College loans in Australia

[Leisured]

I have read a few posts discussing US college loans, and I want to show the Australian way. University (college) fees were free until 1989, and some creative people proposed what is called the Higher Education Contribution Scheme (HECS). it is also known as an Income Contingent Loan. The debtor only starts to pay back the loan if his income reaches a certain level, and the money is collected by the Australian Tax Office. There is no interest on the loan, but the outstanding amount rises each year with the Consumer Price index.

The Federal websites are hard to understand, so I attach a more helpful link to an Australian tax specialist.

https://www.hrblock.com.au/tax-tips/understanding-hecs-help

It is a soft loan, so the Australian government is funding part of the college fees.

Australian governments provided many scholarships for university from about 1940 to the mid seventies. Universities then became free until 1989 when costs were blowing out. My experience predates HECS and I relied on a Federal government scholarship.

[Drifterrider]

I have read a few posts discussing US college loans, and I want to show the Australian way. University (college) fees were free until 1989, and some creative people proposed what is called the Higher Education Contribution Scheme (HECS). it is also known as an Income Contingent Loan. The debtor only starts to pay back the loan if his income reaches a certain level, and the money is collected by the Australian Tax Office. There is no interest on the loan, but the outstanding amount rises each year with the Consumer Price index.

The Federal websites are hard to understand, so I attach a more helpful link to an Australian tax specialist.

https://www.hrblock.com.au/tax-tips/understanding-hecs-help

It is a soft loan, so the Australian government is funding part of the college fees.

Australian governments provided many scholarships for university from about 1940 to the mid seventies. Universities then became free until 1989 when costs were blowing out. My experience predates HECS and I relied on a Federal government scholarship.

Whether or not it is called interest, it is interest.

My question:  Can anyone who wants to go to college go on the above terms or is this available selectively?  By that I mean, is there competition to get into college or can just anyone go regardless of their academic achievement in high school?

[alsoknownasDean]

I have read a few posts discussing US college loans, and I want to show the Australian way. University (college) fees were free until 1989, and some creative people proposed what is called the Higher Education Contribution Scheme (HECS). it is also known as an Income Contingent Loan. The debtor only starts to pay back the loan if his income reaches a certain level, and the money is collected by the Australian Tax Office. There is no interest on the loan, but the outstanding amount rises each year with the Consumer Price index.

The Federal websites are hard to understand, so I attach a more helpful link to an Australian tax specialist.

https://www.hrblock.com.au/tax-tips/understanding-hecs-help

It is a soft loan, so the Australian government is funding part of the college fees.

Australian governments provided many scholarships for university from about 1940 to the mid seventies. Universities then became free until 1989 when costs were blowing out. My experience predates HECS and I relied on a Federal government scholarship.

Whether or not it is called interest, it is interest.

My question:  Can anyone who wants to go to college go on the above terms or is this available selectively?  By that I mean, is there competition to get into college or can just anyone go regardless of their academic achievement in high school?

It's a competitive process based on high school results (known as ATAR in most states IIRC). Universities will do offers at the end of the school year, usually based on ATAR. Some courses or universities will have higher ATAR requirements than others.

There's ways around it though (completing a TAFE diploma first and using that to enter uni, or studying at a less popular university in a regional area, etc). The more prestigious universities will have higher ATAR requirements for the same courses, even though the fees are the same.

The indexation this year was 1.5%. At that price, there's no rush to repay the debt (although I'll have mine done by mid 2018).

Repayments start from about $54K, but that's about to be lowered to $42K. All completed when the tax return is filed.

Of course paying full fees upfront will be likely for ATAR to not matter. International students also have to pay full fees.

It's actually called HELP now :)

[marty998]

ATAR stands for Australian Tertiary Admissions Rank. Basically all school students are ranked based on their final year exams / assessments.

ATAR cutoffs for courses are largely determined on supply and demand. The cutoff is published after all admissions are made and will be the lowest ranked student who secured a place.

It's all a bit of a joke really as you can get in with /local regional bonuses to scores, aptitude, demonstrated ability in the particular subject matter, special consideration etc etc.

