Stop digging – HECS and death duties

Oh dear – that old chestnut.

Federal Education Minister Christopher Pyne has opened the door to collecting HECS debts from deceased estates, a policy move which would boost government revenue by an estimated $800 million a year.

In an interview with The Australian Financial Review Mr Pyne said he had no “ideological opposition” to collecting debts from the estates of former students who died still owing money to the government’s income contingent student loan scheme, which is commonly known as HECS.

Hmmmm. I don’t know what the average HECS debt is. Let’s say about $20,000. So 800 million divided by 20,000 is 40 thousand. We’re invited to believe that, at least, 40 thousand university graduates die each and every year owing about $20,000 in HECS? University graduates must have a very short life expectancy. HECS has only been around for about 25 years.

I have harped on this before and there is no point harping on it again. The problem the Abbott government has is that it has included a whole bunch of policy in the budget that isn’t really about the budget. The higher education reforms are important and valuable and, on balance, good. But they’re not really about the budget. So too the Australian Border Force – an idea I find quite creepy. Why muddy the waters?

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53 Responses to Stop digging – HECS and death duties

  1. Rabz

    The incompetence continues.

  2. Alfonso

    That’s not death duties, it’s simply collecting a debt from a deceased estate.
    Happens all the time.

  3. Sinclair Davidson

    HECS is an income-contingent loan. Most deceased estates have no income.

  4. Infidel Tiger

    Oh no. Fat Joe’s socialist past comes back to haunt his socialist present:

    http://www.smh.com.au/federal-politics/political-news/joe-hockey-video-from-1987-shows-treasurer-protesting-against-university-fees-20140528-394jn.html

    I think we can forgive young Fat Joe. He was young and naive… and hungry.

  5. Rabz

    Mr Pyne said he had no “ideological opposition” to collecting debts from the estates of former students who died still owing money to the government’s income contingent student loan scheme

    So in other words, he has no “ideological opposition” to death duties. Seriously, I consider Pyne to be an utter embarrassment, but this truly is cringeworthy. Add it to the recovery of pensions (post euthanasia) for all those millionaire pensioners we’ve been hearing so much about of late.

    Earth to Pyne – this is not a policy you want to run with. The government you are currently a member of will not see any significant sums of money from this policy and it will give labor an opportunity to “further extend it”, all in the name of that wonderful concept of “everyone paying their share”.

    Idiots.

  6. Alfonso

    HECS is an income-contingent loan. Most deceased estates have no income.
    Errr, so? It’s debt collecting.

  7. Infidel Tiger

    We’ll need a red tape commission to clean up after this embarrassing government.

    Can they make things any more complicated?

  8. Sinclair Davidson

    No – if you have no income, there is no debt.

  9. .

    Infidel Tiger
    #1323469, posted on May 28, 2014 at 5:50 pm
    We’ll need a red tape commission to clean up after this embarrassing government.

    Can they make things any more complicated?

    Makes you wish they were all bent conveyancing clerks with connections to bent NSW cops, who worked in the central local court circuit under Murray Farquhar at times, doesn’t it?

  10. Notafan

    If HECs loans are bigger and attract bigger interest charges because of the proposed changes won’t that just encourage more people to take steps to avoid paying them back?
    Leaving the country, working parttime and the usual tax minimisation will be more attractive to more people.
    Are there other alternatives to income contingent loans?
    Perhaps limiting the availability of HECs loans to some courses? Eg you can only access HECs for one bachelor degree after that stump up in advance for a full fee course. That might also encourage tertiary institutions to make some courses more cost effective.

  11. And don’t forget – with death duties, you inevitably need gift and inheritance taxes.

    Even if it were a good idea (which it isn’t), it would still be a bad idea to retrospectively change the terms of existing loans. Immoral, even.

  12. Tim

    Most deceased estates have no income.

    Actually, most estates that are competently managed will have income for up to three years after death, in order to take advantage of the tax thresholds.

  13. Nathan

    Instead of thinking of ways to claw back HECS/HELP from deceased estates Pyne et al should be working out how to use repayment/reduction rates for HECS/HELP loan amounts to incentivise young professionals (or Tradies if they extend the program to vocational students) to move to, or return to, rural and remote areas that need their skills and qualifications.

