Income Contingent Loans the Australian experience

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Income Contingent Loans- the Australian
experience -
Presentation to Thai Ministerial Delegation led
by Associate Professor Pavich Tongroach
Mr John Mullarvey AVCC Chief Executive Officer
AVCC OfficesCanberra, Australia 27 October 2005
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Topics covered in this presentation

• Australias University Sector
• The AVCC and its members universities
• Facts and figures relating to changing funding
  sources
• Australias Higher Education Contribution Scheme
  (HECS)
• The new higher education funding framework from
  2005
• Teaching Learning

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The AVCC the council of Australias university
presidents

• The peak body representing AVCC members
  universities nationally and internationally
• Established in 1920
• by Vice-Chancellors of the then six Australian
  universities
• Membership now 38
• executive heads of Australias 37 public
  universities one of its two private
  universities
• Funded by subscriptions from its members

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Central/North Queensland Central Queensland
University James Cook University
AVCC Members Universities
Western Australia Curtin University of
Technology Edith Cowan University Murdoch
University University of Western Australia
Southern Queensland Bond University Griffith
University Queensland University of
Technology University of Queensland University of
Southern Queensland University of the Sunshine
Coast
Northern Territory Charles Darwin University
South Australia Flinders University University
of Adelaide University of South Australia
Northern New South Wales Southern Cross
University University of New England
New South Wales Charles Sturt University
Macquarie University University of
Sydney University of Newcastle University of New
South Wales University of Technology
Sydney University of Western Sydney University
of Wollongong
Victoria Deakin University La Trobe
University Monash University RMIT University
Swinburne University of Technology University of
Ballarat University of Melbourne Victoria
University
Tasmania University of Tasmania
Australian Capital Territory Australian National
University University of Canberra
Multi-State Australian Catholic University
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The AVCC main functions

• Advocacy
• Assist Vice-Chancellors in their leadership roles
• Provide a forum to discuss university issues
• Promote needs of Australian universities
• Encourage international cooperation
• Provide information about universities
• Provide services and programs to universities

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Growth in university student numbers 1954 2004
Source DEST Higher Education Student Statistics
(incl. unpublished data) Note unduplicated full
year head counts from 2001 onwards
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Changing funding sources ()1989-2003
Source DEST Selected Higher Education Statistics
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HECS a policy revolution

• 1973-1987 university education free
• no fees charged
• 1987 1988 Administrative Charge
• for Australian undergraduates
• 250 charge upfront caused outcry
• abolished with introduction of HECS
• AVCC objected to the upfront fee

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Ministerial Committee on Higher Education Funding
1987-1988

• Government aims
• to expand capacity effectiveness of higher
  education sector
• to improve access of under-represented groups
• Committee on H.E. Funding
• considered sources of funding involving direct
  beneficiaries of higher education
• proposed an integrated growth equity reform
  package comprised of
• a higher education contribution scheme
• an access improvement package
• industry community contributions

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The Higher Education Contribution Scheme -
1989-1990 (i)

• 1989 - HECS introduced for new students
• Flat student contribution rate A1,800 per year
  (based on EFTSU)
• 15 discount for upfront payment
• HECS exemption scholarships for certain
  postgraduate students

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The Higher Education Contribution Scheme -
1989-1990 (ii)

• Repayments by students
• income contingent, zero real interest loan
• based on taxable income
• (from) A22,000 1
• (from) A25,000 2
• (from) A35,000 3
• From 1990 onwards, the university indexation
  factor applied to both student contribution rate
  and taxable income levels

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The Higher Education Contribution Scheme -
1989-1990 (iii)

• Overall, initial strong objections by the AVCC
• equity of access for different socio-economic
  groups
• set-up costs and ongoing administrative burden
  for universities
• Subsequent, additional 10m in Government funding
  for administration a partial offset

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The Higher Education Contribution Scheme -
1989-1990 (iv)

• By end 1990
• Generally well accepted by students, individual
  universities and the community
• Nonetheless, the AVCC still had policy and
  administrative concerns

