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Wednesday, 2 November 2011
Page: 12472

Ms MARINO (ForrestOpposition Whip) (12:57): The Higher Education Support Amendment (No. 2) Bill 2011 amends the Higher Education Support Act to increase the amount of money available in the Commonwealth Grants Scheme and for Commonwealth scholarships. These are worthy ambitions, which is why we support the bill in principle. However, this bill also cuts support to students and their families by reducing the upfront discount for those paying their higher education fees in advance.

The fees were first introduced in 1989 as the Higher Education Contribution Scheme, or HECS. In 2005 the name was converted in the Higher Education Loan Program or HELP. In both cases, the fees were introduced to ensure students contributed to the cost of their education, which up until 1988 had been provided at the full expense of the Commonwealth. University fees have been around for as long as there have been universities, so the idea that students would pay for their tertiary education is by no means a new one. Early Australian governments, however, recognised that the cost of tertiary education was often a disincentive that prevented many young people from reaching their potential, and this came at a cost to the nation through lost activity and lost productivity, in particular, in research. The fact that cost prevents young people from reaching their potential and from coming back to regional areas to practice the skills that they have learnt is something that is very real in regional areas.

The government responded by providing a greater number of scholarships which covered the cost of the university fees. In this regard both the Curtin Labor government and the Menzies Liberal government deserve accolades. The Curtin government of the 1940s significantly increased the number of scholarships available for Australian students and notably made scholarships available to women for the first time. The Menzies government supported and expanded this investment in Australia's knowledge base and in the 1960s increased our learning capacity by expanding the number of and funding for Australian universities.

By the early 1970s three-quarters of students attending university were receiving Commonwealth scholarships. It was actually achieving what it was set out to achieve. And many of those were bonded, linking employment obligations following graduation with the scholarships. This allowed government to manage its required workforce in professions such as teaching. However, this changed in January 1974, when the Labor government under Gough Whitlam abolished university fees under the pretext of trying to increase participation by lower income earners, something that we have seen again recently through the youth allowance debate. However, many commentators consider that this attempt was not particularly successful, and this may have been in part because most university students were already receiving scholarships.

Free university education remained in place till 1989, when fees were reintroduced under the HECS system. In its initial form each student paid the same fee, which could be paid upfront or deferred as a loan. Those paying upfront received a discount, while those deferring payment would have to repay their debt through the tax system when their income reached a level of around $30,000—currently in the area of $45,000. Under that and the current system, student fees deferred as a loan were paid by the Commonwealth government to the educational institution and the government was to be repaid by the student over time. Interest on these loans was limited to CPI increases. In 1996, the single level of fee was changed to a three-tier system reflecting the value of the courses provided, with the high-cost courses such as medicine, dentistry and veterinary sciences attracting higher fees.

The key issue in this system I have outlined is the need to see the HECS or HELP debts of former students repaid. Given the low rate of CPI interest only, there is little incentive for graduates to repay their student loans. A simple look at financial advice columns will tell you that repaying the government this debt is not always the best financial decision of the newly employed professional. After all, the cost of their student loan is CPI when the cost of a home loan might be seven per cent or a credit card as high as 17 per cent. It makes financial sense for these people to prioritise their highest cost liabilities for any discretionary funding. When their income hits a certain level, graduates are required to make repayments as assessed and managed by the Australian tax office; however, there is little incentive to make voluntary payments, which is the target of the bill before the House. That is why the recorded amount held by the government in higher education loans in June 2009 was $11.5 billion and estimated at some $15 billion. There is, however, a nominal value ascribed to these debts by the Department of Education, Employment and Workplace Relations which includes an estimate of debt owed or incurred but not recorded. As at 30 June 2009, the nominal value of HECS-HELP debt according to Treasury was $18 billion.

The bill before the House further reduces the incentives for graduates to repay their debt. Under the existing system a graduate paying at least $500 upfront will receive a 20 per cent discount, which this bill will cut to 10 per cent. The government will halve the incentive to pay upfront. In the same vein, the bill will halve the incentive for students and graduates to make voluntary payments to reduce their HECS or HELP liability. Currently, voluntary payments of over $500 attract a 10 per cent bonus which reduces the outstanding debt, but this bill cuts that to five per cent. We certainly need to introduce a simple concept that business has known for decades: waiting for payment is the cost the institution bears. The cost is measured by the value of that money to the creditor and the measure of what else could have been achieved by those funds. This cost delayed payment could be equated to a standard investment like a bank deposit; thus the net value to the government of HECS and HELP loans appears to be in permanent decline. So the payment of these debts to the government is important. The current system does not actually encourage rapid repayment.

On top of this the bill reduces those incentives that do exist for the early payment of the debts. The government, through the changes to this bill, is responsible for the removal of incentives to cause graduates to delay paying off their education loans as long as possible. If that happens, the amount of HECS and HELP debt may well increase as a result of this decision.

While I am here I want to touch on the importance of tertiary education, particularly for those in regional areas. In Western Australia, my part of the world, we have a great need of educational opportunities for young people. Universities and other tertiary education are the best opportunities that we can offer any young person in a regional, remote or even urban area. So often what we do see are young people in regional areas disadvantaged. As we know, they have less opportunity to access higher education. We saw that in getting to the university stage so many of our young people require assistance through the youth allowance process. That is why we have had to fight so hard on the changes made to youth allowance to encourage and enable more young people from regional areas to access a tertiary education. We need these young people who are tertiary educated to come back, in time, to our regional areas and add to the skills and productivity that are so important and drive our economy. We also need to encourage the opportunity and aspirations of young people.

I am looking with a group of very interested persons at a form of university or tertiary education offering in Busselton. There is a group of very dedicated people looking at this. When I go to graduation ceremonies for young people, as I am sure members of this House are now—I went to Margaret River and Harvey High School graduations recently—I meet numbers of great young people who have the most fabulous dreams and aspirations. I believe that is the responsibility of all of us in this place to facilitate their access to what they can achieve through higher education.

We need to get to the point where people in regional areas have equity of access to those opportunities. That is something that I am extremely committed to, and it is something that I know we are extremely committed to on my side of the House. This is why we fought so hard not only on youth allowance but for the equity of opportunity for students in regional areas.