Higher Education Contribution Scheme Research Articles

Narratives of financial assistance for university students and the emergence of HECS in Australia

ABSTRACT This article traces the development of four narratives of financial assistance for Australian university students – to encourage excellence; to meet public need; to build the stock of human capital; and as universal provision – and their effect on the development of a fifth narrative, centred on the Higher Education Contribution Scheme (HECS). Financial support schemes have been provided by governments, industry, philanthropic and religious groups, or a combination of these. These narratives reflect deep-seated ideas about the meaning and value of education, and the emphasis placed on public or private benefits. This article shows how these narratives have affected access to university and who has attended. It shows the influence of student support schemes in shaping higher education in Australia.

Revisiting revenue contingent loans for drought relief: government as risk manager

It is clear that Australian governments will provide assistance to farmers in drought, which is a rational political judgement supported by recent survey work suggesting strongly the pervasive existence among voters of agrarian sentiment. In this context, a reasonable question relates to what forms of assistance are most equitable for taxpayers and also have desirable properties for farm businesses. In this study it is argued that traditional and current approaches to drought assistance are not equitable and do not provide sufficient protection to farmers from default and thus insolvency risk. But there is an instrument available to government which can be designed to minimise taxpayer subsidies while at the same time delivering insurance for farmers against default: a Revenue Contingent Loan (RCL). Following the principles inherent in the Higher Education Contribution Scheme, a RCL is financial assistance repaid contingent on a farm's capacity to pay, meaning that loan defaults can be avoided. We model the revenue streams associated with a hypothetical loan of this type and illustrate the advantages for a farm business of these kinds of debt.

Low fertility among women graduates

James Franklin is Associate Professor of Mathematics at the University of New South Wales and Sarah Chee Tueno is a graduate of the University of New South Wales. Australian women who are university graduates have fewer children than non-graduates. In most cases this appears to be the result of circumstantial pressures not preference. Long years of study fill the most fertile years of women students and new graduates need further time to establish their careers. The chance of medical infertility increases with age so, for some, this means that childbearing is not postponed but ruled out. Graduates who do make the transition from university to professional work find that working hours are long and that professional occupations are now both highly demanding and insecure. Women who take time off to care for young children must depend on one insecure income (their partner’s) rather than two, and their return to work is uncertain. These difficulties of time, money and insecurity are compounded by problems in finding a suitable partner. They are magnified by the enduring tendency of women to marry up. Thus it can be more difficult for women graduates to find husbands than it is for women who are non-graduates. ERRATUM: page 44, at the end of the sentance; Many of these career-orientated women are willing to spend up to $US9,600 taking courses on how to find a partner. There should be endnote 43 which reads; S.A. Hewlett, Creating a Life: Professional Women and the Quest for Children, Miramax, New York, 2002 Also on page 44, at the end of the sentance; We have argued elsewhere that there are some prospects of raising graduate fertility through carefully targeted policies to reduce financial risk of childbearing, such as cancellation of the HECS debts of childbearers and paying a living wage to postgraduate research students. There should b e endnote 44 which reads; J. Franklin and S.C. Tueno, ‘Graduate and childless’, Quadrant, vol. 47, no. 7/8, July/Aug, 2003, 52-55; similar in N.O. Jackson, ‘The Higher Education Contribution Scheme — a HECS on the family?’ in G. Carmichael and A. Dharmalingam (Eds), Populations of New Zealand and Australia at the Millennium, special issue of Journal of Population Research, 2002, pp. 105-120 Copyright. Monash University and the author/s

Modeling income dynamics for public policy design: An application to income contingent student loans

This paper studies the importance of dynamic earnings modeling for the design of income contingent student loans (ICLs). ICLs have been shown to be theoretically optimal in terms of efficiency in the presence of risk aversion, adverse selection and moral hazard, and have attractive equity properties. Recognition of their benefits has led to their adoption for tertiary education tuition fees in countries including Australia, New Zealand, and the UK. Since the design of ICLs relies on the prediction of the underlying costs, we explore the extent to which the complexity of earnings modeling affects the estimation of loan subsidies. The use of Australian data allows us to compare our simulated debt repayments to actual repayments under the Australian Higher Education Contribution Scheme (HECS). Our findings reveal that the complexity of earnings modeling has considerable implications for the calculation of loan subsidies.