    Set the incentive rates based on scarcity of skill and ‘hardship’ of the location to drive interest. Need a Dr in an Aboriginal community in outback WA? Offer an additional 10%-20% reduction in HECS/HELP debt for each year completed on top of the amount repaid through tax. (How much fun would the Prod. Comm. or similar have scoping and costing such a program!)

    Who knows, the young Professionals/Tradies might meet a local, call in love, marry, start a family and become a longstanding and valued member of the community!

  14. Yobbo

    That’s not death duties, it’s simply collecting a debt from a deceased estate.
    Happens all the time.

    Exactly. Why should HECS be the only debt exempt from it?

  15. Infidel Tiger

    Just shops you how pointless tertiary education is if there are that many people with degrees who never earned enough to pay it back.

  16. Exactly. Why should HECS be the only debt exempt from it?

    Aside from what I mentioned about retrospective changes like that being wrong? And if it only applied to new lot, it would be a lot of political pain but a long time before payoff… which would be minor – the collection process from the government would be woeful, and open to all sorts of legal wrangles and loopholes.

    And I think Sinc is right that it would become de-facto death duty.

  17. entropy

    well except that most people would have paid it off long before they exit this mortal coil.

    This would be targeting the old biddies with time on their hands that infest numerous courses (usually with “studies” in their name) that have no intention of ever earning a crumpet from whatever they pick up from the course. Its just something to do, with the added bonus of taking up a disproportionate amount of the lecturers’ and tutors’ time to the detriment of the younger students looking for a qualification in their chosen field.

    The issue of course is the younguns with a HECS debt that get killed (in Laos, or in a car for example) who still have a HECS debt but no estate worth mentioning.

    .

  18. Yeah, HECS aint optimal, but implemented this way, I reckon it’d be the thin end of the wedge – not just for death duties, but for a whole new raft of welfare funded in a similar manner (eg, health, pensions, etc)

  19. Tel

    No – if you have no income, there is no debt.

    If you have no income, you are not required to make payments on the debt… but that hardly causes the debt to just go away.

    That said, correct accounting won’t fix an unpopular policy; and someone who grew old and never earned much, is unlikely to leave much behind (doubly so if they expect the ATO coming to snatch at the crumbs). Every tax policy must obey Willie Sutton’s Law.

    I suggest that a better idea is to withhold some of the payment to the educational institution until that debt is paid back. It shares the risk and puts the incentives in the right place.

  20. Notafan

    Is there any way to get old biddies off Hecs eg refusing hecs places to retirees?
    They can study but only as full fee?
    Universitis clearly have no interest in protecting the taxpayers interest.

  21. H B Bear

    HECS is an income-contingent loan.

    Well fix that for a start. Once you are dead you have no income – then you look to assets to repay the loan. Why should the loan disappear on death if there are alternative means of repayment?

  22. Tel

    This would be targeting the old biddies with time on their hands that infest numerous courses (usually with “studies” in their name) that have no intention of ever earning a crumpet from whatever they pick up from the course.

    My approach targets that situation quite well…

  23. I suggest that a better idea is to withhold some of the payment to the educational institution until that debt is paid back. It shares the risk and puts the incentives in the right place.

    I like this idea. Give them an incentive to create useful courses… might see a decline in courses majoring in “[XYZ] Studies”

  24. entropy

    I like it too, Tel, I like it a lot.

    The risk is that the institution would just up the fees for everyone else though.

  25. Peter from SA

    Just shops you how pointless tertiary education is if there are that many people with degrees who never earned enough to pay it back.

    how about some stats on where the unpaid HECS debts come from by insitution and by course?

    that would help inform students about their chances of getting a job on the back of a communications degree (unless they look particularly good on TV, of course) …

  26. that would help inform students about their chances of getting a job on the back of a communications degree (unless they look particularly good on TV, of course) …

    Another good point…

  27. john constantine

    don’t power companies bill the deceased estate for damages when a fatal car crash damages a power pole?.

  28. Kram

    Oh fuck off, if they own money and they are dead then the estate should pay it.

