Time to permanently end the loan fee for the FEE-HELP scheme
There are many perverse aspects to the way in which Australia’s tertiary education system has evolved. One of the most ridiculous of these is an element of the funding arrangements for students that penalises rather than supports them.
In our tertiary education system, many people borrow money to invest in their studies, and we make income contingent loans available to meet this cost. The real travesty is that we charge some of those students a tax on top of their loans for the pleasure of borrowing money to study.
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That’s right, in addition to the amount that a student borrows, the Australian government whacks them with an additional amount – the student loan tax. This tax is over and above the amount that they borrowed to pay for their course.
Independent providers support around 10 per cent of the 1.5 million students in higher education, and the student loan tax hits many of these students hard.
Many students studying with independent providers in the higher education sector access government loans through the FEE-HELP scheme to undertake their studies. In addition to the amount borrowed to fund their tuition, they are charged a 25 per cent FEE-HELP loan fee – a straight-up student loan tax – and thus, a $40,000 debt to the Australian government becomes $50,000.
The egregious nature of the student loan tax on FEE-HELP loans is that it’s applied only to students studying with most independent higher education providers (except Bond University, the University of Notre Dame Australia, University of Divinity, and Torrens University Australia). Students with public universities are not required to pay the student loan tax. In this respect, the student loan tax creates inequity for students – they are penalised for selecting one type of higher education provider over another.
In the vocational education and training (VET) sector, the VET Student Loans program is available to students undertaking a diploma or higher qualification with certain quality independent registered training organisations (RTOs) and public TAFE colleges.
Independent providers support around 60 per cent of the 540,000 students undertaking a diploma or higher qualification in the VET system. Here again, there is a student loan tax for students at independent providers that result in a higher debt obligation to the Australian government; for no discernible reason.
The student loan tax for students accessing a VET Student Loan to study a diploma or higher qualification is 20 per cent on top of the loan to undertake their course. Thus, an $18,000 loan debt to the Australian government becomes $21,800.
As a result of advocacy undertaken by the Independent Tertiary Education Council Australia (ITECA), the Australian government agreed to a six-month waiver of the student loan tax on FEE-HELP Loans and VET Student Loans. This is welcome support to students, and the independent tertiary education sector, during the COVID-19 crisis.
Beyond the current crisis; however, ITECA members believe it is appropriate that the student loan tax be permanently withdrawn noting this additional tax placed on these students, merely because of where and what they choose to study, is grossly inequitable and serves no policy purpose.
The Australian government has stated that the student loan tax is required to recognise the cost of loans unlikely to be repaid – this highlights the inherent inequities in this policy. Both FEE-HELP Loans and VET Student Loans are repaid through the tax system when a student enters the workforce and earns above the prescribed threshold. The injustice arises, because these students are not only repaying the debt associated with their tuition, they are also repaying the student loan tax levied to cover the debts of other students. By adding a loan tax, the government is making it between 20 per cent and 25 per cent harder for these students to pay back that loan and get ahead in life.
ITECA’s view on the removal of these loan taxes is backed by a growing number of parliamentarians that share the views of students about the manifestly unfair nature of student loan taxes underpinned by bad public policy.
Eliminating the student loan tax is just one of the many reforms required on the path to a more cohesive tertiary education system, one in which the higher education section and the vocational education and training sector act as one but retain their separate identities and strengths.
It is wrong that individuals, when borrowing to invest in their education, to help them achieve their life and career goals, are levied the student loan tax by Government, a loan which they are already required to repay. An additional tax makes it even harder to repay.
Now is the time to permanently end the student loan tax.
Troy Williams is the chief executive of the Independent Tertiary Education Council Australia (ITECA), a peak body representing independent providers in the higher education, vocational education, training and skills sectors.
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