Higher HECS charges mean more will defer payment

Increased Higher Education Contribution Scheme (HECS) charges announced

last year are likely to lead to more university students deferring payment

rather than taking the option of paying a reduced contribution up-front,

according to a statistical research paper published today.

ANU Masters student, Cynthia Kim, found that full-time students were less

likely to pay upfront HECS than were part-time students but that the

changes to HECS could discourage part-time students from undertaking

tertiary studies.

In the 1996-97 Federal budget, the Government raised the HECS contribution

for 1997 by an average of $2000 per year per student. In addition, the

minimum repayment income threshold was reduced by almost $7000 to speed up

repayments. Ms Kim examined the likely effects of these changes on the

willingness of students to pay their HECS contributions up-front, and thus

help the Government's immediate fiscal goals.

Her research found that

* the proportion of those paying HECS contributions up-front rose steadily

from 21% in 1991 to 26% in 1995.

* by age-group, in 1995, the percentage was 25% for school leavers, dipping

sharply to 17% for those aged between 20 and 24 and then climbing gradually

for older age-groups.

* full-time students (21%) were less likely to pay up-front than part-time

students (52%).

Ms Kim found that the likely reduction in the proportion of students paying

up-front would be offset by the increase in individual payment amounts of

those who do pay, leading to an overall increase in government revenue.

Secondly, the likely effect of a reduction in the minimum repayment

threshold on the rate of up-front payment is less significant. However,

because part-time students earning above the threshold do not have the

option of deferred payment, lowering the threshold may discourage some

potential part-time students from undertaking tertiary studies. Finally, Ms

Kim found that households which paid their HECS contribution up-front

typically had a higher household income. The addition of a second spouse's,

income was particularly significant.

"This result is plausible if we believe that households often use the

secondary income earned by the spouse of the head of the household to pay

for the 'luxuries or extras' in life," Ms Kim said. "Since an up-front HECS

payment is not compulsory, it can be considered as a 'luxury'. This

provides the government with a fiscal incentive to further encourage the

careers of working women, for example, through child care or flexible work

practices. Given that most 'heads of households' are male and most

'spouses' female, policies that assist women into higher income earning

professions are likely to have some subsidiary effects on HECS up-front payment."

For further information, contact Cynthia Kim: Tel 06 252 6114; or Public Policy Program,ANU: Tel: 06 249 3295; Fax: 06 249 5555
Canberra, Wednesday 9 July 1997 22/97