Revised Explanatory Memorandum
(Circulated by authority of the Minister for Education and Training, Senator the Honourable Simon Birmingham)Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018
The Higher Education Support Legislation Amendment (Student Loan Sustainability) Bill 2018 (Bill) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Bill
The Bill is compatible with human rights because, to the extent that it may limit human rights, the limitations are reasonable, necessary and proportionate.
The Higher Education Support Act 2003 (HESA) is the main piece of legislation providing funding for higher education in Australia, providing for Australian Government subsidies and tuition support for students.
The Government introduced a range of measures as part of the December 2017 Mid-Year Economic and Fiscal Outlook to ensure the long-term viability of Australia's higher education sector. The Bill makes amendments to HESA that will improve the sustainability of the Higher Education Loan Program (HELP) by:
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- setting new repayment thresholds for HELP from 1 July 2018, starting with a lower minimum repayment threshold of $45,000 with a one per cent repayment rate, with a further 17 thresholds and repayment rates, up to a top threshold of $131,989 at which ten per cent of income is repayable
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- aligning the indexation of the HELP repayment thresholds to the Consumer Price Index (CPI) instead of Average Weekly Earnings (AWE)
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- bringing repayment thresholds for the Student Financial Supplement Scheme (SFSS) managed by the Social Services portfolio in line with HELP repayment thresholds from 2019-20, and making corresponding changes to the order of repayment of student loan debts with consequential implications for Student Start-up Loans and Trade Support Loan debt repayment
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- retaining a three-tier threshold for SFSS in 2018-19 using selected thresholds from the Budget Savings (Omnibus) Act 2016
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- setting FEE-HELP loan limits for 2019 for FEE-HELP loans, VET FEE-HELP loans and VET Student Loans
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- introducing the combined HELP loan limits for HECS-HELP loans, FEE-HELP loans, VET FEE-HELP loans and VET Student Loans from 1 January 2020, and
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- allowing for renewable HELP balances, beginning with HELP debt repayments made during the 2019-20 financial year re-crediting HELP balances from 2020.
Summary of analysis
The measures contained within this package are limited and justifiable. While there is minor potential for some changes to lead to increased costs for some students under HELP, these measures are necessary to support the provision of high quality tertiary education and to continue to provide equitable access for students.
Analysis of human rights implications
The Bill has implications for the following human rights:
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- the right to an adequate standard of living - Article 11 of the International Covenant on Economic, Social and Cultural Rights (ICESCR)
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- the right to education - Article 13 of the ICESCR
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- the right to equality and non-discrimination - Article 26 of the International Covenant on Civil and Political Rights (ICCPR).
Article 11: right to an adequate standard of living
This Bill engages with Article 11(1) of the ICESCR which recognises "the right of everyone to an adequate standard of living...including adequate food, clothing and housing, and to the continuous improvement of living conditions".
There are elements within the Bill that may be perceived as relevant to Article 11, particularly as they may result in increased costs for HELP recipients once they begin earning a sufficient wage. None of these changes will necessitate increased costs for students while they study (unless they are earning income above the threshold while studying), as they will continue to be able to defer their tuition fees though the HELP scheme (until they reach the combined loan limit).
Schedule 1 of the Bill establishes a new minimum repayment threshold for HELP loans of $45,000. In the 2017-18 income year, taxpayers are not required to start paying back their HELP loans until their annual incomes reach $55,874. In the 2018-19 income year, the new threshold at which people will start repaying debts will be $45,000.
The proposed minimum repayment threshold is still above the minimum wage (currently around $36,100 for a full-time worker from 1 July 2017, according to Fair Work Australia). Additionally, at the new minimum repayment threshold, individuals will only pay one per cent of their annual taxable income. This is less than $9 per week, minimising any impacts on individuals' standards of living.
Under HESA, where a person's financial and family circumstances result in them either being exempt or receiving a reduction in their Medicare levy, they are not required to make compulsory HELP repayments for that income year.
As such the measure is reasonable and proportionate to meet the policy goal of ensuring the long term viability of the HELP scheme.
In addition to a change in the minimum repayment amount, Schedule 1 of the Bill establishes a new maximum threshold of $131,989 with a repayment rate of 10 per cent. This will ensure that HELP debtors at the higher end of the income scale repay their debt faster.
The sustainability of HELP is crucial to ensure continued access to higher education. HELP ensures that students do not face upfront costs for their higher education and are able to further their study on the basis of capacity to learn rather than capacity to pay.
Schedule 2 of the Bill changes the order of repayment of various student loan debts. Currently, debts under the SFSS are collected concurrently with HELP debts.
Bringing repayment of the SFSS debts into alignment with new HELP repayment thresholds from 1 July 2019 means that there is a risk of additional repayment burden for affected debtors who also have a HELP debt, as repayments may be higher for these debtors. For this reason, the Bill changes the order of repayment so that SFSS debts are only collectable if there is no HELP liability for that income year. In this way, debtors are relieved of duplicate repayment burden.
Article 12: Right to education
This Bill engages with Article 13(2)(c) of the ICESCR which states that "higher education shall be made equally accessible to all, on the basis of capacity, by every appropriate means, and in particular by the progressive introduction of free education".
Schedule 1 of the Bill will change the way in which HELP thresholds are currently indexed. From 1 July 2019 onwards all HELP thresholds will be indexed at the CPI instead of AWE.
