With university tuition fees deferred entirely to HECS, university students are spared significant upfront fees associated with pursuing a bachelors degree. But the generally lower-income students choosing to head to TAFE face costs before they even get in the door.

Economists who designed the original HECS system have long called for vocational education and training (VET) to be comprehensively covered by income-contingent loans, so students have the costs subsidised by the government and can pay off their debt when they receive income as a result of their education.

In 2015, an average of 44.5% of students who enrolled in courses with VET providers, including TAFE, were from low socioeconomic backgrounds, while in the same year only 17.7% of commencing university students were.

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Professor of Tertiary Education Policy at the Mitchell Institute Peter Noonan told Crikey that students enrolling in VET courses which don’t qualify for loans or assistance, such as Certificate IIIs, faced upfront costs.

“A lot of these [certificate] courses are now going to $3,000 or $4,000 up front with no access to an income contingent loan,” he said. “It means that generally people in VET from lower income backgrounds have got no choice but to pay up front – it’s not as equitable as HECS-HELP.”

Noonan said it would take a new federal and state government agreement to implement a universal income contingent loan scheme, similar to how health and the National Disability Insurance Scheme are funded.

“This is not rocket science,” he said, pointing to a model where the state would provide the subsidy for the course and the Commonwealth would provide the income contingent loan at an agreed price.

The VET Student Loans scheme, which replaced a dysfunctional and abused VET FEE-HELP scheme in January, only applies to a set list of diploma courses, capping loans at amounts set for each course. If fees exceed this cap, students need to pay the difference up front. This also risks pricing low income students out.

Bruce Chapman, the economist lauded as the architect of HECS and who has worked with Noonan, has long advocated for an extension of HECS-HELP to TAFE students.

While making changes to the VET sector, the Coalition government has struggled to make headway on higher-education funding reform for universities since full fee deregulation was proposed in 2014 and faced widespread backlash. The sniff of $100,000 degrees was noxious.

Education Minister Simon Birmingham couldn’t get new, softer changes to higher education funding through the Senate in October, which would have lowered the HECS-HELP repayment threshold to an annual income of $42,000 at a repayment rate of 1% a year. It continues to languish as government policy.

While Chapman thinks the proposed $42,000 threshold is a “little bit low”, he told Crikey lowering it from the current rate of a $54,869 annual income at a repayment rate of 8% has got “the advantage of allowing TAFE and other areas of higher education to be covered, because the government can get their money back quicker”.

“I don’t think it’s going to affect behaviour at all. The people who want to go to university will still go to university but it will allow people, governments in particular, to get the system working for TAFE,” he said.

TAFE graduates will typically earn less than university graduates so a lower repayment threshold would be required for the government to recoup debt incurred funding TAFE students.

A spokesman for the Department of Education and Training said in a statement to Crikey the approved course list for the VET student loans program ensured there was a focus on training programs that would lead to good employment outcomes. They said the program delivers income contingent loans that “are student-centred, deliver high quality training, are fiscally sustainable, and hold providers to account”.

But federal TAFE Secretary of the Australian Education Union Pat Forward said in a interview that students from low income backgrounds are excluded from “softer and arts” areas of study at vocational institutions because those courses are “not determined to be needed by society”.

“Yet you don’t have that same restriction on higher education, where kids can still basically go to a university and enrol in a qualification of their choice,” she said.

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Peter Fray
Peter Fray
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