HECS, income-contingent loans and death duties

There was a very nice article on Andrew Norton in the AFR on Monday.

Andrew Norton is an outsider in higher education. He doesn’t have a PhD, he’s not an academic researcher, he’s a self-described “classical liberal” and he’s not at all part of the clubbish circle of vice-chancellors, administrators and bureaucrats who run our universities.

Yet from this position way outside the tent, Norton has become ­Australia’s most influential thinker about ­universities, and his vision of a ­deregulated, market-based higher ­education system is coming ever closer to reality.

I’m not convinced that’s entirely true though – Andrew was an advisor to former education minister David Kemp before becoming an advisor to two Melbourne University VCs making him both an administrator and bureaucrat. He is only an outsider to the extent that his views on higher education are very different to the usual rent-seeking approaches.

Anyway Andrew has long had a bee in his bonnet about HECS – in particular, the fact that HECS is designed as an income-contingent loan. To quickly simplify and summarise: The government provides a loan to students to finance their studies and the loan is only repayable if and when the student’s (Australian taxable) income rises above a threshold level. Students don’t pay interest on these loans (but the loans are adjusted for CPI). Okay – so far so good. But …

Because women in richer households often work very little or not at all, particularly after they have children, many never earn enough to repay the HECS debt they owe to the federal ­government for their university education.

As a result, large numbers of people (not all women), who are only partly or not at all engaged in the workforce, are going to reach the end of their lives without paying off their HECS debts. And unlike other debts, HECS debts are forgiven when the debtor dies.

Norton calculated that if the government decided to recoup this lost money by reclaiming HECS debts from the estates of the non-payers it would add an estimated $800 million a year to the budget bottom line. (Even though the HECS generation of students has not yet reached old age, the impact on the budget is immediate because of the government’s accrual accounting system.)

Andrew and I have disagreed on this point for as long as I can remember.

To my mind, there can be no “bad HECS debts”. If a student – for whatever reason – never earns enough to repay their HECS debt then, by definition, there is no debt. That is a risk the government accepts when it makes an income-contingent loan. Hold that thought while I digress.

The proposal to “recoup lost money” and spend it comes straight from the Wayne Swan school of budgeting – identify a future source of revenue and then spend the money now. The proposal to tax stay-at-home mums at some future date when they die to finance current education is going to be a hard sell. Think “marriage tax” and “death duty”. It also highlights the problem of using accrual accounting in public finance – no matter how you slice or dice the issue, this will be debt-financed expenditure. Sorry – make that deficit-tax financed expenditure.

Another source of revenue that Andrew has long pointed to is those Australians who leave the country, work overseas, earn mega-bucks, and never repay their HECS debt. Okay – this is a problem; but what is the solution? Ban individuals with HECS “debts” from leaving the country?

Anyway I do have some sympathy for Andrew’s position, but I can’t see how the issue can be resolved as long as the HECS system is an income-contingent loan scheme. What he is really suggesting is that the income-contingent aspect of HECS be scrapped. But then why have a government loan scheme and not a commercial loan scheme where government only paid the interest on student loans?

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69 Responses to HECS, income-contingent loans and death duties

  1. Streetcred

    The idea that I prefer better is repayment contingent upon not only the threshold but also an asset value test … and whilst we are talking about HECS abuse, let’s make the threshold test based upon aggregated family income … and I use the most liberal definition of ‘family’.

  2. Mayan

    Even though the HECS generation of students has not yet reached old age, the impact on the budget is immediate because of the government’s accrual accounting system.

    Sounds like dodgy accounting to me. From memory, prepaid funeral companies can’t record a profit until the service is provided, and I would guess a similar concept would apply here. Put simply, is there any certainty that a dead HECS debtor would have realisable assets left to pay the debt?

  3. JC

    sinc

    I can see both your arguments. I think what Andrew is getting at is that HECS loan ought to be reformatted in a way that it doesn’t extinguish against assets and the government would have a right to repayment on death. I reckon that would be fair.

