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HECS for TAFE: The case for extending income contingent loans

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Author Info

  • Bruce Chapman

    (Crawford School of Economics and Government, Australian National University)

  • Mark Rodrigues

    (Australia and New Zealand Banking Group Limited)

  • Chris Ryan

    (Research School of Social Sciences, Australian National University)

Abstract

The public vocational education and training (VET) system is now one of the few areas in Australia's tertiary education system where students are required to pay up-front 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 present a case for introducing an income contingent loan to the VET sector. The economic rationale is similar to that for higher education, and the Higher Education Contribution Scheme (HECS) provides a useful template. Using data from the first three waves of the Household Income and Labour Dynamics in Australia (HILDA) survey, we establish that there are indeed significant private returns to VET qualifications. An income contingent loan is argued to enhance access to these benefits, and the collection streams are analysed for different qualifications. The form that an income contingent loan might take for VET is considered, as are the implications for the Commonwealth Government with respect to potential subsidies associated with the design parameters.

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File URL: http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2007/Working%20Paper%202007%2002/Downloads/PDF/TWP%202007-02.ashx
File Function: First version, 2007
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Bibliographic Info

Paper provided by Treasury, Australian Government in its series Treasury Working Papers with number 2007-02.

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Length: 62 pages
Date of creation: Apr 2007
Date of revision: Apr 2007
Handle: RePEc:tsy:wpaper:wpaper_tsy_wp_2007_2

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Related research

Keywords: educational finance; educational economics; vocational education;

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References

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  1. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-73, December.
  2. Chapman, B., 1996. "Conceptual Issues and the Australian Experience with Income Contingent Charges for Higher Education," CEPR Discussion Papers 350, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  3. 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 Economics, Australian National University.
  4. Joshua D. Angrist & Alan B. Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," NBER Working Papers 3572, National Bureau of Economic Research, Inc.
  5. Buly A Cardak & Chris Ryan, 2006. "Why are high ability individuals from poor backgrounds under-represented at university?," Working Papers 2006.04, School of Economics, La Trobe University.
  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, .
  7. Orley Ashenfelter & Colm Harmon & Hessel Oosterbeek, 2000. "A Review of Estimates of the Schooling/Earnings Relationship, with Tests for Publication Bias," NBER Working Papers 7457, National Bureau of Economic Research, Inc.
  8. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
  9. 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.
  10. 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 Economics, Australian National University.
  11. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  12. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
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Cited by:
  1. Bruce Chapman, 2007. "Higher Education Financing in Australia," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 5(2), pages 55-61, 07.
  2. 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.

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