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Gerald Burke Centre for the Economics of Education and Training gerald.burke@monash.edu

‘The extension of the Australian government's Higher Education Loans Programs (HELP) to Vocational Education’ The role of loans in financing vocational education and training CEDEFOP Workshop, 4 October 2010, Thes saloniki. Gerald Burke Centre for the Economics of Education and Training

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Gerald Burke Centre for the Economics of Education and Training gerald.burke@monash.edu

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  1. ‘The extension of the Australian government's Higher Education Loans Programs (HELP) to Vocational Education’ The role of loans in financing vocational education and training CEDEFOP Workshop, 4 October 2010, Thessaloniki Gerald Burke Centre for the Economics of Education and Training gerald.burke@monash.edu

  2. Australian context 1 • 22.5 million people in 2010 • Federal system – Australian and 8 States/territory governments • Australian government provides • funding support for tuition in public higher education • loan schemes and student financial assistance, and • part of public funding to vocational education delivered through States • Fees relatively high in publicly supported higher education • Fees low, so far, in public vocational education (5% of funds) • Fees high in fully privately funded tertiary education, including for international students

  3. Australian context 2 • High participation rates in higher and vocational education • Australia escaped the recession, supported by financial stimulus • Australian Public expenditure growth now limited to 2% per year • Need vocational education students to grow 3% per annum to lift literacy, qualifications and labour force participation • Public expenditure per hour of training in VET falling sharply, does not get the priority of schools or higher education • Need more funding per student for less advantaged

  4. Fees and government funds $ (1)

  5. HECS-HELPHigher education contribution scheme – higher education loan programme • Tuition fees reintroduced 1989 and income contingent loans • Debt to the Australian government for the specified tuition fees • Available for publicly supported higher education tuition • Discount on fees of 20% if choose to pay up-front • Repay to Tax Office when annual income reaches a threshold • Tax begins at 4% at $43,000 income, up to 8% when $80,000+ • 10% bonus on voluntary extra repayments • Interest free except for that implied by discount but debt indexed against consumer prices 5

  6. FEE-HELP for higher education • FEE-HELP for full-fee (no public support) courses from 2005 • Similar in most respects to HECS-HELP • Extended to approved private providers • Maximum debt $106,000 • Similar in most respects to HECS-HELP: • but no discount for up-front payments and • a loan fee of 20% is charged (quasi interest payment)

  7. VET FEE-HELP from July 2009 • Only available to Diploma+ courses in vocational education • Not available to certificate courses (which includes apprentices) • Available to full-fee students • Available to publicly supported students in one state (to date) • 20% loan fee is charged for full-fee courses • 20% loan fee notcharged on publicly supported courses • Projected VET-HELP numbers 130,000 equivalent full-time 2013 • Compared to 470,000 projected on HELP in higher education 2013

  8. VET students, public system only, Australia 2009 '000

  9. Fees and government funds (2)

  10. Example of full-fee and/or supported course in VET in another state • Diploma of Business • Career Opportunities Middle Level Manager, Administration Officer, Team Leader, Supervisor, Business Trainee • Entry Criteria School leavers with Year 12 etc or Non school-leavers are on vocational experience, previous study and personal competencies • Program Duration Full Time   12 months • Program Award Diploma or Certificate IV • Government Subsidized Fee Full Rate: $ 3,775 Government subsidized fees must be paid through existing payment methods at the time of enrolment. • Full Fee$15,260 VET FEE-HELP eligible .

  11. Grants for student living costs • HELP loans are for tuition fees only • Australian government has grant schemes for living costs • Grants for full-time students in senior secondary, higher and VET • Subject to income and wealth tests • About 30% of full-time students receive some assistance • Not proposed to have loans for living costs

  12. Effects on Governments • Australian government covers fees and later collects repayments • Shifts some costs from State government to Australian government • Repayments --- rough estimate 50% to 75% of nominal fees • Threshold for repayment, some take a long time -- or never • VET graduates earn less than higher education graduates • Zero real interest on loan • Snapshot of data on HELP debt 2008-09 • $ billion • Loans to students in year 2.8 • Repayments in year 1.4 • Total accumulated debt 17.8 • Expected never repaid 4.3

  13. Effects on providers ‘Teething problems’ in first year causing admin problems: • FEE-HELP rules designed for higher education courses • Vocational courses have units of variable size • Choice of units can affect length of course • Diploma duration varies across fields of study Loans are available for courses with approved providers including government and private providers

  14. VET diploma students and higher education students • About 50% of VET diploma+ students aged up to 24 • About 25% of older VET diploma students are full-time • Many younger ones progress to higher education • 75% of university students full time and 88% on HECS-HELP • VET students on average older than higher education students • VET diploma students somewhat lower social background • Only rough data on VET so far but maybe 25% of all diploma full and part-time students took up HELP this year in Victoria

  15. Effects on students + • Access to education not denied by inability to pay tuition fee • Repay only if income above 75% of average weekly earnings • No real interest charged on loan • Benefits of qualifications on average much greater than the fees • Some groups may not increase incomes very much, dont repay • Does not appear to have deterred students from higher education but no evidence yet on VET

  16. Effects on students - • So far not available to most VET students – only for Diplomas+ • Vocational fees for diplomas already rising, will rise further • Exemptions from fees for low income diploma students abolished • VET caters for more disadvantaged students than higher education • VET students thought to be more risk averse but little evidence • Students who drop out have limited rewards, and a debt • Reduced disposable income in early working years

  17. References and links Australian Treasury 2010, Intergenerational Report 2010 www.treasury.gov.au/igr/igr2010/ Chapman B, Rodrigues M and RyanC 2007, HECS for TAFE, Treasury Working Paper 2007–2 www.treasury.gov.au/documents/1252/PDF/TWP07-02.pdf Lee W, Coelli M 2010, Analysis of private returns to VET NCVER www.ncver.edu.au/publications/2221.html Long M, and Shah C 2008, Private returns to vocational education and training qualifications, NCVER www.ncver.edu.au/publications/2011.html Going to Uni, Higher education for students in Australia www.goingtouni.gov.au/Main/Quickfind/PayingForYourStudiesHELPLoans/HECSHELP.htm Skills Australia 2010, Australian Workforce Futures www.skillsaustralia.gov.au/PDFs_RTFs/WWF_strategy.pdf VET FEE-HELP www.deewr.gov.au/skills/programs/support/vetfeehelp/Pages/default.aspx

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