You add a little spice of increasingly fluid labour markets, and what do you get ? Well something worse than now !….which is not that great.
    But anyway, on Chumpai’s point, I think a HELP system is generally quite fair (compared to totally free markets), as society benefits from an educated populace. But it does need to be tightened. Having 30 year-old live-at-home, perpetual adoloscents, studying for 15 years for useless degrees is not good for anyone.

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  4. I think the HELP system is good too, and it would be interesting to know how much it really has been rorted given most people that work OS will go back and forward in their life (like me) — my bet is that you would lose more from people simply dropping out of the workforce, but no-one will complain about that due to the groups most likely to do it and and it not being politically correct to complain about those groups. There must also be fringe cases where people get educated later in life and don’t pay it back, but this stops them retiring and collecting a pension. Presumably these people might save the government money. I think this group is growing, but I imagine you have the real stats.

    Incidentally, the other reason HELP is good is that, at least from a kiwi perspective, they think people leave to repay their debts, but I don’t know anyone that left Australia permanently to get out of a HECS debt. Again, I’m not sure if the actual truth value of that, and I’m not sure the kiwi government is either!

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  5. Even anecdotally, I am not aware of much ‘rorting’ of HELP, in the sense of a main aim of moving overseas being to avoid repaying. Non-repayment is a consequence of decisions made principally for other reasons.
    Not recovering from people who are not working is an inherent feature of income-contingent loans, and is the main cost driver. But I am concerned here with people who are working and would be repaying if their incomes were earned in Australia.
    Quantifying the scale of this is hard. There is data on the number of HELP debtors lacking an Australian address, but this has shown implausible changes over time and DEEWR and ATO are reporting different numbers. I will do my best in the planned Grattan report, but it will be impossible to get a precise number.

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  6. Students should just have to sign a commitment saying whenever they are overseas and still have a student debt they will report their income to the ATO (using World Bank PPP, or whatever) and make their repayments. This is common sense, and is what is required in the UK (http://www.studentloanrepayment.co.uk/portal/page?_pageid=93,3867114&_dad=portal&_schema=PORTAL).

    In NZ you can get a repayment holiday or up to 3 years, but they will charge interest while you are overseas (http://www.ird.govt.nz/studentloans/overseas/long-trip/).

    I just don’t see any reason why those who move overseas should have their loans forgiven as a matter of course. It is not efficient, nor equitable. Nor are the administrative barriers to repayment from overseas that great.

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