The boom in HELP debtors

The latest ATO taxation statistics come out today, giving us some new information on HELP.

Although growth in higher education student numbers moderated in 2015, VET FEE-HELP was still out of control in the period covered until mid-2016, contributing to a substantial increase in total debtor numbers. They grew by nearly half a million (a 24% increase) between 30 June 2014 and 30 June 2016. With big policy changes in vocational education taking effect in 2016 and 2017, along with continued moderate growth in higher education numbers, the rate of growth should slow substantially in the year to 30 June 2017.

On current policy settings, however, the number of debtors repaying is not likely to accelerate rapidly. Only 22 per cent made a repayment in 2013-14 and the number is likely to to be lower still in 2014-15 (there is a 2014-15 number in the chart, but these have a history of significant upward revision due to late tax returns, so it is too early to say exactly what proportion made a repayment).

The 2014-15 repaying share is likely to be lower because of the number of people who are still students, the high initial repayment threshold of nearly $55,000 a year is delaying repayment for recent graduates, and a large proportion of VET FEE-HELP borrowers are unlikely to earn enough to repay.

There is speculation that the initial threshold for repayment will be reduced in the Budget. These numbers explain why the idea needs considering.

3 thoughts on “The boom in HELP debtors

  1. Where to begin?

    For a start there is a big selection problem here. We do not know how many people are not in your sample because they have finished paying off their debts.

    Raw cross sectional data like this actually tells us nothing about how much HECS/HELP will be recovered, let alone from whom. You need panel datasets, which no one can be bothered building precisely because “but everyone knows …” is the standard criterion that passes for evidence in this field.

    I’d want a lot more than just this before I contemplated lowering the threshold and thus raising EMTRs on young graduates. Especially as the rationale for HELP is that free education is regressive – undermine the progressivity of the repayments and you undermine that rationale.

    Plus of course these calculations leave out the very substantial repayments due to education raising peoples’ taxable income and hence their ordinary tax liabilities (which is why, in fact, free education is both economically and fiscally efficient).


  2. We can’t get access to the ATO’s panel data, but we did use other panel surveys to analyse likely repayment patterns:

    Some of the speculated thresholds in the mid-$40,000 would really only take us back to what it was in real terms in the mid-2000s when last rebased by the Howard government, ie limit the effect of AWE indexation.

    We also need to make the system suitable for voc ed students as well as higher ed students.

    As to the point about free education, our report last year argues for moving beyond 1980s political considerations in ending free education, towards a system that integrates with contemporary educational, social security and Budget considerations.


  3. Andrew – we beyond speculation and have a reform package announced with significant reductions in the repayment threshold (1% @ $42k that does not cover CPI indexation of an “average’ $25k undergraduate debt) and an increase in the rate of repayment at the top end (10% @ $120 k). In both the upper and lower limit the case to have a sustainable loan system may be come unstuck as a reault of the perceived fairness of the proposed changes.

    A question on the repaying debtors your 500k figure is higher than the most recent reported data which I think you are saying is a result of late returns – is there a benefit from getting graduates to put their tax returns in on time – and how one might this be incentivised – there would appear to be around 200k who are lagging


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