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HECS further early developments

• 1991
• Repayment rate for three income bands increased
  to 2, 3, 4 respectively
• 1992
• HECS increased by more than Consumer Price Index
  (from A1,993 to A2,250)
• 1994
• AVCC objected strongly to proposed double HECS
  for second degrees not agreed to by Parliament

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1997 differential HECS (i)

• Introduced in 1996 Budget
• Included provision for Australian fee-paying
  undergraduates 25 maximum per course
• AVCC view uncontrolled experiment in higher
  education
• major concerns about economic, social, academic,
  administrative effect
• realistic income thresholds for repayments must
  be maintained

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1997 differential HECS (ii)

• Three HECS bands - based on course cost/income
  potential, e.g.
• Law low cost, high income (top band)
• Nursing medium cost, medium income (bottom
  band)
• Also proposed major change to student income
  support tough new Actual means test
• widespread objections led to Government backdown

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HEC RATES 1989 to 2005
Source DEST HECS Information (selected years)
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HECS administration

• Set up costs for universities and government
• structures and procedures
• University-Tax Offices processes
• now well-established
• acknowledged as relatively simple to administer

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From Crossroads Review to Backing Australias
Future reforms

• The AVCCs Vision for 2020 includes
• capacity for universities to access additional
  income through student fees underpinned by income
  contingent loans
• flexibility and discretion in setting fees (HECS
  and non-HECS)
• Backing Australias Future 2003
• flexible student contribution from 2004 a key
  feature
• unavoidable given limits placed on public funding
  of higher education

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Student Learning Entitlement (SLE)

• Available to Australian citizens, New Zealand
  citizens, permanent visa holders
• To access Commonwealth-supported places
• For 7 years equivalent full-time study
• Additional SLE for
• Undergraduate courses gt 6 years
• Honours
• Graduate entry bachelor degrees
• Postgraduate courses
• every 10 years

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Commonwealth Grants Scheme (CGS)

• Funding by discipline
• Load target ? 100-105
• Funding target gt 100
• ? discipline controls

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Student contributions from 2005

• Four bands
• includes new National Priorities band
  (education, nursing)
• Universities set level from 0 to new specified
  maximum amount for each band by unit
• major issue for university management and
  councils
• differential government and student contribution
  for different disciplines among universities

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Mix of Govt and student contributions
Source DEST Fact Sheet 6 http//www.dest.gov
.au/highered/hesat/fact_sheets/6.rtf
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Fee-paying Australian undergraduates

• Provide a means to enrol additional students
• most fee-paying students pay for a course with
  high entry requirements (e.g. Law)
• For the Government, fee-paying students reduce
  the cost of higher education
• Only after all Government places are filled
• No more than 35 of students in a course

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Teaching learning reformsBacking Australias
Future (2003-04)

• Big step forward - but important gaps
• Core funding needs to increase
• Indexation to maintain its value
• Extra places to meet demand
• Improved student income support
• Fair go for Indigenous Australians
• Research and innovation targets
• More support for international mobility of
  Australian students

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AVCC perspective (i)

• BAF a strong base for future development of a
  diverse university sector of high quality
• Flexible student contributions are a key
  competent
• Opposition Partys position a major concern
• return to pre-BAF arrangements, i.e. three
  existing HECS bands (indexed) with no flexibility
  to vary
• move mathematics and science from middle to
  lowest band
• AVCC has called on Labor to reconsider

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AVCC perspective (ii)

• A Framework of Choice is essential
• Our main provisos are
• universities retain responsibility for setting
  rates for their students up to maximum determined
  by legislation
• realistic income threshold for repayments
  maintained
• student contributions are complemented by a more
  effective student income support system

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Income Contingent Loans- the Australian
experience -
Presentation to Thai Ministerial Delegation led
by Associate Professor Pavich Tongroach
Mr John Mullarvey AVCC Chief Executive Officer
AVCC OfficesCanberra, Australia 27 October 2005