James Paterson (Victoria, Liberal Party) Share this | Hansard source

As I was saying last night, the government is increasing transparency for students around admission requirements and course cut-offs. We are working to give students better information about their choices. We are funding rural and regional hubs and regional scholarships, and we're having Universities Australia and Professions Australia work together to improve arrangements for student work placements. We are not increasing student fees. We do, however, think that we should hold universities to account for student outcomes, given the significant taxpayer funds they receive—something Labor also opposes. We also think that universities, like non-university providers, should not be able to charge students whatever they like because taxpayers and students will pick up the tab irrespective of how inefficient they are. Providers need to think of the product and the service they are providing students for the significant taxpayer investment they receive.

The Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018 will set a new schedule of repayment thresholds for HELP from 1 July 2018 with a lower minimum repayment threshold of $45,000 at a one per cent repayment rate—up from $42,000 proposed in last year's budget—and with smaller incremental rises in thresholds and repayment rates, up to a top threshold of $131,989, at which 10 per cent of income is repayable. It will align the indexation of the repayment thresholds to the consumer price index. From 1 July 2019, it will bring repayment thresholds for the Student Financial Supplement Scheme, managed by the Social Services portfolio, into line with HELP repayment thresholds and make corresponding changes to the order of repayment of student loans. It will also introduce a refreshable, new combined loan limit on how much students can borrow under HELP to cover their tuition fees. The combined limit is $150,000 for students studying medicine, dentistry and veterinary science courses and $104,440 for other students. We heard and read in the media today about the importance of that, given that some 'serial students', as I think the minister has categorised them, have racked up debts large enough to pay for an apartment, let alone higher education. While the loan limit is not new, it will now apply to Commonwealth supported students borrowing through HECS-HELP as well as fee-paying students accessing FEE-HELP, VET FEE-HELP and the VET Student Loans scheme.

HELP lending has grown rapidly, with the expansion of the demand driven system. The amount accessed for HELP loans has increased from just $3 billion in 2009 to $7 billion in 2016. The Turnbull government shut down Labor's failed VET FEE-HELP loan scheme at the end of 2016 and replaced it with the VET Student Loans scheme. This is a much more tightly controlled scheme with caps on tuition accounts and extensive safeguards against reporting by unethical providers. The fiscal challenge for the government is that HELP repayments have not kept pace with HELP lending growth. From 2010-11 to 2016-17, the level of new debt not expected to be repaid increased from 16 per cent to 25 per cent. It is no longer possible to ignore the long-term burden of this debt on the taxpayer.

Schedule 1 of the bill proposes a new set of repayment thresholds commencing from 1 July this year. There is a new minimum repayment income of $45,000 at which one per cent of income is repayable, amounting to around $8.65 per week. The second threshold is $51,957 with a two per cent repayment rate, which would otherwise be the first threshold rate on 1 July this year. Each progressive threshold increases by six per cent income amounts and by half a per cent increments in repayment rates, which smooths the repayment obligations. Importantly, this new schedule of thresholds will also reduce incentive for debtors to 'cluster' below thresholds to avoid repayments as they do now. This came out very clearly in the Senate inquiry. There are increased repayment rates for those earning the highest incomes, who are best placed to repay their debts sooner, with those earning $131,989 or more paying at 10 per cent of their income, as I said earlier.

From 2019–20, the revised HELP thresholds will also apply to SFSS debts under the Social Security Act 1991 and the Student Assistance Act 1973. Currently, these debts are repaid concurrently with HELP debts but according to a subset of just three thresholds. To improve rates of repayment of SFSS debts, and to achieve consistency in debt administration, the current three-tier threshold approach applied to SFSS repayments will be replaced with the full range of HELP thresholds. There will be a transitional year in 2018-19 that maintains the three-tier threshold arrangement, while systems changes are implemented, and to allow these debtors additional time for transition.

Schedule 1 of the bill also implements new indexation arrangements for the HELP repayment thresholds, which are currently indexed according to average weekly earnings. For a number of years now, the HELP repayment thresholds have been rising relative to earnings. The higher growth in AWE, average weekly earnings, has meant that people have dropped from a higher repayment threshold to a lower one, or have dropped out of the repayment stream altogether as the thresholds rise faster than their income growth. This bill provides that the minimum and all subsequent thresholds will instead be indexed to the consumer price index. This will ensure repayment requirements are adjusted in line with the cost of living. It also streamlines indexation factors used throughout the Higher Education Support Act 2003, as all amounts will be indexed in the same way.

Schedule 2 of the bill amends the order of repayment of student loan debts by loan type. Currently, student debts under the Social Security Act 1991 and the Student Assistance Act 1973 are repaid concurrently with HELP debts. I realise I have repeated myself there, so please excuse me.

Schedule 3 of the bill provides for the expansion of the loan limit to all HELP loans for which students can defer their tuition fees but makes it replenishable. The Senate committee inquiry which I chaired received evidence that a replenishable loans cap was preferable to a lifetime limit, and that was the recommendation to the government from the majority report of the committee. I'm pleased that the government has accepted that amendment, which it introduced in the House of Representatives and which was subsequently passed.

The new $150,000 loan limit for students undertaking medicine, dentistry and veterinary science courses, as defined in the act, is an increase on the estimated current FEE-HELP limit of $130,552 for 2019. Students in these courses who had previously reached their FEE-HELP limit will, from 2019, have access to additional funds up to the new $150,000 limit. Apart from annual indexation increases, the loan limit applying to students in other courses remains the same, with a base amount of $104,440 in 2019. The caps will be increased in 2019, but new replenishable combined loans caps arrangements will not start until 2020.

The measures in this bill are fair. They are modest but, over the longer term, they will ensure that the world-class income-contingent loans program remains sustainable for future generations of students and taxpayers. We have a system that is the envy of the world, and Professor Bruce Chapman is a man in demand around the globe as others seek to emulate the system that we have. Australian government funding is now at record levels, and it is important that we continue to ensure that Australians from all walks of life, irrespective of their background or financial means, can continue to access high-quality tertiary education if they have the aptitude and the application to succeed. That's why I, like my colleagues across the government, want to ensure we keep these opportunities open to future generations.