‘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 1

Australian context 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 2

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 3

Fees and government funds $ (1) 4 Higher Education, Australian government supported place, full-time full year 2010 Examples Maximum fee Approximate Government funds Total revenue to provider Science 4,200 15,200 19,400 Education 5,300 9,000 14,300 Humanities 5,300 4,900 10,200 Accounting, Law 8,900 1,800 10,700 Medicine 8,900 19,300 28,200 Vocational education, Victorian government supported place, full time full year 2010 Maximum fee* Approximate Government funds** Total revenue to provider Diploma and Advanced Diploma 2,000 6,000 8,000 * Fees the same across all fields, projected to rise ** government funding is per hour of training, courses vary in total hours; funding per hour varied by field

55 HECS-HELP Higher education contribution scheme – higher education loan programme 1.Tuition fees reintroduced 1989 and income contingent loans 2.Debt to the Australian government for the specified tuition fees 3.Available for publicly supported higher education tuition 4.Discount on fees of 20% if choose to pay up-front 5.Repay to Tax Office when annual income reaches a threshold 6.Tax begins at 4% at $43,000 income, up to 8% when $80, % bonus on voluntary extra repayments 8.Interest free except for that implied by discount but debt indexed against consumer prices

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 ) 6

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 not charged on publicly supported courses Projected VET-HELP numbers 130,000 equivalent full-time 2013 Compared to 470,000 projected on HELP in higher education

VET students, public system only, Australia 2009 '000 8 Diploma or higher20012% Certificate IV21913% Certificate III52631% Certificate II29617% Certificate I905% Other students37722% Total 1,707100%

Fees and government funds (2) Higher Education, Australian Government supported place, full-time 2010 Maximum fee Government funds Total revenue to provider Years on course HELP debt on completion Science 4,249 15,156 19, ,872 Education 5,310 9,020 14, ,240 Humanities 5,310 4,901 10, ,930 Accounting 8,859 1,765 10, ,577 Medicine 8,859 19,253 28, ,154 Vocational education, Victorian government supported place, full time 2010 Maximum fee* Approximate Government funds** Total revenue to provider Years on course HELP debt on completion Diploma and Advanced Diploma 2,000 6,000 8, ,000 * Fees the same across all fields ** government funding is per hour of training and courses vary in total hours; funding per hour varied by field of study 9

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. 10

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 11

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 » $ billion –Loans to students in year 2.8 –Repayments in year 1.4 –Total accumulated debt 17.8 –Expected never repaid

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 13

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 14

Effects on students + 1.Access to education not denied by inability to pay tuition fee 2.Repay only if income above 75% of average weekly earnings 3.No real interest charged on loan 4.Benefits of qualifications on average much greater than the fees 5.Some groups may not increase incomes very much, dont repay 6.Does not appear to have deterred students from higher education but no evidence yet on VET 15

Effects on students - 1.So far not available to most VET students – only for Diplomas+ 2.Vocational fees for diplomas already rising, will rise further 3.Exemptions from fees for low income diploma students abolished 4.VET caters for more disadvantaged students than higher education 5.VET students thought to be more risk averse but little evidence 6.Students who drop out have limited rewards, and a debt 7.Reduced disposable income in early working years 16

References and links Australian Treasury 2010, Intergenerational Report Chapman B, Rodrigues M and RyanC 2007, HECS for TAFE, Treasury Working Paper 2007–2 Lee W, Coelli M 2010, Analysis of private returns to VET NCVER Long M, and Shah C 2008, Private returns to vocational education and training qualifications, NCVER Going to Uni, Higher education for students in Australia P.htm P.htm Skills Australia 2010, Australian Workforce Futures VET FEE-HELP