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An Analysis of FEE-HELP in the Vocational Education and Training Sector

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Author Info
Bruce Chapman
Mark Rodrigues
Chris Ryan

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Abstract

"The public vocational education and training (VET) system is one of the few areas in Australia's tertiary education system where students are required to pay upfront fees without access to loan assistance. These arrangements may lead to sub-optimal educational outcomes to the extent that prospective students reject a VET education on the basis of short-term financial constraints. In this paper we analyse some of the important issues related to the adoption of FEE-HELP (a 2005 federal government financial instrument based on the Higher Education Contribution Scheme (HECS)). It is argued that income contingent loans of this kind are associated with the advantages of both default-protection and consumption smoothing. Using data from the first three waves of the Household Income and Labour Dynamics in Australia (HILDA) survey, we examine various empirical issues associated with the adoption of FEE-HELP in VET, including the extent of private salary returns to VET qualifications. As well, we explore issues related to the public subsidies inherent in the adoption of FEE-HELP in VET, and illustrate the time periods involved in loan repayments for various assumptions concerning the size of the charge and the future income of VET graduates. Administrative issues are considered, as are the implications for the Commonwealth government with respect to potential subsidies associated with the design parameters. In the 2007-08 Federal Budget, the former government announced a small extension of the FEE-HELP system into Australian VET, a reform consistent with improved tertiary funding arrangements." Copyright (c)2008 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.

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Article provided by The University of Melbourne, Melbourne Institute of Applied Economic and Social Research in its journal Australian Economic Review.

Volume (Year): 41 (2008)
Issue (Month): 1 (03)
Pages: 1-14
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Handle: RePEc:bla:ausecr:v:41:y:2008:i:1:p:1-14

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier. [Downloadable!] (restricted)
  2. Bruce Chapman & Chris Ryan, 2002. "Income-Contingent Financing of Student Charges for Higher Education: Assessing the Australian Innovation," CEPR Discussion Papers 449, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
  3. Jeff Borland, 2002. "New Estimates of the Private Rate of Return to University Education in Australia," Melbourne Institute Working Paper Series wp2002n14, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
  4. repec:fth:prinin:425 is not listed on IDEAS
  5. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 1999. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," Working Papers 804, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  6. Griliches, Zvi & Mason, William M, 1972. "Education, Income, and Ability," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages S74-S103, Part II, . [Downloadable!] (restricted)
  7. Miller, Paul W & Mulvey, Charles & Martin, Nick, 1995. "What Do Twins Studies Reveal about the Economic Returns to Education? A Comparison of Australian and U.S. Findings," American Economic Review, American Economic Association, vol. 85(3), pages 586-99, June. [Downloadable!] (restricted)
  8. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January. [Downloadable!] (restricted)
  9. Bruce Chapman & Chris Ryan, 2003. "The Access Implications of Income Contingent Charges for Higher Education: Lessons from Australia," CEPR Discussion Papers 463, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
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  10. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall. [Downloadable!] (restricted)
  11. Chapman, Bruce, 1997. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," Economic Journal, Royal Economic Society, vol. 107(442), pages 738-51, May. [Downloadable!] (restricted)
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  12. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January. [Downloadable!] (restricted)
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