House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Education, Training and Youth Affairs the Hon Dr David Kemp MP)

Schedule 3 - Limit on student debt to Commonwealth

Higher Education Funding Act 1988

Item 1

Amends the definition of institution in section 3 to also exclude proposed Chapter 5B from the meaning given to the term by section 4.

Item 2

Inserts a new Chapter 5B providing for a limit on total student indebtedness to the Commonwealth under the Act.

Chapter 5B - Limit on student debt to Commonwealth

Part 5B.1 - Preliminary

(NOTE: proposed section is abbreviated as ps)

ps106ZB Definitions

Inserts a definitions clause which gives particular meanings to words and expressions used in Chapter 5B (unless there is a contrary intention apparent). Expressions used in Chapter 5B that are defined in Chapter 4, 4A, 5 or 5A have the same meaning in Chapter 5B (unless a contrary intention is apparent).

Part 5B.2 - Additional condition of grant of financial assistance

ps106ZC Additional condition

This proposed section adds compliance with Chapter 5B to the conditions an institution referred to in section 4 must comply with to be eligible for financial assistance under the Act.

Part 5B.3 - Maximum permitted debt

ps106ZD Minister may determine maximum permitted debt

This proposed section provides that the Minister may make a determination specifying the maximum permitted debt for the purposes of Chapter 5B.

Part 5B.4 - Loan limit notices

ps106ZE Commissioner to give loan limit notice

Proposed subsection 106ZE(1) provides that the Commissioner of Taxation must give a notice, known as the loan limit notice , to a person if the persons total indebtedness under the Act exceeds the maximum permitted debt determined under proposed section 106ZD. Proposed subsections 106ZE(2) and (3) specify the form and content of a loan limit notice and that it must be given to the person to whom it relates, while proposed subsection 106ZE(4) provides that, unless the loan limit notice has been cancelled under proposed section 106ZF, the Commissioner must give a copy of the notice to each specified institution or the agency, as applicable.

Proposed subsection 106ZE(5) further provides that the Commissioner of Taxation must also give a statement in writing to the person to whom the loan limit notice relates specifying the maximum permitted debt and the persons total indebtedness under the Act at that time.

ps106ZF Cancelling loan limit notice

This proposed section provides that a person issued with a loan limit notice may ask the Commissioner of Taxation to give a notice, known as the cancellation notice , cancelling the loan limit notice . The Commissioner must give the cancellation notice to the person if their total indebtedness under the Act no longer exceeds the maximum permitted debt. Proposed subsection 106ZF(3) sets out the form and content of a cancellation notice .

ps106ZG Consequences of loan limit notice - no amounts payable by Commonwealth

HECS and PELS

Proposed subsections 106ZG(1) and (2) of this proposed section provide that if the Commissioner of Taxation has given a person a loan limit notice in accordance with proposed section 106ZE that relates to that person, the Commonwealth is not liable (and is taken never to have been liable) to lend an amount to the person in relation to a course of study for a semester under subsection 57(3), paragraph 57(3A)(e), subparagraph 57(3B)(b)(i) or proposed paragraph 98G(2)(a); or to make a payment to an institution under subsection 57(2), subsection 57(3), paragraph 57(3A)(e), paragraph 57(3A)(f), subparagraph 57(3B)(b)(ii) or proposed paragraph 98G(2)(b).

Proposed subsection 106ZG(3) specifies what constitutes a course of study for a semester for the purposes of proposed subsection 106ZG(2).

Open Learning Deferred Payment Scheme

Proposed subsections 106ZG(4) provides that, in relation to a unit of study for a study period covered by proposed subsection 106ZG(5), the Commonwealth is not liable (and is taken never to have been liable) to lend an amount to the person under paragraph 106D(1)(a) or to make a payment to the Open Learning Agency of Australia Pty Ltd under paragraph 106D(1)(b).

Proposed subsection 106ZG(5) specifies what constitutes a unit of study for a study period for the purposes of proposed subsection 106ZG(4).

Notifying affected persons

Proposed subsection 106ZG(6) provides that the regulations may set out procedures for an institution or the Open Learning Agency of Australia Pty Ltd to notify persons who may be affected by proposed subsections 106ZG(2) or (4).

Part 5B.5 - Suspension notices

ps106ZH Commissioner must give suspension notice

This proposed section has the effect of providing that the Commissioner of Taxation must give an institution a written notice (known as a suspension notice ) under proposed subsection 106ZH(1) in relation to a person where a HECS debt has been reported for a student after a loan limit notice has already been issued. Such an event will only occur where a student changes institution and does not advise their new institution that they have been issued with a loan limit notice . It is not necessary to issue a suspension notice where a PELS or OLDPS debt is reported as the consequences are different.

Proposed subsection 106ZH(3) provides that the Commissioner of Taxation must give a copy of the suspension notice to the person to whom it relates.

ps106ZJ Consequences of suspension notice - HECS courses

This proposed section has the effect of providing that, where a suspension notice has been issued to a student, the institution must dis-enrol the student unless the student makes an up front payment of fees for the entire semester. The requirement to dis-enrol arises from the requirements of section 41. In the case of PELS and OLDPS, institutions and the Open Learning Agency of Australia Pty Ltd have discretion on how to treat students who have not paid their fees and were not eligible to take out a loan.

Part 5B.5 - Secrecy

ps106ZK Secrecy

The proposed section extends the application of the secrecy provisions of section 78 to proposed Chapter 5B.

Item 3

Amends paragraph 110(b) to provide that a determination under proposed section 106ZD is a disallowable instrument.