The Costs of Unpaid Higher Education Contribution Scheme Debts of Graduates Working Abroad

The Higher Education Contribution Scheme (HECS) is an income-contingent loan designed to collect tuition from Australian university students. The debt is collected on the basis of recorded incomes and, as a consequence, debtors living overseas will not repay. Using various data sources and assumptions, multiple scenarios are considered in order to estimate the extent of uncollected overseas debt. A conservative estimate of the amount of foregone HECS revenue for the 1989–2011 graduate cohorts working overseas is over $400 million, but it is shown that, under other plausible assumptions, the foregone revenue may be close to double this amount.

Higher Education Contribution Scheme (HECS)

The Higher Education Contribution Scheme (HECS) was the first national university policy in which tuition was collected through the tax system and dependent on the income of debtors. At the time of its introduction in 1989 HECS was a both controversial and novel initiative, with the financing reform process being accompanies by spirited and at times hostile argument. The paper documents and explains the political and economic context surrounding the introduction of HECS, and examines the views and activities of the major political groups engaged in the debate. We touch briefly on the role of the academic and research associated with the development of HECS. Systems of income contingent loans based on the Australian model are becoming commonplace internationally, a development which seemed very unlikely 25 years ago.

The Social effects of the Australian Higher Education Contribution Scheme (HECS)

Australia’s Higher Education Contribution Scheme (HECS) is an income contingent loan scheme, in which university students pay back part of the costs of their tuition after their post-university income reaches a certain threshold, is an important policy innovation for the financing of higher education. However, its critics claim that HECS increases socioeconomic inequalities in higher education and the HECS debt reduces the ability of young people to make the transitions to adulthood. This paper investigates these claims. There is no evidence that socioeconomic inequalities in higher education in Australia increased after the implementation of HECS in 1989 or the 1997 reforms. The magnitude of the HECS debt was found to have a negative impact on the transition to parenthood, but had no negative impacts on other transitions to adulthood: leaving the parental home, marriage and home ownership. Its effects on parenthood were moderate compared to other influences, such as full-time work in the previous year, marriage and being in a de facto relationship. Furthermore, only a small proportion of young people who attended university have large enough HECS debts for it to affect their fertility decisions.

An Analysis of FEE‐HELP in the Vocational Education and Training Sector

Abstract The public vocational education and training (VET) system is one of the few areas in Australia's tertiary education system where students are required to pay upfront fees without access to loan assistance. These arrangements may lead to sub‐optimal educational outcomes to the extent that prospective students reject a VET education on the basis of short‐term financial constraints. In this paper we analyse some of the important issues related to the adoption of FEE‐HELP (a 2005 federal government financial instrument based on the Higher Education Contribution Scheme (HECS)). It is argued that income contingent loans of this kind are associated with the advantages of both default‐protection and consumption smoothing. Using data from the first three waves of the Household Income and Labour Dynamics in Australia (HILDA) survey, we examine various empirical issues associated with the adoption of FEE‐HELP in VET, including the extent of private salary returns to VET qualifications. As well, we explore issues related to the public subsidies inherent in the adoption of FEE‐HELP in VET, and illustrate the time periods involved in loan repayments for various assumptions concerning the size of the charge and the future income of VET graduates. Administrative issues are considered, as are the implications for the Commonwealth government with respect to potential subsidies associated with the design parameters. In the 2007–08 Federal Budget, the former government announced a small extension of the FEE‐HELP system into Australian VET, a reform consistent with improved tertiary funding arrangements.

Births, debts and mirages: The impact of the Higher Education Contribution Scheme (HECS) and other factors on Australian fertility expectations

This paper uses survey data to examine the effect of the income-contingent charge mechanism, the Higher Education Contribution Scheme (HECS), and other demographic and attitudinal variables on fertility expectations in Australia over the recent past. HECS requires former Australian students to fund some of the costs of higher education through the repayment of interest-free loans made by the Australian government. Its defining characteristic is that repayments only occur when and if students future incomes exceed a particular level. Since its introduction in 1989, media and other populist commentary has suggested that HECS has had unanticipated effects on behaviour. Most recently, attention has focused on the effects of HECS on fertility, with some arguing that university graduates are delaying births, and having fewer children, because of their HECS debts. This paper demonstrates that the introduction of HECS has had no discernible impact on Australian fertility rates, nor on the number of children that people expect to have. However, education, age and a number of attitudinal factors are associated with significant differences in fertility expectations.

Higher Education Loans and Tax Evasion: A Response to Perceived Unfairness

Australian higher education funding policy has been a contentious and emotionally charged topic on the political agenda since the introduction of the Higher Education Contribution Scheme (HECS). Under HECS, students have options either to pay upfront or defer payment. This article examines the implications for the Australian Taxation Office, which has responsibility for debt collection among students who defer HECS payments. Results show that HECS debt undermines tax compliance directly, and indirectly through perceived injustice. The path model demonstrates how perceptions of government policy can shape cooperation with government in other spheres.

