Government flags introduction of household income test for HECS repayments

Elections, Politics — By on June 29, 2016 12:22 PM






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University repayments may soon be calculated according to household income if the Government adopts a controversial measure proposed in the 2016 budget.


The Turnbull Government is refusing to release their plans for the higher education sector ahead of the election however they have announced they will consider a series of reforms to reign in Government spending on universities.


One of the measures is the introduction of a “household income test” to determine when students should begin repaying their HECS debt. This would mean that the total income of everyone in their household such as their parents’ or partner’s incomes will be combined to decide when their HECS debt will have to be paid back.


Currently graduates do not start paying back their HECS loans until their personal income reaches over $54,126 a year.


Federal Education Minister Simon Birmingham has said that he welcomes suggestions on how the HECS system can be improved but that he will not be giving a running commentary on the issue.


Mr Birmingham told Fairfax Media “there is no point believing that just by racking up ever-increasing debts today, that somehow Australians down the track will miraculously be able to pay for them.”


Prime Minister Malcolm Turnbull told Channel 7’s Sunrise after the budget was handed down that he thinks it is fair for students to make a greater contribution to funding their education.


The idea to introduce a household income test has come from a report by the Grattan Institute which also proposed lowering the income threshold to $42,000 a year.


Andrew Norton, the Grattan Institute’s education program director, told Fairfax Media “it is the part-time workers in families who are, long term, earning below the threshold who can and should pay.”


According to the Grattan Institute’s research, nearly half of students with HECS debts and income below the current threshold of $54,126 live in households with disposable income exceeding $80,000 a year.


Therefore they say basing HECS repayments on household income would cut to the heart of a national university debt crisis that the Government estimates will reach $70 billion by 2018.


However, University of South Australia Student Association (USASA) President Carey Moore says we need to stop thinking of education as an unnecessary overhead in the national budget and start looking at it as investment.


“I don’t see it so much as a problem as I see it as a long-term investment.


“While its returns aren’t immediate, in the long-term it does pay off. Firstly, it pays off as a social benefit: providing doctors, teachers, scientists, engineers, artists and philosophers who keep our society going.


“Secondly, there is a direct financial return, as a graduate will earn a much higher income in their career than somebody who did not study and entered an entry-level career – which pays off as higher income tax revenue for the government as well as more spending into the economy,” Mr Moore says.


He says the introduction of a household income test rings immediate alarm bells.


“If it is a large household and everybody is working, albeit in low-income jobs, does this mean that household is now above the threshold? In that case, you could have low-income households paying amounts they cannot afford.


“If that is not the case, there will still be a strong perception of it. Either way, it will just discourage low-income households from sending students to university, out of fear of suddenly being declared above the threshold,” Mr Moore explains.


Mr Moore pointed out that with the threshold being effectively lowered, it’s going to require repayments a lot sooner.


“Only those who can afford the payments are going to want to send their children to university – effectively setting up the same barrier that literal upfront fees would,” he says.


Labor’s Shadow Assistant Education Minister Amanda Rishworth has similar concerns.


“They (The Government) have put out a discussion paper that has a whole range of things including taking it (HECS debt) from a person’s estate. I’d say the whole thing starts to take the idea of more of a bank loan which is what HECS never was meant to be.


“I think we need to make sure that it is affordable and it’s repaid when people get above the average weekly earnings not down to the minimum wage which is what has been discussed in the past,” Ms Rishworth says.


“If you have a situation like we were looking at with the Liberal Party cutting 20 per cent from universities at the same time as de-regulating fees, there is no doubt that we would see huge fee increases and not just in the short term but over time as well.


“There is a point when you just can’t afford to go to university anymore. You just look at it as an option and you’re smart enough and you’ve got the talent and you know what you want to do but you look at that and go it’s not going to be for me and I think that would lead to taking us down the wrong way.


“Two thirds of jobs in 10 years time are going to need a university degree we can’t be pricing people out of the market,” Ms Rishworth says.


Belinda Zanello is studying education part-time at UniSA and will vote in Ms Rishworth’s electorate of Kingston.


She says she thinks the current system is fair and that HECS should be determined solely on the income of the individual who studied.


“I think it is hard enough when a person is an unemployed full-time student on welfare living with their parents, and even more so for part-time students who do not receive Youth Allowance or Austudy (which is only for full-time students).

“Therefore part-time students must work harder to earn more to support themselves, while applying for 20 jobs a month as per the Newstart Allowance and then to learn that due to their parents’ income they may need to start paying HECS while still studying anyway, just puts greater financial strain on all students, who may need to consider dropping back to part-time study load just to pay for their study, and therefore graduate and enter their chosen industry/profession much later in life, which has a huge ripple effect for the economy, the real estate market, and more.

“As a part-time student in my final year, I do find it disappointing, and do feel for those who are still studying and yet to graduate soon, as this puts a lot of pressure on their future finances, and how they will cope under this financial strain should the household income testing and other HECS changes take place,” Ms Zanello says.

The Government revealed in the budget that they will delay the implementation of their higher education reforms that were announced back in 2014, which included measures such as a twenty per cent reduction in funding to universities and the de-regulation of course fees, which were wildly unpopular with voters, and will keep the current arrangements in place for 2017 while they undertake further consultation.

At this point the Government has not determined a threshold for household incomes before repayments kick in but the government is hoping to introduce any changes before the beginning of 2018.


If a Labor Government is elected on July 2, Ms Rishworth says they have no intention of proceeding with a household income test and will instead move to properly index university funding.


“We have announced that we want to work with universities to support 20,000 extra completions by 2020 so that’s not just about enrolling students it’s about supporting them on their journey… affordability is absolutely crucial and if price starts to be a deterrent for people then we’ve got a real problem,” she says.


Education Minister Simon Birmingham’s office was contacted for comment however they did not respond before the deadline.

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