Revised Explanatory Memorandum
(Circulated by authority of the Minister for Education and Training, Senator the Honourable Simon Birmingham)Outline
The purpose of this Bill is to improve the sustainability of the Higher Education Loan Program (HELP) and debt recovery of the Student Financial Supplement Scheme (SFSS) by:
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- setting new repayment thresholds for HELP from 1 July 2018, starting with a lower minimum repayment threshold of $45,000 with a one per cent repayment rate, with a further 17 thresholds and repayment rates, up to a top threshold of $131,989 at which ten per cent of income is repayable
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- aligning the indexation of the HELP repayment thresholds to the Consumer Price Index (CPI) instead of Average Weekly Earnings (AWE)
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- bringing repayment thresholds for SFSS managed by the Social Services portfolio in line with the HELP repayment thresholds from 2019-20, and making changes to the order of repayment of student loan debts with consequential implications for Student Start-up Loans and Trade Support Loan debt repayment
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- retaining the current three-tier repayment threshold for SFSS, with the existing indexation, for 2018-19
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- setting FEE-HELP loan limits for 2019 for FEE-HELP loans, VET FEE-HELP loans and VET Student Loans
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- introducing the combined HELP loan limits for HECS-HELP loans, FEE-HELP loans, VET FEE-HELP loans and VET Student Loans from 1 January 2020, and
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- allowing for renewable HELP balances, beginning with HELP debt repayments made during the financial year 2019-20 re-crediting HELP balances from 2020.
Schedule 1 of the Bill makes changes to HELP repayment arrangements. It replaces the current repayment threshold and repayment rates with new ones, including a new minimum repayment threshold and repayment rate plus additional repayment thresholds and rates. From 1 July 2019, repayment thresholds including the minimum repayment income, will be indexed using the CPI rather than AWE. The repayment thresholds for SFSS will also be brought into line with the HELP repayment thresholds from 2019-20 and the current three-tier repayment threshold for SFSS retained with the existing indexation for 2018-19.
Schedule 2 of the Bill makes changes to the order of repayment of various student loan debts. From 2019-20, when the HELP threshold will start to apply to student debts under the Social Security Act 1991 and the Student Assistance Act 1973, debts from the SFSS will be repaid after HELP debts are discharged, rather than concurrently.
Schedule 2A of the Bill introduces a new loan limit to how much students can borrow under FEE-HELP, VET FEE-HELP and VET Student Loans to cover their tuition fees from 1 January 2019. The limit is $150,000 for students studying medicine, dentistry and veterinary science courses, and $104,440 for other students.
Schedule 3 of the Bill brings HECS-HELP under a combined HELP loan limit from 1 January 2020, but also enables students who make repayments to their HELP debts to continue accessing HECS-HELP, FEE-HELP and VET Student Loans (the VET FEE-HELP scheme was closed to new students at the end of 2016).
Financial Impact Statement
This Bill implements the Government's revised higher education package announced in December 2017 as part of the Mid-Year Economic and Fiscal Outlook.
The measures in Schedule 1 of the Bill (changes to HELP repayment thresholds and indexation) deliver savings of $345.7 million in fiscal balance terms and $245.2 million in underlying cash balance terms over the forward estimates (2017-18 to 2020-21).
The measures in Schedule 1 of the Bill (changes to SFSS repayment thresholds) and Schedule 2 of the Bill (order of repayment of debts) deliver savings of $32.3 million in underlying cash balance terms over the forward estimates (2017-18 to 2020-21). There is nil impact in fiscal balance terms.
The measures in Schedule 2A and Schedule 3 of the Bill (combined HELP loan limit) deliver a cost of $0.9 million in fiscal balance terms over the forward estimates (from 2017-18 to 2020-21). In underlying cash balance terms, the measures come at a cost of around $14.2 million over the forward estimates.