It's a good thing that the income repayment threshold has been lowered. It's now that little bit harder to go through life gaming the system and never paying back a dollar...

[alsoknownasDean]

The way the repayments operate is that when commencing a new job, you're required to provide an employer with a tax declaration form, and on that form there's a section asking whether you have a HELP/SSL/TSL debt. If this box is selected as yes, and if the income is above the threshold, an additional amount of tax is withheld (calculated automatically by the payroll system) to account for the HELP repayment. This is usually shown separately on an employee's payslip. End of year payment summaries will show the combined tax/HELP amount as the tax withheld for the year.

[Drifterrider]

So, from what I gather not everyone can qualify to go to college, you have to have proven (through your high school grades) you have the aptitude?  Yes?

I think using tax dollars to further educate the smart people is one of the best uses of money.  Those who graduate from college with a usable degree are going to make far more over their lifetime than those who don't, which means they will pay far more in taxes.  It is like seed corn.  You use it to grow a bigger crop, then keep some in reserve for next year where you can grow an even bigger crop.

[mustachepungoeshere]

It's all a bit of a joke really as you can get in with /local regional bonuses to scores, aptitude, demonstrated ability in the particular subject matter, special consideration etc etc.

Yep. My degree did not have what was then a UAI (University Admissions Index) cut-off. You were accepted or rejected on the basis of two essays.

Interestingly, other unis offering a course in the same subject demanded a UAI in the 90s, but mine was by far the better course for education, networking and career-readiness.

[alsoknownasDean]

So, from what I gather not everyone can qualify to go to college, you have to have proven (through your high school grades) you have the aptitude?  Yes?

I think using tax dollars to further educate the smart people is one of the best uses of money.  Those who graduate from college with a usable degree are going to make far more over their lifetime than those who don't, which means they will pay far more in taxes.  It is like seed corn.  You use it to grow a bigger crop, then keep some in reserve for next year where you can grow an even bigger crop.

From what I can see through a quick browse of Wikipedia, pretty much. There's a limited number of subsidized university places (that are eligible for HELP) available for each course at each university, so high school grades and good old supply/demand take care of the rest. I'm assuming that some students can get into university subject to less stringent requirements by paying full course fees up front.

There's workarounds though, I ended up getting into a degree that had an ENTER (ATAR now) requirement of 10 points higher than I achieved, because I completed a two year diploma course at TAFE (kinda the equivalent of community college in the US) first. Advantage of that is that at the time TAFE operated differently re: funding and I only had to pay a nominal amount upfront. As such I graduated university with only $14000 in student debt.

Not only do graduates earn more on average (so financially worthwhile for governments), but importantly, it keeps prices accessible to most people so that there's more skilled professionals. If university fees were extremely expensive to the point where most people couldn't afford it, there'd be a major problem for a country when there starts to be massive shortages of particular skilled professionals.

https://en.wikipedia.org/wiki/Tertiary_education_fees_in_Australia#Commonwealth_supported_students
https://en.wikipedia.org/wiki/Tertiary_education_in_Australia
https://en.wikipedia.org/wiki/Higher_Education_Loan_Programme

[Leisured]

My original post was to elicit comparisons, favorable or otherwise, between the Australian model and the US model for college loans.

I fully agree that government funded education can be seen as seed corn.

[alsoknownasDean]

My original post was to elicit comparisons, favorable or otherwise, between the Australian model and the US model for college loans.

I fully agree that government funded education can be seen as seed corn.

There was of course the proposals in the 2014 budget, but fortunately that didn't go ahead. I guess lots of us heard about the US model and didn't want to replicate it here (like with healthcare) :)

[mustachepungoeshere]

My original post was to elicit comparisons, favorable or otherwise, between the Australian model and the US model for college loans.

My understanding is that many US college loans can be used for living expenses in addition to tuition, which inevitably leads to students living the high life then complaining about the excessive cost of "school".

Here, your HECS-HELP loan is the cost of tuition.

Eighteen-year-olds are not given a blank cheque from the government and expected to make responsible choices.

[nnls]

My original post was to elicit comparisons, favorable or otherwise, between the Australian model and the US model for college loans.