HECS and HECS‐HELP: Equity issues

There have been many changes to the Higher Education Contribution Scheme (HECS) since its introduction in 1989. The most significant of these is possibly the reforms announced in the 2003 Federal Budget, which allow universities to increase the contributions required of students by up to 25%. This paper considers the distribution of deferred HECS liabilities according to the socioeconomic status of students. An algorithm is presented for converting area‐level data to its individual‐level equivalent. It is found that students of lower socioeconomic status defer a much larger proportion of their HECS than students of higher socioeconomic status. The adverse side effects of HECS identified in the literature will therefore be more acute for low socioeconomic status background students than for their wealthier counterparts.

Effective Cost-Sharing Models in Higher Education: Insights from Low-Income Students in Australian Universities

This study examines the global trend in shifting university costs from na- tional governments to individual students and families, with a specific focus on the existing cost-sharing model in Australian higher education. The research examines the manner in which the availability of income-contingent loans (through the Higher Education Contribution Scheme, or HECS) enters into individual cost assessments and evaluative frameworks during the university exploration and search process of low- income Australian youth, and the resulting lessons that might be applied to other national contexts. Semi-structured interviews with 16 participants addressed a broad range of issues related to the development of educational aspirations, and how beliefs and attitudes about cost influenced participants' understanding and decision-making regarding tertiary enrollment and post-graduate plans. A number of discreet and related themes emerged from analysis of the interviews, including motivations for attending university; pre-university cost considerations; self-assessments of skills, abilities, and personal traits and characteristics; general financial orientation; pre-university experi- ences and influences; and the role of others including family, peers, teachers and other school staff. The author concludes that the Australian system is worthy of consideration by other nations as a possible mechanism for enhancing access to higher education for individuals who might otherwise not possess the opportunity to participate.

A NOTE ON THE RISING COST OF EDUCATION IN AUSTRALIA

Human capital, or a better educated labour force, is a major determinant of economic growth and productivity. However, recent trends in the cost of education in Australia may cause growth and productivity to suffer. For example, during the period 1982–2003 inflation rose on average by 4.4 per cent per annum, whereas the cost of education grew overall on average by 7.8 per cent. This has made education a relatively expensive item among Australian households. However, one can argue that the increased cost of education to private households may reflect choices to purchase a higher quality for their children in private schools and as such government should not be concerned about it. This paper compares and contrasts the cost of education in Australia and comparable economies with the cost of other goods and services embedded in the CPI (Consumer Price Index) basket, using the latest available quarterly data. Finally, the major determinants of the rising cost of education in Australia are examined. It is found, inter alia, that over the period 1986–2003 the increasing number of students enrolled at non-government primary and secondary schools and the introduction of the Higher Education Contribution Scheme (HECS) were two important determinants of the rising cost of education.

Nine Lessons for Teaching Negotiation Skills

Legal education – along with all tertiary education – has become oppressively expensive in recent years. Higher Education Contribution Scheme (HECS) fees have increased significantly, many faculties are charging top-up fees, and some students desperate for a legal education are taking up a rising number of full-fee paying places. Most students graduating from law faculties at the present time – even those on HECS – expect to be burdened with a debt of around $40,000 when they graduate. The scramble for jobs at the end of their study to pay off this burden has become more stressful, and has induced strategic job-centred approaches to the selection of units of study. Many students seek advice on what units of study will best enhance their employability. This paper outlines a project undertaken to collect empirical data from employers of graduates of the University of Sydney Law Faculty. The project, funded by a grant from the Faculty’s own Teaching Innovation Fund, was designed as a pilot project, to sample the views of a range of employers. An electronic survey was designed, and distributed to 100 organisations known to have employed University of Sydney law graduates recently. The survey went to small and large private law firms, government and non-government (non-profit) organizations, and commercial enterprises. Unfortunately, we did not obtain responses from all of the organizations invited to participate. Some were cautious of responding to the survey because they claimed they did not employ our graduates in sufficient numbers to be able to generalize their responses. Some did not reply at all, and because of the limited funds available for the project, no attempt was made to follow up those people. The reasons why some people did not respond at all might be the subject of a further study. If this small sample is at all indicative of broader opinion, it may be that law schools’ energies in expanding units of study on clinical legal skills are misdirected. The respondents to this survey suggest that they want to recruit graduate lawyers who can research, analyse and understand legal resources – meaning cases and legislation. They want recruits who can apply that knowledge to communicate advice and opinions on the law. The practical competencies – in drafting, interviewing, advocacy – come afterwards, with experience and on-the-job training.

