The Commonwealth Government could save more than 800millionayearby2017,accordingtothisreport,ifitrecoversoutstandingstudentloansfromdeceasedestatesandpeoplelivingoverseas.Overview:StudentloanshavehelpedmillionsofAustraliansfinancetheirhighereducationsincetheGovernmentintroducedtheHigherEducationContributionScheme,HECS,in1989.ThesuccessortoHECS—theHigherEducationLoanProgram,HELP—lendsmorethan6 billion a year. It has been a very effective policy. But it has become expensive. By 2017 the Commonwealth will have 13billionofloansonitsbooksthatitdoesnotexpecttocollect.Studentsandformerstudentsrepaytheireducationdebtonlyiftheyearnmorethanathresholdamount—currently51,309 a year. Income contingent loans cleverly help cash-poor students pay for their education when they can afford to do so. Some of them never earn enough in Australia to repay what they borrowed.
About 17 per cent of new lending is now classified as doubtful, meaning it is not expected to ever be fully repaid. This expense, which appears each year in the Commonwealth Budget, is projected to be 1.1billionthisfinancialyear.Withstudentnumbersrapidlyincreasing,andnewusesbeingfoundforincomecontingentloans,doubtfuldebtcostswillcontinuetorise.Thisreportinvestigatesseveralwaysofreducingdoubtfuldebtwhilestillprotectingagainstfinancialhardship.OnereasonfordoubtfuldebtisthatHELPdebtorsleaveAustralia.BecauseHELPisrepaidthroughtheAustralianincometaxsystemitisnotcollectedfrompeoplelivingelsewhere.EnglandandNewZealandhavesimilarstudentloanschemesandbothrequiredebtorsinothercountriestopay.ThisreportrecommendstheNewZealandpolicyofrequiringaflatannualrepaymentfromstudentloandebtorslivingoverseas.FordebtorsstayinginAustralia,someneverearnmorethantheincomethresholdordosofortoofewyearstorepayalltheirdebt.Becausethethresholdislinkedtoaverageweeklyearnings,itisincreasinginrealterms.Overtime,thismeansthatfewerdebtorsareobligedtorepay.Linkingthethresholdtoinflationwouldmaintainitsrealvaluewhileincreasingfuturerepaymentlevels.AlthoughthesereformswouldreduceHELP’scosts,ontheirowntheireffectondoubtfuldebtismodest.ItsmaincauseisthatHELPdebtindeceasedestatesiswrittenoff.Thisisnotagooduseofscarcehighereducationfunding.MostbeneficiariesoftheHELPwrite−offwillnotbefinanciallydependentontheHELPdebtor.PartneredHELPdebtorsearninglessthanthethresholdarenotusuallythehousehold’smainincomeearner.Theirchildrenwillbeadultsbythetimetheestateisdistributed.IntroducingassetcontingentHELPrepaymentforestatesover100,000 would radically improve HELP’s finances.
If all these reforms were implemented now, they would save $860 million a year by 2016–17, and remove the need for planned cuts to teaching and research expenditure.
HELP’s repayment system was never designed for lending on the scale we see today. With the reforms in this report, we can achieve the goals of HELP at a much lower cost