Yesterday the Prime Minister said the government would extend income contingent loans to students studying for ‘high-level’ vocational skills (diploma-level voc ed courses already have HELP loans in some cases). Various concerns have been expressed in today’s paper.

One of my concerns is that this would be overly costly for taxpayers if the existing HELP loan scheme is used. This is because the repayment system is designed for graduate level income, not the incomes of people with vocational qualifications. It is not entirely clear what Gillard is proposing, but in 2009 the median annual income of someone with a certificate III or IV qualification was $45,600. In that year the threshold for repaying a HELP loan was $43,151.

The median is all workers, so the median for new workers would be lower (though in these lines of work, income tends to plateau early). This suggests that there would be large numbers of slow or non-repayers, with consequent interest and bad debt costs for taxpayers.