  4. Sinclair Davidson

    JC – sure. But then it’s not an income-contingent loan. It is something else. I’m not opposed to something else, but then what is the role for government? Not much, if anything, to my mind.

  5. 2dogs

    The solution is to make the HECS funded places available in courses proportionate to the level of HECS repayment by graduates of that course.

    Providers of courses that don’t produce actual HECS repayers will need to charge up-front fees.

  6. entropy

    But, but, that would out southern cross uni out of business, 2dogs!

  7. 2dogs

    And that is a problem how, entropy?

  8. 2dogs

    Rabz doctrine by stealth.

  9. Tracey

    What about the Professional Students who do course after course after course? At some point are they denied HECS loans? Honest question; I don’t know anyone at Uni.

  10. 2dogs

    No, Tracey, you can accumulate as much HECS debt as one’s heart desires.

  11. H B Bear

    The more welfare and government spending that is asset and wealth tested the better in my book. As a PAYG salary earner I’m sick of seeing roughly a third of my wages disappear every fortnight while asset rich baby boomers and others help themselves to the PBS, part-pensions, utilities and local government rebates and so on.

    By way of personal anecdote, a friend of my mothers went back to Uni to do a Dip Ed after her own kids finished uni. She accrued a HECS debt knowing her income would never require it to be repaid. She also draws a part-pension despite owning an unencumbered primary residence of $1.5m+ and a 20 acre hobby farm. Nice work if you can get it.

  12. MemoryVault

    I’ve got a great new idea.
    1) – Establish a universal, independent exam for the end of high school. Call it something catchy like a “matriculation”
    2) – Offer a small number of “scholarships” to the brightest and hardest working – based on the results of the “matriculation” exam.
    3) – Encourage firms, with tax incentives, to offer “cadetships”, where the firm pays the uni fees, and the student works part time. Competition for “cadetships” based on matriculation results.
    4) – Get large institutional employers, like Education Departments, to offer “bursaries”. That’s where the Department pays the uni fees for ‘X’ years, and the student then owes the department ‘Y’ years as an employee, to be posted wherever the Department needs an employee.
    5) – Change employment laws to allow those who don’t qualify for any of the above, to work odd jobs at odd hours, under odd agreements, so they can attend uni part time.

    Oh, sorry.
    Just realised – that wasn’t a “new idea”.
    That was a flashback to my youth in the 60′s.

    Damn this Alzheimers.

  13. Sid

    Option. HECS payments begin to be re-paid at the point of:
    (a) income contingent test, or
    (b) [x] year holiday period,
    whichever comes first. ‘X’ might be, say, 3-4 years. In other words, you have 3-4 years to get your career sorted.

    Would have to be some exclusion for perpetual students (although I might only have HECS available for the first undergraduate degree).

  14. Trish

    Centre link “deem” my income to also be my husbands income. No doubt most of these women have husbands earning substantial salaries. This should be used to repay the debt.

  15. Notafan

    I’d certainly only offer full fee places to mature age students.
    The tertiary sector is bloated and a lot of people would be better off with cadetships but why would employers pay for training if the government will do it?

  16. LordAzrael

    It changes it from income contingent to income deferred. Its still only indexed at CPI, and surely the taxpayers have more of a right to see payback out of the estate than relatives ? It would still be more acceptable than the private alternative as it is either deferred until income reaches a level or death, in which case it is only repaid if the estate has sufficient assets (and its been interest free the whole time).

    Re people travelling overseas, just make it part of the obligation under hecs to provide their overseas income tax return each year, and assess a HECS repayment scheduled based on the overseas income.

  17. Notafan

    If Australia were to introduce private student loans would that has a positive effect on the tertiary education market, student expectations would be higher, courses that were not up scratch would close?
    That would be a nice way to clean up our gender studying universities.

  18. Bill Shut

    Just been reading a nursing journal. Mature age student does 3 year uni nursing degree and passes with flying colours. The course is fully funded by you taxpayers. She won’t be working as a nurse because she’s 92 but she plans to go into the academic side. Somebody approved this.

