Explainer: proposed changes to HELP repayment
This is the first in a series of posts put together by GSA’s Representation Team, aiming to explain the proposed changes to higher education policy that were revealed ahead of next Tuesday’s Federal Budget. (You can read our position statement on higher education funding changes here.)
The thing with higher education policy is that it’s bloody complicated and some of it is kinda boring, so there’s a lot that hasn’t been covered in the media.
At GSA, we believe that the complicated and boring stuff is also important.
For today’s post, we’ll be talking about HELP repayment changes.
So, what’s the current situation?
Currently, domestic coursework students at Australian universities are funded in two different ways:
- For students in Commonwealth Supported Places (all undergraduates and some postgraduates), the government pays about 58% of the cost, and the student contributes the other 42%.
- For students in full-fee places (many postgraduates), they pay the entire cost of their course.
In both of these cases, students can defer the payment of their contribution by putting the fees on the Higher Education Loan Program (HELP): either HECS-HELP for Commonwealth Supported Places, or FEE-HELP for full-fee places.
Currently you start paying back HELP when you earn around $55,000 or more. You start by paying 4% of your pre-tax income, and that percentage increases as your salary does, up to 8% when you’re earning around $102,000 or more.
And what’s the government’s latest proposal?
In the policy proposal released on Monday night, the federal government outlined plans to change the HELP system in three key ways:
- Lowering the threshold at which you begin to pay back HELP from $55,000 to $42,000.
- Changing the percentage of income that you repay at different income levels.
- Changing the way that the income levels are indexed (that is, increased over time to adjust to real prices) from Average Weekly Earnings to the Consumer Price Index.
All three of these changes will impact everyone who has HELP debts – whether they’re still studying or if they graduated years ago. This is because the government intends for them to apply to everybody, not just people who start accruing HELP from the time the policy is introduced.
So what do each of these changes mean?
Lowering repayment threshold to $42,000
When the HECS (now called HELP) system was introduced in 1989, the idea was that once people who had gone to university were earning around the average weekly wage or higher, they would repay part of the cost of their education.
The government’s proposed policy changes that; now people would start paying that cost when they’re earning just $7000 a year over the minimum wage (pre-tax).
They’d be paying it back at a lower percentage, starting at 1% rather than 4%, but it’s still a heavy blow to relatively low income earners, and will particularly affect women and those in less well-paid careers like teaching, child care and aged care, or veterinary nursing.
Changing the percentage of income repaid
As well as drastically lowering the income at which people start repaying HELP, the government also wants to change the amount of HELP people pay at different income levels.
Almost everybody will be paying more.
From starting repayments at $42,000 to increasing the maximum percentage of income repaid from 8% to 10%, the government’s plan will hit everyone’s budget harder.
Changing the indexation of HELP thresholds
Currently, the thresholds at which you start repaying HELP, and increase the percentage of your income you repay, are adjusted to match increases in Australia’s average weekly earnings. This means that as wages go up, the HELP repayment thresholds rise to match.
Under the government’s proposed policy, the thresholds would instead increase according to the Consumer Price Index. CPI calculates the average household expenditure on goods and services, and is used to measure inflation.
Because wage growth is often a bit stronger than inflation, what this means is that the repayment thresholds will rise more slowly over time, so that more people will be repaying more of their HELP debt at lower relative salaries.
Aside from making it tougher for graduates to make ends meet, this change fundamentally erodes the design of HELP: to be an income-contingent program, where repayments are based on your salary.
Where does that leave graduate students?
If the government’s policy is passed by the federal parliament, you’ll be repaying HELP sooner, and more of your income will be going to your HELP debt. Combined with the government’s plans to increase fees for Commonwealth Supported Places, future graduate students will also have larger debts to repay.
We don’t think it’s fair for university students and graduates to be loaded even more heavily with debt for their education, which is why we’re calling on the government to drop this flawed policy and instead start genuinely investing in higher education and Australia’s students.