The Australian‘s High Wired column reports on an exchange between education minister Simon Birmingham and his Green shadow Sarah Hanson-Young on how the government’s proposed $42,000 threshold for HELP repayment was set:
The Greens’ Sarah Hanson-Young was in her element in Senate Estimates yesterday. First up, she wanted to find out where the $42,000 new HECS repayment threshold came from. ‘Plucked out of the ether’ was the answer she was looking for. Which she didn’t get, but the Grattan report on reducing the HECS threshold was mentioned. (And where did that figure come from? Plucked out of the ether, maybe.)
The $42,000 figure was proposed in this Grattan report released in March 2016. There is no science that says exactly what the initial HELP repayment threshold should be. There is always going to be some policy and political judgment involved. But our report did make a non-ether case for a substantial lowering of the initial threshold, which at the time the report was released was based on policy and political judgments made in 2003 (the base level) and 1993 (AWE indexation).
In the intervening years just from 2003, HECS had become HELP and turned into a very different, and much larger, program – with many more students in the core public university undergraduate programs, thanks to the demand driven system, and many extensions of income contingent loans – to higher education students outside the public university system, to diploma students in vocational education, OS-HELP, SA-HELP and other loan systems such as for student income support that use the same basic repayment system.
Total HECS/HELP lending more than tripled between 2003 and 2016, and the risk of non-repayment also substantially increased as we brought in debtors with weaker earnings prospects than was the case with a smaller, more educationally elite, group of eligible borrowers.
It’s sometimes said that the threshold should be high to provide a financial benefit before repayment is required. Arguments like that were made in the late 1980s, and have stuck in popular understanding of HELP. But it is not clear that there is any principle behind this idea. In our report, we argue for seeing HELP in the context of other government income protection programs, rather than a special, very generous deal that graduates should receive for unclear reasons. $42,000 is still a bit on the high side by that standard, but we took into account previous Labor statements that $40,000 would be too low. We want a stable system, so looked for a threshold that Labor would at least keep in office, even if it opposed it on introduction.
So while $42,000 is not pure science, unlike the current threshold it is based on something more than long ago policy decisions made with different circumstances in mind.