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Academology: What is HECS?

28 March 2015

By the time Farrago goes to print, the Federal Government will have put its proposed higher education bill to the Senate (again). There’s a student National Day of Action on 25th March set to protest the Federal Government’s philosophy on higher education. We got Ryan Cushen to take a look just before the storm hit.

Whilst enrolling in university the other day, it struck me how little I know about the HECS system, and the Abbott Government’s proposed changes to higher ed funding. So for anyone who wants to know about how their student fees will stack up, here it is: HECS unravelled.

Australian unis offer two types of course places: Commonwealth Supported Places (CSPs) and full-fee places. CSPs constitute the majority of places held by students at university. Full-fee places comprise the remainder, and students in those courses pay the whole cost of their tuition themselves.

For CSPs, the cost of tuition falls upon two parties: the student, and the Federal Government, who pays the balance. The HECS-HELP scheme allows the student contribution to be deferred as an interest-free loan. Today we have a three-tiered system where the student contributions are divided into separate tranches (“bands”) depending on anticipated future income.

The student contribution amounts prescribed are not mandated fees, but maximum amounts that students can be charged. They have, nonetheless, become the default tuition fee at most universities, meaning that there is very little price competition between institutions.

The number of CSPs offered each year by universities is largely set at the discretion of each institution. Universities tell the government how many students they want to enrol in bachelor degrees, and receive subsidies for the cost of these students’ tuition. This system is called “demand-driven funding.” For certain areas of study — like medicine — the Australian government only provides funding for a predetermined number of CSPs.

Australian full-fee paying students are not not required to front-up these large sums each year; they too can receive an interest-free loan from the government (FEE-HELP), though the size of their debt burden is obviously much larger. International students are charged in full, and cannot receive any loans from the Australian government.

Calculating your potential HECS debt (under the current system) is a pretty simple exercise. You can check the year’s contribution amounts on studyassist.gov.au; multiply whatever band each of your subjects fit into by 0.125, add it all up and voilà – you’ve just discovered your annual uni fees.

The question remains: will all this good stuff be thrown out the window by Abbott and Hockey’s cuts? The answer is both yes and no. Removal of the maximum student contribution amounts effectively abolishes the three tiers of pricing, probably to be replaced by fees specific to each course. Could a BA go from $6,152 per year to $50,000? Yes. Is this likely? Definitely not.

Of course, this does not mean fees will not increase – they almost certainly will, since the proposed changes include an overall 20% cut in CSP tuition subsidies. At present though, it is impossible to predict specific changes to course fees.

From their conception, HELP loans have been made on the condition of mandatory repayment. For example, this year, people with HELP loans who earn between $53,345 and $59,421 will be required to pay 4% of their income towards their HELP loan (usually with their income tax). This threshold is adjusted each year for inflation; although the Abbott government is proposing a reduction in this threshold to an estimated $50,638 as of 1 January 2016, meaning an earlier recouping of debt.

The demand-driven system of CSP allocation will also be extended to cover non-university higher education courses at the diploma, advanced diploma and associate degree level.

These changes, if passed, will have an undoubtedly enormous impact upon the Australian higher education landscape. The legislation that contains all these changes was rejected by the Senate last year. It was reintroduced to Parliament this year and as I write this is currently before the Senate, where, again, it has little chance of progressing.

Image from the Federal Senate Information Website.


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