  29. Baldrick

    If I owe money to a bank from a loan and die, it will be collected from my deceased estate. There should be no difference when collecting a government debt from a deceased estate.
    Sounds like good policy to me.

  30. Splatacrobat

    We’re invited to believe that, at least, 40 thousand university graduates die each and every year owing about $20,000 in HECS?

    I think Pyne was counting the brain dead students as well. That would make 40,000 believable.

  31. Boambee John

    “Perhaps limiting the availability of HECs loans to some courses? Eg you can only access HECs for one bachelor degree after that stump up in advance for a full fee course. That might also encourage tertiary institutions to make some courses more cost effective.”

    Notafan:

    Another option worth considering would be to limit access to HECS (or whatever its current fashionable name might be).

    Up this way, there was a big blurb on the news a couple of years back about a person in, IIRC, their eighties, getting a PhD. There is no way that person will ever repay the money.

    Tighten up, so that HECS recipients must have a reasonable period of working life left, to at least give the appearance that the money will be repaid to some extent.

  32. Splatacrobat

    Isn’t that the point of probate? Settling the deceased debt’s to creditors?

  33. Boambee John

    “(unless they look particularly good on TV, of course)”

    It is a standing joke in our household that TV news readers are almost exclusively recruited from the YFP demographic – Young, Female and Photogenic!

  34. Splatacrobat

    Probate is a legal document. Receipt of probate is the first step in the legal process of administering the estate of a deceased person, resolving all claims and distributing the deceased person’s property under a will.

    Its the same as winding up a company. Creditors ( Banks, utilities, Council rates etc) are paid then beneficiaries.

  35. Craig Mc

    I like this idea. Give them an incentive to create useful courses… might see a decline in courses majoring in “[XYZ] Studies”

    Do the actuarial work to see which degrees are bad loan risks and charge higher interest on them. You know, like everything else in the real world.

  36. Aristogeiton

    A mortuo tributum exigere.

    “Let shame then be defined as a kind of pain or uneasiness in respect of misdeeds, past, present, or future, which seem to tend to bring dishonor; and shamelessness as contempt and indifference in regard to these same things. If this definition of shame is correct, it follows that we are ashamed of all such misdeeds as seem to be disgraceful, either for ourselves or for those whom we care for. Such are all those that are due to vice, such as throwing away one’s shield or taking to flight, for this is due to cowardice; [...] And making profit out of what is petty or disgraceful, or out of the weak, such as the indigent or dead; whence the proverb, “to rob even a corpse,” for this is due to base love of gain and stinginess.”
    (Aristotle, Rhetoric, 2.6.2-5)

  37. Do the actuarial work to see which degrees are bad loan risks and charge higher interest on them. You know, like everything else in the real world.

    Good idea #3… of course if they don’t earn enough, they’ll still never pay it back, but at least this way, those that earn enough cash despite their useless degree will be subsidising their former peers. LOL

    So, to recap:

    1. Link uni funding (partially) to if/when loan is repaid
    2. Increase transparency so that students can make informed decision about useless degrees
    3. Charge risk-based interest rate on degree type

    That’s a pretty good start.

    I reckon the Cat could fix this country up in no time :)

  38. HECS is an income-contingent loan. Most deceased estates have no income.

    It’s a levy, payable only by graduates, that’s meant to approximately resemble the cost of their higher education, a little bit, kind of.

    In other words, it’s just like the Medicare levy. It’s even in increments based on income level, like the Medicare levy.

    I still don’t believe it’s a loan at all, which is why they have no right to claim it from deceased estates.

  39. Aristogeiton

    Fleeced
    #1323809, posted on May 28, 2014 at 10:32 pm
    Do the actuarial work to see which degrees are bad loan risks and charge higher interest on them. You know, like everything else in the real world.

    Good idea #3… of course if they don’t earn enough, they’ll still never pay it back, but at least this way, those that earn enough cash despite their useless degree will be subsidising their former peers. LOL

    So, to recap:

    1. Link uni funding (partially) to if/when loan is repaid
    2. Increase transparency so that students can make informed decision about useless degrees
    3. Charge risk-based interest rate on degree type

    That’s a pretty good start.