My understanding is that many US college loans can be used for living expenses in addition to tuition, which inevitably leads to students living the high life then complaining about the excessive cost of "school".

Here, your HECS-HELP loan is the cost of tuition.

Eighteen-year-olds are not given a blank cheque from the government and expected to make responsible choices.

Australian students may be eligible for Austudy or youth allowance which is government welfare to assist with living expenses and such. This doesnt need to be paid back though

[deborah]

The previous government made courses more accessible, so that the Universities could take as many student as they liked (previous to this, the number of places were capped in each course in each university). There are also a number of courses that are not in the HELP scheme, because they are considered marginal - for instance, when I did Fashion Design, it wasn't in the HELP scheme.

I have read a few posts discussing US college loans, and I want to show the Australian way. University (college) fees were free until 1989, and some creative people proposed what is called the Higher Education Contribution Scheme (HECS). it is also known as an Income Contingent Loan. The debtor only starts to pay back the loan if his income reaches a certain level, and the money is collected by the Australian Tax Office. There is no interest on the loan, but the outstanding amount rises each year with the Consumer Price index.

The Federal websites are hard to understand, so I attach a more helpful link to an Australian tax specialist.

https://www.hrblock.com.au/tax-tips/understanding-hecs-help

It is a soft loan, so the Australian government is funding part of the college fees.

Australian governments provided many scholarships for university from about 1940 to the mid seventies. Universities then became free until 1989 when costs were blowing out. My experience predates HECS and I relied on a Federal government scholarship.

Whether or not it is called interest, it is interest.

Sorry, if it is pegged to inflation, it's the same value, so it's not really interest. And, if you never earn enough to meet the income test, you never need to pay it back - if you die, it disappears.

[BlueHouse]

I fully agree that government funded education can be seen as seed corn.

Here in the us, we've been told for decades that anyone can go to college and if you want to amount to anything, you HAVE to go to college. That right is imprinted on us from a very young age as evidenced by the idea that each of us could be President if we want it.
How do you guys deal with the sector that doesn't get to go to college?  What types of jobs are available to them, and do those jobs offer living wages? 

[marty998]

You go get a trade - the sector is called VET - Vocational Education and Training.

But apprenticeships are not what they once were, and it is hard to attract kids to complete 4 years of training whilst only paying them a nominal amount. The ones that do make it through do very well - builders, carpenters, plumbers, electricians, tilers, painters, machinists...

Plenty of good jobs out there without needing a higher education degree.

[nnls]

I fully agree that government funded education can be seen as seed corn.

Here in the us, we've been told for decades that anyone can go to college and if you want to amount to anything, you HAVE to go to college. That right is imprinted on us from a very young age as evidenced by the idea that each of us could be President if we want it.
How do you guys deal with the sector that doesn't get to go to college?  What types of jobs are available to them, and do those jobs offer living wages?

Quite a few of my mates, myself included, did not go to university. I am 30. Most of us are able to earn a living wage, and those that don't its more caused by health issues not a lack of university education.

Besides trade work that Marty mentioned, I have friends who are making decent money in retails, some that have started their own businesses or admin work/call centre work. All of these supply a living wage. Quite a few of my friends and work colleagues have managed to get into management positions in various corporations without a degree, though there is only so far you can seem to go without going back to study

[alsoknownasDean]

I fully agree that government funded education can be seen as seed corn.

Here in the us, we've been told for decades that anyone can go to college and if you want to amount to anything, you HAVE to go to college. That right is imprinted on us from a very young age as evidenced by the idea that each of us could be President if we want it.
How do you guys deal with the sector that doesn't get to go to college?  What types of jobs are available to them, and do those jobs offer living wages?

Yeah, skilled tradies can earn some pretty good money. In fact it's probably a faster way to FIRE than spend three years at uni and start in a low-paid graduate position. There's also lots of TAFE colleges that offer certificates and diplomas for stuff that doesn't require a degree.

The minimum wage here is about $18AUD an hour (for >21 years old, it scales under that). A single person living a Mustachian lifestyle could probably manage just fine on that much, even with our higher COL (although it'd be much easier in a lower COL city). It'd be a bit harder to raise a family on that much, but I'm guessing there's government assistance available to those that do.