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Income-Contingent Financing of Student Charges for Higher Education: Assessing the Australian Innovation

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  • Bruce Chapman
  • Chris Ryan

Abstract

In Australia in 1989, for the first time in the world, a broadly-based income contingent loan policy for the payment of higher education charges was adopted, when the government introduced the Higher Education Contribution Scheme (HECS). This can be seen to be a watershed in terms of the relationship between economic theory and education policy. Fourteen years later it is timely to revisit the arguments for its introduction and review Australia's experience with income contingent charging for higher education. That is the purpose of this article. It is argued that compared to all possible alternatives, income contingent loan arrangements are preferable for both economic and social reasons, so long as the administrative context allows efficient collection of the debt. These points are explained in detail. The political background to HECS is examined, and the paper considers the implications of the scheme for both revenue and the access of the poor to higher education. It is demonstrated that neither the introduction of the scheme in 1989 nor the radical modifications undertaken in 1997 have had any deleterious consequences for the participation of less advantaged students.

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Bibliographic Info

Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 449.

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Length: 18 pages
Date of creation: May 2002
Date of revision:
Handle: RePEc:auu:dpaper:449

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Cited by:
  1. repec:hal:cesptp:hal-00369986 is not listed on IDEAS
  2. Courtioux, Pierre, 2008. "How Income Contingent Loans could affect Return to Higher Education: a microsimulation of the French Case," MPRA Paper 14246, University Library of Munich, Germany.
  3. Piruna Polsiri & Rangsit Sarachitti & Thitima Sitthipongpanich, 2008. "Thailand’s Student Loan Fund : An Analysis of Interest Rate Subsidies and Repayment Hardships," EABER Working Papers 21952, East Asian Bureau of Economic Research.
  4. Bruce Chapman & Mark Rodrigues & Chris Ryan, 2007. "HECS for TAFE: The case for extending income contingent loans," Treasury Working Papers 2007-02, Treasury, Australian Government, revised Apr 2007.
  5. Bruce Chapman & Kiatanantha Lounkaew & Piruna Polsiri & Rangsit Sarachitti & Thitima Sitthipongpanich, 2009. "Thailand’s Student Loan Fund: An Analysis of Interest Rate Subsidies and Repayment Hardships," CEPR Discussion Papers 592, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  6. Bruce Chapman, 2008. "The Australian University Student Financing System : The Rationale for, and Experience with, Income Contingent Loans," EABER Working Papers 21944, East Asian Bureau of Economic Research.
  7. Bruce Chapman & Mark Rodrigues & Chris Ryan, 2008. "An Analysis of FEE-HELP in the Vocational Education and Training Sector," CEPR Discussion Papers 570, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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