  19. Pedro

    Sinclair, seems to me there is some sense in reducing the level of income contingency because of the incentive effects, while still having the govt carry a level of risk that would not be acceptable to the private sector. If there is a justification for any education funding by govt, and no point arguing there isn’t, then the best next step is to reduce the level of education spending without broader flow-on benefits.

    I know HECS doesn’t cover anything like the cost of a degree, but an increase is cost recovery by the govt, which is what we are talking about, does not logically lead to an even bigger reduction in the cost to govt through the complete privatisation of some of the funding (which I’m for, so you’re not distracted, its just not a comparable thing).

  20. entropy

    Linda Botterill from ANU has been pushing income contingent loans as a drought assistance measure for years. I suspect it would not work too well at all as any decent accountant would make sure the farmer never made enough to meet the income threshold*. So if the debt is forgiven on death it would be a bottomless pit, and if it was to be rapid at death it would just burden destroy the viability of the next generation who probably also has to pay out their siblings shares of the inheritance.

    It wouldn’t work anyway as we live in the land of droughts and flooding rains, and before the poor old cocky had a chance to start paying the loan back, the next drought would arrive, and as with all new droughts, it will be the worst one ever. The cockies would quickly run out of equity, and it would be all owed to the government.

    *really, HECS is pretty well designed around the assumption we all work for the man** on salaries and wages.

    **generic ‘man’, not gender specific. Certainly not cis-gender either.

  21. Pedro

    The answer to the drought assistance problem is to not have any. It should be the same as the lack of customers for DVD rental problem.

  22. stackja

    Pedro
    #1286708, posted on April 30, 2014 at 8:16 pm
    The answer to the drought assistance problem is to not have any. It should be the same as the lack of customers for DVD rental problem.

    We cannot download food over the internet if the farms go out of business.

  23. entropy

    Regardless of policy merits or lack thereof, I would say that any government that doesn’t provide drought assistance will be done and dusted.

    Have you heard of the Ray Martin effect? The way it works is Channel Nine drags Ray and his hair out of retirement, sends him out west to interview a busted arse prickle farmer and his wife, who takes him for a drive out to the dam where they drag a dying sheep, or preferably a cute little joey, out of the mud at the bottom of the dam.
    The three year old daughter will be there, cute as a button, to be filmed standing in the middle of the cracked clay elsewhere at the bottom of the dam, with a deep blue sky behind her, liberally coasted in dust by the cameraman. The cameraman did such a good job that the little girl tears up and the tears track through the dust on her cheeks. Ideally she would be holding the raggedy little joey as she explains to Ray, who asks her in as patronising a fashion as possible, when was the last time she played in the rain, to which she says, of course, “Never” as she coyly looks up at him through her dusty locks.

    If you walked down the mall in Brisbane, Sydney and Melbourne, four out of five people you talked to would say they want to help the poor farmers. Especially if they had seen Ray Martin the night before. No logic, no consideration of the policy implications. They want to help. Drought assistance will be provided.

  24. Go Tiges

    The reported numbers are large. Last time I looked, the value of the outstanding HECS debt was well north of $20 billion with about $4 billion of this reported as debt not expected to repaid. There is not a lot of data about this but I doubt Andrew’s assertion that there are hollow logs of cash to be found by chasing up Australians becoming qualified here and earning a fortune overseas. You’d reckon that most of them come home eventually and start paying. In which case, as the debt is repaid, the asset value goes down. I think the problem is that the Government reports the HECS debt under AASB 13 – the infamous fair value standard, which among other things requires it

    to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions

    Given that it’s (mostly) long term debt, small movements in interest rates generate significant fluctuations in asset/bad debt value. Be interesting to see what would happen if the Government did sell it off.

  25. .

    The problem is education is too expensive.

    Has anyone seen the cost of a “professional MBA” from UNSW? I think it is about 160k all up.

