FEATURE ARTICLE 2: HIGHER EDUCATION LOAN PROGRAMME
In 2005, the Australian Government introduced the Higher Education Loan Programme (HELP) replacing the Higher Education Contribution Scheme (HECS) and other previous income-contingent loan programmes for tuition fees. HELP includes HECS-HELP for eligible domestic students studying in Commonwealth supported places, FEE-HELP for eligible domestic fee-paying students (including undergraduate fee-paying students previously not eligible for loans) and OS-HELP for eligible Commonwealth supported students wishing to study part of their course overseas.
Students who are eligible for HECS-HELP and choose to pay their student contribution up-front to their provider receive a 20% discount for payments of $500 or more. There is no loan fee for HECS-HELP.
Students can take out a FEE-HELP loan for the total of their tuition fees, up to a lifetime limit of $80,000 in 2007 and $100,000 for courses in medicine, dentistry and veterinary science. A 20% loan fee applies to FEE-HELP loans for undergraduate courses, however there is no loan fee for FEE-HELP loans for postgraduate courses of study. A 20% loan fee also applies to OS-HELP loans.
Students who incur a HELP debt are required to make repayments when their income exceeds the minimum threshold for compulsory repayment, which was at $36,184 (indexed) in 2005-06. Students also have the option of making voluntary repayments and receiving a 10% bonus for repayments of $500 or more.
The income-contingent repayment arrangements under HELP mean that some people may never repay their HELP debt. Where a HELP debt is never repaid the Australian Government meets the cost; this is referred to as the ‘debt not expected to be repaid’. The loan arrangements for HELP involve deferral costs which are also met by the Australian Government (e.g. there is no real interest charged on HELP debts, HELP debts are indexed only in line with the Consumer Price Index to maintain their real value). Since 2005-06 the ‘fair value’ of outstanding HELP debts has been calculated to reflect debt not expected to be repaid and deferral costs. It is estimated that of the total $10,423 million (m) debt outstanding at 30 June 2006, $2,501m, is unlikely to be repaid (table 12.36).
12.36 HIGHER EDUCATION LOAN PROGRAMME (HELP) debt
|Total HELP debt at 30 June |
8 061 921
9 093 866
10 208 045
11 511 874
12 924 579
|Estimate of HELP debt not expected to be repaid(a) |
1 572 075
2 018 998
2 890 459
2 375 237
2 501 158
|Total HELP debt estimated to be repaid |
6 489 846
7 074 868
7 317 586
9 136 637
10 423 421
|HELP fair value at 30 June 2006(b) |
8 184 600
|- nil or rounded to zero (including null cells) |
|(a) The estimated provision for the amount of HELP debt not expected to be repaid is determined by a preliminary actuarial assessment. |
|(b) The estimate of fair value reflects accumulated debt not expected to be repaid and accumulated deferral cost and accumulated value of bonuses for voluntary repayments. |
|Source: Department of Education, Science and Training, Annual Reports. |