Indexing the HELP repayment thresholds at CPI will ensure the value of the thresholds is maintained in real terms, as the thresholds will increase in line with consumer prices rather than average wages. With AWE being typically higher than CPI, indexation by CPI will slow growth in repayment thresholds, bringing more individuals into the repayment scope over time.
Access to higher education will be maintained through the continued availability of HELP loans. As individuals will commence repayment sooner, it may create the belief that costs are increasing for students, thereby reducing access to higher education. By lowering the repayment threshold, and altering the indexation of the threshold to grow in line with CPI, this measure makes the overall scheme more affordable for Government in the long-term, and does not result in an overall increase in costs for students.
Schedule 2A of the Bill introduces an increase to the current FEE-HELP limit.
This will enable some students to access a higher loan limit than under current arrangements. The new $150,000 loan limit for 2019, for students undertaking medicine, dentistry and veterinary science courses (as defined in HESA) is an increase on the estimated 2019 FEE-HELP limit of $130,552. Students in these courses who had previously reached their FEE-HELP limit will, from 2019, have access to additional funds up to the new $150,000 limit. This will enable them to borrow up to the new limit.
Schedule 3 of the Bill introduces a new, combined, and renewable limit on how much students can borrow under HELP to cover their tuition fees from 1 January 2020. The combined limit will be an indexed amount of the 2019 FEE-HELP limit set in Schedule 2A of the Bill.
By limiting borrowing to a maximum amount that is, firstly, sufficient to support almost nine years of full time study as a Commonwealth supported student and, secondly, can reasonably be repaid within a borrower's lifetime, this measure is consistent with fair and shared access to education.
The loan limit is indexed annually according to CPI, so that it keeps pace with inflation.
The combined loan limit is not retrospective for HECS-HELP loans. From 1 January 2019, all new HECS-HELP borrowing will count towards a student's loan limit. However, no previously incurred HECS-HELP debt will be taken into account. This means that these students' right to education will not be compromised by amounts they have previously borrowed through HECS-HELP while they were Commonwealth supported students.
As FEE-HELP, VET FEE-HELP or VET Student Loans debt were already subject to a limit, any debt already accrued under the existing FEE-HELP limit will be transferred onto the new HELP tuition limit for that student. Any new FEE-HELP, VET FEE-HELP or VET Student Loans borrowing will continue to count towards their combined loan limit.
To the extent that this measure may limit the right to education, these measures are reasonable, necessary, and proportionate to the policy objective of ensuring access to tertiary education for those who cannot afford to pay their tuition upfront. Moreover, the measure could be seen to support and augment the right of access to education by establishing a fiscally responsible student loan scheme. It does not alter the general availability of tuition loan support for higher education and is justified in the context of available resources and the spirit of maximising educational access and inclusion.
Article 26: Right to equality and non-discrimination
This Bill engages with Article 26 of the ICCPR which states that "the law shall prohibit any discrimination and guarantee to all persons equal protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status".
The measure contained in Schedule 1, the introduction of new HELP repayment thresholds, may be seen as limiting the right to non-discrimination due to disproportionate impacts on women and other low income groups.
The Government currently carries a higher deferral subsidy from demographic groups that tend to have lower incomes. This includes women, individuals in part-time work, or individuals in low paid professions. As a result, some of these individuals, including women, may be making repayments for the first time as a result of the introduction of a lower minimum repayment threshold. Addressing this income inequality, however, is not the role of the higher education loans system.
This measure also introduces additional repayment thresholds for high income earners, who will be required to repay their HELP debts at higher rates. As men are disproportionately represented among high income earners, this aspect of the measure is more likely to affect men.
The new minimum repayment threshold remains above the minimum wage. This ensures that, even with the introduction of lower thresholds, individuals should not fall below a liveable income as a result of their repayment obligations. However, measures have been taken to reduce the effect of these changes on lower income earners. The lower rate of repayment ensures that the requirements on individuals facing repayment obligations for the first time are minimal, at only one per cent of their income.
Additionally, women, individuals in part-time work, or individuals in low paid professions will not face any limitations on their right to access a HELP loan, and therefore higher education courses, as a result of the changed thresholds.
In addition, the inclusion of a renewable HELP loan limit provides scope for all individuals who have made HELP debt repayments during an income year to benefit through re-crediting of their HELP loan balance. This will enable them to pursue further study in order to retrain, change careers, or further specialise in their current profession. This adds an element of flexibility and equality to the HELP scheme that recognises that people often seek to engage in lifelong learning and ensures that they will not be prevented from doing so by the barrier of upfront tuition fees.
Finally, protection for low income earners is maintained by the retention of Medicare levy protections. A person is not liable to make repayments towards their debt if they qualify for a reduced amount of Medicare levy, or if no Medicare levy is payable by that person on the person's taxable income for that year.
The introduction of these new repayment thresholds is necessary to ensure the sustainability of HELP. The introduction of these new thresholds will reduce the time it will take for individuals to repay their HELP debts, thereby reducing the deferral costs of providing HELP loans to students at no real rate of interest. The objective of ensuring the sustainability of the HELP scheme is reasonable, and the measure is proportionate and necessary.
Conclusion
The Bill is compatible with human rights because, to the extent that it may limit human rights, the limitations are reasonable, necessary and proportionate.