    Absurd. It’s an egregious example, but you can see the waste the way unis charge here. ‘Oh, they make money off that”.

    Well, perhaps they do. What is the total cost upfront, enrolment plus recommended materials, to get through a three or four year degree?

    http://indicativefees.unsw.edu.au/

    I am an: Undergraduate student

    My faculty is: Science

    My degree is: Bachelor of Science (3970)

    Results

    Indicative annual tuition fee for 2014: $35,760
    Indicative fee to complete program: $116,760
    Years to complete program: 3 years
    Weeks to complete program: 156 weeks

    Does not include recommended materials.

  26. Tel

    I think what Andrew is getting at is that HECS loan ought to be reformatted in a way that it doesn’t extinguish against assets and the government would have a right to repayment on death. I reckon that would be fair.

    I also think that would be fair, but not retrospectively to go back on an existing agreement. If the government has made some dumb deals in the past, then deciding to fix that up but just editing the contract is not the sort of thing we want to encourage (and might just perhaps also be unconstitutional, presuming anyone still takes that stuff seriously).

  27. Tel

    The problem is education is too expensive.

    This would suggest that either the market is uncompetitive because of barriers to entry, or else a Cantillon effect is in progress caused by money injection coming from somewhere.

  28. Tel

    We cannot download food over the internet if the farms go out of business.

    Sure you can, it’s called “online ordering”. You offer money, someone brings food… pizza, Chinese, raw vegetables, tins of beans, anything you want.

    There’s this thing called “supply chain” where lots of people ask each other what’s the best way to make food come when you pay money, with enough people involved in “supply chain” they can even search so hard they find someone who is able to figure out how to successfully manage a farm. No I’m not kidding, they can do it.

  29. mundi

    I was under the impression HECS only covered some of the cost, with the government chipping in the rest for free. Most degrees you pay $40k HECS but government spends $120k?

  30. brc

    There should be asset testing on hecs. It’s designed to get young penniless people an education. Established people looking for some mid-life oomph should pay their way.

    I also agree that places should be skewed towards those degrees with a high rate of repayment.

    A time-based, income weighted repayment should also be considered. That is, if after ten years, you haven’t made the threshold, your tax rate is going to go up a bit to pay your way. Even if it collects nothing, it would be a good signaller ‘you’ve got to pay for this eventually’

    Ultimately the issue is too much credentialism and not enough vocational training. There are too many people completing degrees for no purpose. That’s fine if you want to vainly collect letters for fun, but pay for your own hobby.

    Ultimately smaller universities are facing the same set of horrors as the music and book publishing industries have already been decimated from. When you can complete a top degree from an internationally renowned university without leaving your house, what is the purpose of a tin-pot regional uni? Soemthing the NBN is going to hasten, if it ever gets finished.

  31. Notafan

    Yeap, taxpayers shouldn’t have to subsidise degrees is gender studies, wine appreciation and other wanketry.
    As for Phds unless they have a commercial application, and that could be supported by industry, pay for it yourself.

  32. Tintarella di Luna

    A time-based, income weighted repayment should also be considered. That is, if after ten years, you haven’t made the threshold, your tax rate is going to go up a bit to pay your way. Even if it collects nothing, it would be a good signaller ‘you’ve got to pay for this eventually’

    What about all those like Gillard, Swan, Costello, Abbott, Emerson, Rudd, UnderpantsMan etc… who all got a free education can never paid a zac — how about that large rump of people who wen through those 20 years or so of free education, they’d probably all be earning a bit to pay their way either that or they’re in gaol, well who have we here then, Orkipolous, Craig Thomson. What about they get hit up for their fair share?

  33. MemoryVault

    What about they get hit up for their fair share?

    God I love the smell of retrospective legislation in the morning.
    Especially on a blog dedicated to the ideals of libertarianism, just laws and free markets.

  34. Tintarella di Luna

    just laws

    would that be simply laws or laws that are just and deliver justice?