The access implications of income-contingent charges for higher education: lessons from Australia

This paper describes the Higher Education Contribution Scheme (HECS), Australia's income-contingent charge mechanism, and analyses its impact on the social composition of university participation. We consider university participation data from three cohorts of young Australians. The first completed their schooling prior to HECS, the second following its introduction and the third after the scheme was amended substantially. We find that the social composition of participants was different in 1999 from that of 1988: the distribution was more equal. That outcome reflected strong relative growth in participation in the middle of the wealth distribution. Other aspects of university participation also changed: participation grew more strongly among females than males. We find no evidence that participation fell among ‘marginal decision makers’—those who, while at school, did not intend to study at university. We conclude that HECS did not discourage university participation in general or among individuals from low wealth groups.

A threat to tax morale: The case of Australian higher education policy

This study investigated tax morale among a sample of 447 Australian graduates who completed the Graduates’ Hopes, Visions and Actions Survey shortly after receiving their higher education degrees. Using structural equation modeling (AMOS), pathways are mapped out showing linkages from (a) the values that individuals hold concerning the kind of society they want to live in, through (b) satisfaction with government policy requiring students to pay fees financed through a government loan (HECS or the Higher Education Contribution Scheme), to (c) HECS morale, that is, an internalized obligation to repay the loan, and finally to (d) tax morale, that is, an internalized obligation to pay income tax. Also affecting tax morale indirectly are the personal experiences of the new graduates. Those who were dissatisfied with their university course and those who were in the process of repaying their loan were more opposed to HECS and had lower levels of HECS morale, which in turn, adversely affected tax morale.

An income‐related loans proposal for drought relief for farm businesses

In 2004 the Commonwealth government is undertaking a review of its drought policy. This follows expenditure in excess of $1 billion on drought relief during 2002 and 2003 and comes only a decade after similarly large expenditure on support for farmers during the drought of the 1990s. Drought support for farm businesses has been provided within the framework of the National Drought Policy (NDP) agreed by Commonwealth and state governments in 1992 and at present is in the form of interest rate subsidies. This article suggests an alternative form of drought relief for farm businesses based on the Higher Education Contribution Scheme, which is more equitable between farmers, less regressive in its impact on tax payers and less open to politicisation.

When Tax Collectors Become Collectors for Child Support and Student Loans: Jeopardizing the Revenue Base?

SUMMARYThis paper investigates the relationship between making additional payments to the state for student loan (via the Higher Education Contribution Scheme) and child support (via the Child Support Scheme) and compliance with tax law. Data are taken from the Community Hopes, Fears, and Actions Survey based on a random sample of 2040 individuals. Additional payments were found to pose a compliance problem for tax authorities. At the same time, this study demonstrated that perceived deterrence, moral obligation and possible trustworthiness play significant roles in reducing tax evasion. An important finding to emerge from this study is that tax evasion is more likely to accompany additional payments when personal income and belief in trust norms are low. The finding of greater tax evasion among economically marginalized groups has been demonstrated in other contexts, but the adverse effects of becoming irreconcilably socially marginalized from legal authority has tended to be both undervalued and under‐theorized in the taxation compliance literature.

Higher Education at the crossroads: Response to an Australian ministerial discussion paper

The Commonwealth Governmentshould move to the funding of undergraduate coursesfor Australian students through the studentsrather than by way of direct grants toinstitutions. An independent coordinating bodyshould be re-established to report on thehigher education sector, advise theCommonwealth and administer Commonwealth highereducation programs. Public funding ofundergraduate education and research trainingshould be decentralised through a system ofscholarships. Undergraduate scholarship holdersshould pay charges determined by universitiesunder HECS (Higher Education ContributionScheme) arrangements. HECS arrangements alsoshould apply to full fee paying undergraduatesand PELS (Postgraduate Education Loan Scheme)arrangements to full fee paying researchstudents. Institutional research fundingshould be on a disciplinary basis, takingaccount of the volume and quality ofoutputs.

Evaluation of the Australian Higher Education Contribution Scheme (HECS)

(2002). Evaluation of the Australian Higher Education Contribution Scheme (HECS) Perspectives: Policy and Practice in Higher Education: Vol. 6, No. 1, pp. 16-22.