    I reckon the Cat could fix this country up in no time

    All good ideas, of course only after passing the Rabz Omnibus Bill, and Fisk’s Law ordering the internment of lefties and altering the Mental Health Act to have leftism classified as a mental illness.

  40. min

    What happens after a female student marries ,is not working does she still have to pay debt? Teacher training if you married before you worked out the contract you still had to repay even if you weren’t working.
    People working overseas do not pay back HECS either I believe
    Granddaughter is studying medicine where an undergrad. Degree was required ,now has 4 years of study to qualify lectures 9-5 daily ,tutes til 2.30 Saturday so no time for job.

  41. Not a student

    To me, the biggest, anti-conservative thing about the university changes is that interest will be applied to all HECS debts, even if they were incurred years ago. Students were told, in writing, before signing up that the loans were interest free (see the ABC’s fact check site for a list of the various representations). You wouldn’t be able to get away with changing terms if this was a personal loan, it’s a bad precedent for government to start doing it.

    I say start, although I know these sort of retrospective changes were just the sort of thing Gillard, Rudd etc. loved. But that’s not what this government was supposed to be about. People should be able to make plans and financial decisions based on what they are told.

  42. john of dandenong

    Formal tertiary education is nothing more, in these days, a service that allows most recipients to access higher wages. I have a masters from RMIT (circa – mid 90s at 55 years of age) and paid for it. Not worth the cost of the certificate. Alternative – depending on whether you seek knowledge or networking, is to research you chosen interest. These days the internet is your best friend, not some ideoligically driven lecturer. Most employers assess what you have done work wise rather than your academic achievements. Post Nominal Initials are attractive, but mostly to the holder. Jock Marshall, the foundation professor of zoology at Monash University, not only had one arm but no formal tertiary education. cheers

  43. Alfonso

    Nah, it’s levy vs tax time again.
    Any govt can add a clause that defines the HECs debt owing at death and passes that fixed amount as a debt to the estate to be collected from the estate.
    Easy peecy.

  44. Roger

    Sinclair Davidson #1323471, posted on May 28, 2014 at 5:55 pm
    No – if you have no income, there is no debt.

    No – the debt still exists on the government’s books and will have to be accounted for in some way.
    The income-linked mechanism for re-payment will not be triggered by most deceased estates (some estates do earn income), but the government could, in theory, enact legislation to effect collection of the debt from an estate.

  45. Alfonso

    “Prime Minister Tony Abbott has quashed suggestions the Government will collect higher education loan debts from dead people’s estates.”

    Gee, thanks Tone.
    Give them another free pass and send the f*****g bill to me as per f*****g usual.

  46. .

    Fucking Rabz. I come up with the idea of a mega repeal bill, C.L. gives it a spiffy title and rabz gets the credit because of his mantra to end the obsolete ABC.

  47. Mr Skeletor

    “Prime Minister Tony Abbott has quashed suggestions the Government will collect higher education loan debts from dead people’s estates.”

    Gee, thanks Tone.
    Give them another free pass and send the f*****g bill to me as per f*****g usual.

    Maybe he did that so that the socialists on this site start liking him again.

  48. Cancel the entire HECS Program. It’s become a dogs breakfast.

  49. .

    I agree. Go back to scholarships. If you get into engineering 1st round – 100% scholarship.

    Otherwise, get a cadetship and pay for your subjects per term.

    The protests are not about free uni but stopping dumb people perpetually miseducating themselves at our expense.

  50. Aristogeiton

    .
    #1324224, posted on May 29, 2014 at 9:12 am
    Fucking Rabz. I come up with the idea of a mega repeal bill, C.L. gives it a spiffy title and rabz gets the credit because of his mantra to end the obsolete ABC.

    What was C. L.’s title?

  51. .

    Omnibus Repeal Bill 2007-2013 I believe (in working families…)

  52. Notafan

    I like scholarships they can be government or private cadetships,
    Failing that you get one bite at hecs for a single bachelor degree under retirement age.
    Prospective students will be more likely to choose wisely, work harder and maybe universities offer better prices.

  53. Andrew

    HECS is an income-contingent loan. Most deceased estates have no income.

    ^

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