HELPless: How the FEE-HELP Loans System Lets Students Down and How to Fix it

• • Australia pioneered repaying student loans through the tax system, the HECS scheme.
  • In 2005, HECS was replaced by three new loans schemes called HELP (Higher Education Loan
  • Programme): HECS-HELP for students receiving federal government tuition subsidies, FEE-HELP for full-fee students, and OS-HELP for study overseas.
  • FEE-HELP has the potential to reform higher education radically.
  • 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).
  • The loan cap is a crude way of controlling lending, taking no account of course costs or capacity to repay.
  • 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.
  • 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.
  • The government can improve HELP’s finances by:

– Charging postgraduates for the cost of lending.
– Collecting HELP debts owed by people living overseas.
– Not writing off HELP debts on death.