  35. MemoryVault

    would that be simply laws or laws that are just and deliver justice?

    To be honest Tinta, I’ve been coming to this blog for over a year now, and I’m still not sure what it really stands for – if anything.

  36. Tintarella di Luna

    To be honest Tinta, I’ve been coming to this blog for over a year now, and I’m still not sure what it really stands for – if anything.

    You are reading too much into MV — just treat it like a drug.

  37. johanna

    The income-contingent aspect wouldn’t matter so much if the repayment thresholds were not so high. In the current financial year, you have to earn around $50,000 before you have to repay a penny of your HECS debt. If only other lenders were so forgiving!

    The current system actually rewards people who take out “loans” from taxpayers which they have no intention and/or capacity to ever repay.

    At a minimum, the threshold should be dropped to just above the minimum wage level, even if repayments are low. For mature age (say over 30) students, the loans should be means and asset tested, and repayment levels should be more stringent. The objective should be to make people consider whether they can afford to take out such a loan, rather than a way to study some hobby at taxpayers’ expense with no real plan for ever paying the money back.

  38. Norton’s position is unsaleable.

    When HECS was brought in, the only way to make it politically palatable was make it income contingent. That was the agreement. You can’t change the rules for existing debt-holders.

  39. Michel Lasouris

    Aussie pundit…Why not? It’s only a convention. I’m firmly of the belief that unpaid HECS should be deducted from the recipients estate, and thereafter their heirs. That’ll make them think….

  40. dianeh

    I’d certainly only offer full fee places to mature age students.

    Sorry I disagree but I incurred a HECS debt and paid it off as a mature age student. I started uni at 24 after working , on leaving high school, to earn enough money to support myself at uni.

    Your proposal would have denied me my education and career, as I could not afford to go if I had to pay full fees. And I have been working now for 20 years and paying the govt quite a nice amount of tax. I was at UNI (2nd year) when HECS was introduced.

  41. Aussie pundit…Why not? It’s only a convention.

    Because that was the arrangement that people entered when they went to university under this system. Changing the rules on someone who has already graduated tantamount to changing a contract after the contract is signed. It’s like altering the menu at a restaurant after you’ve ordered.

    And furthermore that was the political agreement with the voters when it was introduced. The income-contingent aspect was a reassurance that the new system wasn’t going to drive anyone into poverty or bankruptcy.

  42. politichix

    Tel
    #1286813, posted on April 30, 2014 at 9:54 pm
    There’s this thing called “supply chain” where lots of people ask each other what’s the best way to make food come when you pay money, with enough people involved in “supply chain” they can even search so hard they find someone who is able to figure out how to successfully manage a farm. No I’m not kidding, they can do it.

    You tell ‘em Tel! My parents are on the land so I have some skin on this game but have always wondered why farming and farmers are such sacred cows. Plenty of other “essential” industries are lumpy but are successfully run by a motivated private sector sans handouts.

  43. politichix

    Typo “in” not “on”

  44. Max

    Because women

    One thing missing from all this budget analysis is just how staggeringly expensive and long lasting social programmes for women are. And how little they contribute in the way of income taxes.

    While most men will put in 40, 50, 60 years in the workforce earning income, contributing and paying taxes a large number of women will spend a good 50 years squatting in a piece of prime real estate collecting benefits AND hampering economic growth via being a wild haired Harridan or its political equivalent a Greenie

  45. mundi

    If it’s a know percentage then wants the problem? Sounds like more dodgy government accounting.

    HECS repayments are just a tax and HECS is welfare.

  46. Combine_Dave

    When HECS was brought in, the only way to make it politically palatable was make it income contingent. That was the agreement. You can’t change the rules for existing debt-holders.

    Change it for future debt-holders only. And courses where no one pays the fees, either up front or via Hecs, should be shut down.

  47. .

    Aren’t you guys shocked the all-up tuition fee for a B Sc is over 116k AUD?

    I bloodywell am.

