Campus Review: Hecs black hole reaches A$500m

By Susan Woodward, for Campus Review

March 28, 2012

Australian university graduates who move overseas have deprived the nation of about A$500 million (£329 million) in unpaid student loans since the Higher Education Contributions Scheme began in 1989, new research estimates.

The study, by Tim Higgins and Hecs architect Bruce Chapman, both of the Australian National University, projects the cumulative figure to rise above A$1 billion in the next 10 years.

Higgins told Campus Review that while the amount represented a small portion of the billions in outstanding Hecs debts, it was significant and probably simple to start recovering. The study suggests three methods the Australian government could adopt. The researchers favour the idea that students be required to sign a Hecs contract requiring them to repay their minimum annual debt if they live internationally beyond a short period.

“This amendment would require that a Hecs debtor leaving the country inform the ATO [Australian Tax Office] of their plans and make arrangements to offset the outstanding debt through the provision of their required details, such as the relevant tax file number,” the academics say in the study. “This could become an additional piece of information on overseas departure cards.”

Higgins said this would be easier than trying to recover the money via the tax systems of other countries or through reciprocal tax agreements with them. He said the motivation behind chasing the money was one of fairness. “I see it as an equity issue. We have students who are doing their degrees in Australia, and the ones who remain here have to pay back and the ones who don’t remain here don’t have to pay back. It my opinion, all students should be treated in the same way,” he said.

It was also right that the graduates honour their debt to Australia, Higgins said. “If they incur a Hecs debt and they have the good fortune to be able to go overseas to get a job, first of all they’re not paying tax in Australia. So even though our system may educate them, Australia doesn’t benefit from the income that they earn and doesn’t benefit directly from the education that our taxpayers have provided to them,” he said. Analysing survey data from Graduate Careers Australia, the study finds that about 10 per cent of all 2006 graduates with deferred Hecs debts worked overseas within three to four years of graduation. The vast majority of the students seemed to stay overseas for more than three years. “It’s quite a large proportion; it’s actually larger than I expected,” Higgins said.

The study, Stop the Boats! The Costs of Unpaid Hecs Debts from Graduates Going Overseas, does not take into account FEE-HELP, another state-backed student loan scheme. With that system set to expand and the onslaught of uncapped university places, Higgins said the current loss of about A$30 million-A$40 million a year due to migration would skyrocket. The report contains deep explanations of the methodology used to derive the estimates. The researchers stress that due to a general lack of data, their conclusions contain a lot of uncertainty, but are most likely underestimates. Higgins said the phenomenon was a hole in the system that probably should have been dealt with when Hecs originated. “The policy was so novel at the time. It could well be that there were suggestions at the time but not all of them were implemented,” he said.

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