Back to Media Releases homepage MEDIA RELEASE 27/02/06 HELPless: How the FEE HELP loans system lets students down and how to fix it Students let down by ‘unrealistic’ FEE-HELP Three new loans schemes were introduced in 2005 to fix omissions in the HECS system. The schemes were part of HELP (Higher Education Loan Programme) and included: HECS-HELP for students receiving federal government tuition subsidies, FEE-HELP for full-fee students, and OS-HELP for study overseas. In a paper released on Monday 27 February , HELPless: How the FEE-HELP loans system lets students down and how to fix it , Andrew Norton argues that a more realistic FEE-HELP loan cap needs to be implemented so FEE-HELP can achieve its stated objectives of reducing unmet demand and assisting students to ‘access their preferred course.’ ‘FEE-HELP has the potential to reform higher education radically, as it extends loans to all full-fee students, undergraduate or postgraduate, at both public and private institutions.’
This gives the private higher education sector a chance to expand, creating more choice for students and more competition among institutions. However, FEE-HELP’s effectiveness is undermined by a maximum lifetime loan of $50,950 (with $80,000 proposed for medicine). ‘Setting the FEE-HELP limit at this amount biases the market against courses that are long or have high per year costs, or both,’ argues Norton.
The loan cap is a crude way of controlling lending, taking no account of course costs or capacity to repay. ‘FEE-HELP’s effectiveness is undermined by being modelled too closely on the old HECS loans scheme.’ ‘This is bad for student choice, bad for the private higher education sector, and bad for competition. ’ A truly radical reform would make student loans mimic commercial loans: students with good earning prospects could borrow large sums, other students could borrow less, and some could not borrow at all. ‘Instead of denying or limiting loans to people doing high cost courses, as now occurs, the government could deny loans to people who are unlikely to repay.’ A more incremental reform increases the cap to realistic levels of $95,000 for most courses, and $160,000 for medicine, dentistry and veterinary science. ‘Lifting the general cap to $95,000 would cover all but 4% of the full-fee courses.’ Norton argues that the government can improve HELP’s finances ‘by cutting three extravagances – cheap loans for postgraduates, zero repayments for people living overseas, and writing off debt on death.’ Andrew Norton is a Research Fellow at The Centre for Independent Studies. He is available for comment. Copies of the report HELPless: How the FEE HELP system lets students down and how to fix it are available on request or from the CIS website: http://www.cis.org.au/IssueAnalysis/ia68/IA68a.pdf ENQUIRIES
For more information, please contact: Gina Schwass
Public Affairs Officer
The Centre for Independent Studies
t: 02 9438 4377
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www.cis.org.au
The Centre for Independent Studies has released a paper calling for reform of university student fees system. The paper, authored by Andrew Norton, argues that the cap on loans to full fee paying students is too low. The current cap allows for loans during a lifetime of AU$50,950.

"Setting the FEE-HELP limit at this amount biases the market against courses that are long or have high per year costs, or both," argues Norton in the paper. "The loan cap is a crude way of controlling lending, taking no account of course costs or capacity to repay."

According to Norton, this undermines student choice and competition. He argues that the system should function more like commercial lending.

"A truly radical reform would make student loans mimic commercial loans: students with good earning prospects could borrow large sums, other students could borrow less, and some could not borrow at all," he said. "Instead of denying or limiting loans to people doing high cost courses, as now occurs, the government could deny loans to people who are unlikely to repay."

The paper was criticised by Senator Kerry Nettle, Education Spokesperson for the Australian Greens. She argued that the changes would mean an increase in costs to students already struggling to pay, and called on Education Minister Julie Bishop to rule out the changes.

"To consider refusing loans to those deemed less able to repay would further cut off higher education for Australians from low socio-economic backgrounds," she said. "Julie Bishop should use her address to the National Press Club tomorrow to rule out any moves to further deregulate the HECS system."

"Student fees have spiralled upward under the Howard government and any further deregulation would just make a bad system worse," she added.