    So in a class of 30 students (small) – the government costs this at $4865 x 30 students = $145,950

    To run a couple of lectures, tutorials and hours of practicals for 11 weeks? Shared between a professor on less than 170k per year (effectively fixed and the max rate) and a couple of Ph D students paid casually?

    Remember most professors still have teaching responsibility for at least two subjects per semester on their campus.

    Sure, their are capital costs and consumables, but this seems a little outrageous.

    A level B or C Ph D teaching 1st year maths in lectures – four hours per week perhaps (2 hrs calculus, 2 hours linear algebra) and they might have 100-250 students, for 11 weeks. Plus the casually employed tutors.

    How does this cost $486,500? Or how do 250 students “cost” over 1.21 million to teach for 11 weeks?

    I’d like to see the accounting on these figures.

  48. johanna

    Dot, the US is a good example of what you describe. Tuition fees have been rising well above inflation for many years, and students end up with crippling loans which they must repay when they want to be starting families and saving up for a home.

    The reasons are twofold. Firstly, credentialism means that a college education is now regarded as a necessity for anyone who wants a decent, but not in any way spectacular, job. Secondly, universities are increasing their bureaucratic overheads at the expense of teaching staff. Most of the fees are skimmed off the top to pay for ever-growing administrative expenses.

    Both of those things are happening here as well.

    With the exception of scientific and technical subjects, the real overheads for delivering a degree course are tiny. You need a room and a teacher. In an age where all students have computers, that’s about it. How that translates into the numbers you describe is indeed a scandal.

  49. .

    Even at half the cost, running a first year history subject at a large university is overblown by probably about tenfold. Economics may be in the higher band and so be inflated 20 times.

    Would you agree?

    Just where is the money going? This is a goddamned scandal.

  50. MemoryVault

    Just where is the money going? This is a goddamned scandal.

    After Chris Turney’s “Ship of Fools” Boy’s Own Adventure to Antarctica, you need to ask?

  51. ProEng

    Memory Vault, agree with your proposal of exams, scholarships & bursaries. I did a survey in second or third year of my course and found that all the those that had managed to pass the quota for entry in the second year were scholarship holders. Another needed change is reintroduction of Senior Technical Colleges (or upgraded TAFE’s) which offer part time courses and a route to University final degree courses through subject exemptions (ie giving the brightest and experienced of Diploma holders a way to upgrade qualifications at University) I would think together with matriculation exams and scholarships that would halve the university students, double the skills of Australians and lift the ranking of Australian Universities in international ratings.

  52. Even at half the cost, running a first year history subject at a large university is overblown by probably about tenfold. Economics may be in the higher band and so be inflated 20 times.

    This is a very good point.
    The university sector may be much more diverse and market-driven in a decade or two. Only then will we discover the true cost of running these courses.

  53. Lysander

    When HECS was brought in, the only way to make it politically palatable was make it income contingent. That was the agreement. You can’t change the rules for existing debt-holders.

    Of course you can change it. Everyone has a “tax agreement” with government and they are always changing these so I see no reason why this HECS contract couldn’t be changed either. For example, Gillard changed it by providing incentives for paying off earlier.

  54. Of course you can change it.

    they could legislate to paint all the trees white too, but that doesn’t make it a good idea.

    Everyone has a “tax agreement” with government

    we do?

  55. Lysander

    we do?

    Yes you do. It’s called the pay your tax or go to gaol agreement.

    You mightn’t have signed on the dotted line but you’re still privy to the “agreement.” And they can change the agreement whenever they like.

    they could legislate to paint all the trees white too, but that doesn’t make it a good idea.

    Well that’d just be plain racist.

    Bigot.

  56. Heh.
    I actually got the metaphor from an article on the Aral Sea by AA Gill.

    Every tree in Uzbekistan is painted white. It’s the literalism of communism. Someone once wrote an after-lunch memo, and the next day they started painting all the trees.

  57. Lysander

    Surprised they didn’t choose red.

    An after-lunch memo sounds like a Mike Carlton article.

