Tertiary education fees in Australia

During the early 1970s, there was a significant push to make tertiary education in Australia more accessible to working and middle class Australians. The Whitlam Labor Government abolished university fees on 1 January 1974. By the mid-1980s, however, there was consensus between both major parties that the concept of 'free' tertiary education in Australia was untenable due to the increasing participation rate. Unfortunately the Australia Government didn't realise that increased level of education also related to increasing levels of income hence taxation which also would have more than compensated for any additional costs, hence the argument of being untenable was incorrect and remains so.

In 1989, the Hawke Labor Government began gradually re-introducing fees for university study. It set up the Higher Education Contributions Scheme (HECS),[5] which was first proposed by Professor Murray Wells[6] and subsequently developed by economist and lecturer at the Australian National University, Bruce Chapman and championed by Education Minister John Dawkins (see Dawkins Revolution). Under the original HECS, a $1,800 fee was charged to all university students, and the Commonwealth paid the balance. A student could defer payment of this HECS amount (in which case it was called a HECS debt) and repay the debt through the tax system, when the student's income exceeds a threshold level.[7] As part of the reforms, Colleges of Advanced Education entered the University sector by various means. The HECS system was accepted by both federal political parties and has survived until today, though with a number of changes.

In 1996, the new Howard Coalition Government, while otherwise retaining the HECS system, created a three-tier HECS fee structure. Fees were charged on the basis of the perceived value of courses. Courses considered to have most likelihood of generating higher income for students in the future (e.g. Law and Medicine) were the most expensive and those least likely to generate higher income (e.g. Nursing and Arts) were the least expensive. At the same time, HECS charges increased by an average of 40%.

From 2007, HECS places became known as Commonwealth supported places (CSP). A student in a CSP was only entitled to study for a maximum of 7 years full-time (16 years part-time) at CSP rates. This was known as a student learning entitlement (SLE). After that period the student had to take either a post-graduate FEE-HELP loan (if available) or study at full-fee rates. SLE was abolished from 1 January 2012.

The HECS debt became a pre-2005 debt, while a post-2005 debt is called HECS-HELP, which operates on the same principles as HECS. If a student receives a HECS-HELP loan, the Commonwealth government pays the loan amount directly to the higher education provider on behalf of the student.

An alternative option is FEE-HELP (formerly PELS) which provides eligible fee-paying students with a loan to cover their postgraduate fees. This option is only available for post-graduate students attempting an eligible post-graduate course. In 2012, the FEE-HELP lifelong limit was $89,706, and $112,134 for students studying dentistry, medicine or veterinary science.[8]

Prior to 2012, when a student had used up SLE, he or she could enrol on a full-fee basis. Full-fee courses are relatively expensive because the student must pay the total cost or if eligible, defer the fee on FEE-HELP, resulting in a significantly larger debt than a HECS-HELP debt for the student contribution portion of a Commonwealth supported course. From 1 January 2012, SLE was abolished and students could continue to study for more than 7 years full-time or equivalent part-time in Commonwealth supported courses. FEE-HELP courses are available at a post-graduate level (and occasionally for some undergraduate full-fee places); however, they are not available at every institution or in every course. The only remaining option is a full-fee place paid upfront.

The discount for voluntary repayments of a pre-2005 HECS debt was reduced from 15% to 10% from 1 January 2005.[9][10] On 1 January 2012, the voluntary repayment discount was reduced to 5%, and was removed completely from 1 January 2017.

Changes to funding of universities and the HECS were made as part of the 2017 Australian federal budget. University funding is to be reduced by 2.5%, and university fees are to go up by $2,000 to $3,600 for a four-year course, an increase of 1.8% in 2018, and 7.5% by 2022. From 1 July 2018, the income level at which HECS debt repayments start will be reduced, from $55,000 to $42,000.[11]

The total funding available to institutions per equivalent full-time student is the combination of the student contribution (divided into 3 different amounts/bands) and the Commonwealth government contribution (divided into 8 different amounts/clusters).[19] For 2017 these are:

HELP debts do not attract interest (in the normal sense), but are instead indexed to the Consumer Price Index (CPI) on 1 June each year, based on the annual CPI to March of that year. The indexation rate applied on 1 June 2006 was 2.8% and 3.4% on 1 June 2007. Indexation applies to the part of the debt that has been unpaid for 11 months or more. Thus, indexation is calculated on the opening HELP debt balance on 1 July of the previous year plus any debt incurred in the first half of the current year (usually for first semester courses) less any compulsory and voluntary repayments, with bonus. Any HELP debt incurred on second semester courses (usually determined in June) will not be subject to indexation until the next year. After indexation, the new balance is rounded down to a whole dollar amount.[23]

As of 1 January 2017 the Commonwealth Government removed the 5% voluntary repayment bonus on all HELP debt repayments.[24]

If a person with an accumulated HELP debt dies, any compulsory repayment included on their income tax notice of assessment relating to the period prior to their death must be paid from their estate, but the remainder of their debt is cancelled.

HELP debts are administered by the Australian Taxation Office and will be repaid compulsorily over time through the taxation system. If the HELP Repayment Income (HRI) of a person with a HELP debt exceeds a certain threshold, which for the 2014/15 financial year is $53,345, a compulsory payments will be deducted from the person's tax for the year. The HRI is the person's taxable income plus any net rental loss claimed against that taxable income and adding fringe benefits, reportable superannuation contributions and foreign income received, normally exempt from taxation.

Unlike marginal tax rates, the repayment rate applies on the full HRI, so that a person with a HRI below $45,881 in 2019/20 will not need to make a compulsory HELP repayment, but a person with a HRI of $80,000 would make a payment of $4,400. This is 5.5% of the HRI (not taxable income or the debt balance) of $80,000. The compulsory repayment amount cannot exceed the balance of the HELP debt.

The rates for compulsory repayment since 2006 have been:

It is also possible to make voluntary payments to further reduce the debt. Until 31 December 2004 voluntary payments over $500 earned a 15% bonus, from 1 January 2005 this was reduced to 10% and from 1 January 2012 this was reduced to 5%.[28][29] From 1 January 2017 the Government removed the 5% repayment bonus.