The student income support system under COVID-19

A previous post on my new paper on tertiary student finances under COVID-19 showed that, despite two lockdown-caused crashes in employment, students generally did well out of the COVID-affected labour market. This post looks at the student income support system. It too did well in maintaining and increasing student living standards.

Bonus payments for student income support recipients

The base student income support payments are modest. When COVID arrived in Australia in early 2020 the fortnightly Youth Allowance rates were $304.60 a fortnight for 18 year olds living at home, and $462.50 if living away from home. But COVID-19 bonuses significantly increased the financial benefits of being on student income support.

Students receiving YA, Austudy or Abstudy on 12 March 2020 received a $750 economic stimulus payment. From 27 April to 24 September 2020 they received the $550 fortnightly Coronavirus Supplement. This supplement was then phased down, to $225 a fortnight from 25 September 2020 to 31 December 2020, and then $150 a fortnight from 1 January to 31 March 2021. A student continuously on student income support from March 2020 to March 2021 received more than $9,000 in COVID-related bonus payments.

From 1 April 2021 the base student income support rates were permanently increased by $50 a fortnight.

The number of students receiving income support increased

After March 2020 the number of Youth Allowance recipients increased significantly compared to the same months in 2019, as the chart below shows.

Source: DSS, JobSeeker and Youth Allowance recipients: monthly profile

Austudy and Abstudy data is reported quarterly rather than monthly. Austudy, like Youth Allowance, experienced a sharp increase in recipient numbers after the March quarter in 2020 compared to the same quarters in 2019. Abstudy numbers also increased, but by a lesser percentage.

Source: DSS, DSS payment demographic data

Drivers of growth — eligibility for student income support

In 2020 the government temporarily relaxed some eligibility criteria for student income support, including the assets test and the social security waiting period for new permanent residents.

However, labour market changes were the larger driver of increased eligibility. Covering all age groups (rather than the 15-to-24-year-old age group that I focused on in my previous post) tertiary student employment declined by 180,000 between the February and May quarters of 2020 (table 25a). Many more students could satisfy the personal income test.

However, the student personal income test is not the only labour market relevant factor relevant to student eligibility levels.

For students on Austudy, independent Youth Allowance or independent Abstudy, usually just over half of all recipients, there is also a partner income test. At the time of the 2016 Census about a quarter of full-time tertiary students in the 22 to 40 age range were in a registered or de facto marriage.

To the extent that partners lost their jobs, that could make more students who met the personal income test prior to COVID eligible for student income support.

For students aged 21 years or less generally a parental income test applies. This test works in two ways, only one of which seems relevant to 2020. When the actual income of parents is measured it is based on a preceding tax year, before COVID could affect their income. But if parents are on social security benefits this satisfies the parental income test. Most people on JobSeeker won’t have children aged 21 years or less who are full-time tertiary education students, but the chart below shows an increase in JobSeeker numbers at the right time. Combined with zero or low personal student income, this provides the mechanism by which the general labour market decline of March to May 2020 could quickly translate into more students receiving dependent Youth Allowance.

Source: DSS, JobSeeker Payment and Youth Allowance recipients – monthly profile

Data supplied to me by the Department of Social Services indicates that, on a late June 2020 to late June 2019 comparison, the increase in dependent student income support numbers (26%) was higher than for independent student income support (21%).

An annual review of parental income status in September and October, along with course completions, contributes to the decline in recipient numbers in the final quarter of the year.

Drivers of growth — attractiveness of student income support

Prior to 2020 Youth Allowance and Austudy numbers had been trending down. Possibly this is due to the reverse of the 2020 situation. With a generally improving labour market in the late 2010s increased student parent and partner income meant that fewer students could satisfy the household income tests.

But perhaps there is more to the increases in recipient numbers in 2020 than just eligibility.

Another, not mutually exclusive, explanation is that pre-COVID an increasing number of students who met the eligibility criteria judged that student income support failed a cost-benefit analysis. It does not pay much, requires reporting of personal income every fourteen days, and drags parents and partners into intrusive scrutiny of their finances. A couple of shifts at a cafe is better than dealing with Centrelink.

The COVID bonus payments temporarily flipped the cost-benefit calculation. Potential income from work went down while social security income increased, making it worthwhile for eligible students to apply.

My paper includes Youth Allowance data showing that 2021 recipient numbers exceeded 2019 levels, despite being lower than in 2020 — perhaps students who went on benefits remained on them, despite an improved labour market. But in 2022 numbers are back below 2019 levels.

Conclusion

Student income support trends cannot be fully explained using the available data. But the system worked in 2020, delivering increased benefits to more students as a major economic crisis threatened their living standards.

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