  58. I randomly googled Samarkand just now to see if it was true. Sure enough, the bases of these trees are all white.

  59. Notafan

    So there needs to be changes to HECs and the university sector needs to be more competitive, costs reduced. I certainly wasn’t thinking of 24 y o as mature age students. We were referring to older people given access to HECs for hobby type degrees.
    The US isn’t a great comparison as the Australian government still subsidies a substantial percentage of the cost of the course.
    The funding of non vocational qualifications, at least, could be subject to a lower repayment threshold.
    Isn’t part of the issue ensuring that the demand for tertiary education might work better if it is  driven more by economic demand and that should tie into what jobs are available?

  60. johanna

    Notafan, in the US the State universities (some of which are very good indeed) are also government subsidised to a large extent, and their lower fees reflect this. But there simply isn’t enough room for everyone, and the large number of private universities continues to grow.

    What they all have in common is skyrocketing fees (whatever the base) and increasing proportions of their income being spent on non-teaching expenses. Just like here.

  61. .

    Research outside of medicine or nuclear physics…why does it cost so much…and medicine clearly has a commercialisation value.

    Other than to buy data, commission a survey or to buy a stats package or travel for case studies interviews, why would a commerce faculty require high expenses for research…other than say a statistical consultant…they can get from the science or their own faculty???

    The only other variable may be buying out teaching time…which shouldn’t be too onerous.

  62. When I was a little girl, a ‘loan’ was ‘something that had to be paid back’.

    And a ‘gift’ was ‘something you didn’t have to pay back’.

    HECS seems to be somewhere between the two. A ‘lift’, perhaps. Or a ‘groan’.

    Can anyone clarify for me what other types of debt in Australia today are completely ignored if you ‘don’t have enough money to pay them’?

  63. I mean, don’t get me wrong or anything, it’s just that I’d like to know where else I can borrow money, and then not have to pay it back unless I earn enough to do so.

    So perhaps we need to reclassify HECS as something other than a ‘loan’. Perhaps a ‘levy’ is more appropriate, because then you only have to pay it if your income kicks in over a certain point. Calling it a ‘student loan’ is nonsense.

  64. Ellen of Tasmania

    We have an education bubble.

    If the government got out of it, education would be better and cheaper.

  65. Can anyone clarify for me what other types of debt in Australia today are completely ignored if you ‘don’t have enough money to pay them’?

    business capital. If you invest in a company and it goes broke, they don’t pay you back. If you buy shares and the company gets liquidated, you don’t get a refund.

  66. kurt

    I would be interested to see what costs are involved for permanent residents who come to Australia to study and then return home to never pay a cent in HECS.

    There is massive immigration churn in this country. I suspect the costs would be in the billions.

  67. Michel Lasouris

    There seems to be a huge market for realistically priced degrees that have real standing and top tutors. It seems also that “traditional” centres of learning are ripping students off. Cannot most of the “leg-work’ necessary to achieve a degree can be done over the ‘net? Followed of course with proper exams that are closely monitored to prevent plagarism and other cheating.
    (Apologies for ending a sentence above with a preposition)

  68. Yohan

    I know 3 women in their 50′s doing this. They are divorced, and studying useless degrees at UNI just for something to do. Those HECS debts will never be repaid.

  69. Andrew Norton

    The report asks the question whether income contingency is the principle, or whether income contingent repayment is just a mechanism we use to smooth income and manage risk while still aiming to recover as much of the money lent as possible. If it is a mechanism, as the report suggests, the departures from income contingency are not in themselves an issue.

    On the deceased estate and overseas repayment issue the report recommends these be applied in future, making it clear that even if income contingency was the principle in the past that would no longer be the case.

    As the Commission of Audit says, the main argument against the overseas recovery measure is that there would be new administrative costs and annual revenue increases would probably not be massive. The report goes for a simple flat annual repayment to deal with some of the bureaucratic complexities evident in England, where they try to apply income contingency to overseas graduates.

    All the detail is here.

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