Category: Higher education

The history and politics of the first student debt repayment threshold

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The government’s HELP legislation, cutting student debts by 20% and introducing a new repayment system, was introduced into Parliament yesterday. While I have criticisms of the 20% cut, it will be implemented and once done cannot be reversed. The changes to the repayment system will pass now but can, and probably should, be changed at a later date.

In this post I briefly explain how the repayment system will change and then discuss the choice of the first threshold.

The current and proposed student debt repayment systems

Under the current system, repayments start at an annual income of $56,156, at which point student debtors repay 1% of their total income. From there the percentage of income repaid increases incrementally to reach 10% of income at $164,712.

Under the new system repayments start at when income exceeds $67,000. At this point a marginal rate of 15% of income above $67,000 applies up to $124,999, where a marginal rate of 17% applies for income of $125,000 or more. Unexpectedly the bill restores part of the old system with an annual repayment cap of 10% of total income. This avoids some high income earners paying more than now.

The new thresholds will be indexed to growth in average weekly earnings. The current thresholds are indexed to CPI.

The logic of the first threshold

As the chart below shows, in the black dotted line, the first repayment threshold has changed over time. The long-term policy/political tension is between the idea that graduates should enjoy some financial advantage before repaying their student debt and the idea that student debt should be repaid except in cases of financial hardship. The policy pendulum is currently shifting from the latter to the former.

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Despite an increase in applications for the 2024 academic year, school leaver interest in higher education remained below mid-2010s levels

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University applications statistics for 2022 to 2024 were finally released late last week, giving us another data source on demand for higher education.

This post focuses on recent school leavers. The chart below shows that applications for this group were up in 2024 on 2023, but that the slump in applications since the late 2010s remained evident – other than the spike for academic year 2021, which is only apparent for teenagers who finished school prior to 2020. This is consistent with people deciding to sit out the COVID recession at university.

That COVID spike meant that in 2021 an unusually large share – 35% – of the 19 and under applicant group were not people who had finished school the year before. This share was 32.5% in each of 2023 and 2024, higher than any year 2012 to 2020, when it averaged 28.4%. This could mean that we are seeing more young people delaying higher education. This data source does not, however, distinguish between people who delayed applying until one or two years after finishing school, and people who enrolled but reapplied to change university and/or course.

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What is behind increased rates of upfront payment of fees and student contributions?

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It’s been a while – seven years – since I took a look at higher education student decisions to take out a HELP loan or pay upfront. Since then we’ve had instability in upfront student contribution payment incentives and increased student debt salience, triggered by high-CPI indexation. Anecdotally some students paid upfront to avoid high indexation of the subsequent debt.

Student contributions & HECS-HELP

The direct incentive to pay student contributions upfront has been framed as a discount. If the upfront discount was 10% and the fee was $1,000 a person who paid upfront would incur a debt of $900. The Commonwealth compensated the university for the lost $100, but avoided holding debt that might go bad and paying interest on its own borrowings to finance lending the student $1,000. In recent years, according to estimates in the Budget papers, about 15% of each year’s lending is not expected to be repaid.

The size of the incentive to pay student contributions upfront has varied over the last 20 years. Any incentive was abolished in 2017, restored for 2021 and 2022 to get Pauline Hanson to vote for Job-ready Graduates, and then abolished again from 2023.

I am in the no upfront discount camp, as I believe most people who pay upfront will do so anyway, whether there is a discount or not.

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What’s in the 2025 funding agreements? – ‘Higher education courses’ block grants

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In February I reported on preliminary university-level 2025 allocations under the Commonwealth Grant Scheme and estimates of student contributions.* These have since been updated to add money for FEE-FREE Uni Ready places and regional university study hubs. The revised funding summary is here.

This post looks at the underlying funding agreements for more detail on the ‘higher education courses’ part of CGS funding. As usual in funding agreements since 2021, the detail reveals a range of legal and policy problems.

A spreadsheet summary of higher education courses funding for 2025 is here.

The role of higher education courses funding

Higher education courses funding is intended, by the Higher Education Support Act 2003, to be a flexible block grant. Within their total funding envelope, expressed as the ‘maximum basic grant amount’ (MBGA), universities can move resources across coursework AQF levels and between fields of education, other than medicine.

Although higher education courses funding is supposed to be flexible, both Coalition and Labor governments have used ad hoc funding agreement conditions to restrict use of higher education courses money to purposes chosen by the government.

This has in turn led to the unlegislated concepts of ‘base MBGA’ and ‘total MBGA’. Total MBGA is actual MBGA under HESA 2003. Base MBGA excludes most ad hoc programs. Its purpose is to reduce expenditure on the higher education continuity guarantee and the current equity plan funding. If universities don’t meet the ad hoc criteria they get $0 for those non-delivered places.

Overall trend in higher education courses funding

To the surprise of universities the first-term Albanese government often treated them harshly. But Labor kept the former government’s promise to index higher education courses funding to CPI. That was 4.1% for 2025. They also kept the Coalition’s region-based funding increases. While there are complex financial flows in and out of higher education courses funding – discussed further in this post – it is up 6.1% between 2024 and 2025 to a total of $7,687,211,975.

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Mapping Australian higher education 2023 – data update March 2025

Andrew Norton2 Comments

Update 20/12/2025: More recent data here.

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I won’t have the capacity to produce another edition of my Mapping Australian higher education report in the foreseeable future, but I am extending the life of the October 2023 edition by updating the data behind the charts.

Mapping‘s chart data is the only publicly-available source of long-term time series data on many higher education topics, especially on financial matters.

I had been waiting on the 2023 university finances report before releasing another chart data update. That finally happened yesterday. Despite a record 27 universities reporting deficits, in the aggregate there was a small surplus, after a loss overall in 2022.

2023 had some weak numbers for the two main Commonwealth student programs, the Commonwealth Grant Scheme and HELP. Several factors were behind this: temporary COVID places coming out of the system, Job-ready Graduates reductions in total funding rates for some courses, and weak domestic demand. These programs trended up in 2024 and 2025, as seen in the chart below, although high CPI-driven indexation was a significant factor.

The updated chart data is available here.

Preliminary 2025 funding per university for Commonwealth supported places

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Due to the Department of Education’s under-reporting of higher education funding, last year I consolidated institution-level information into a spreadsheet. There were about 250 downloads each for the original and a subsequent updated spreadsheet, so I decided it was worth doing again this year. The data sources are the funding determinations for the various funding categories.

I emphasised ‘preliminary’ in the post title because the FEE-FREE Uni Ready funding is not yet included. While this is a little frustrating, the upside is that when it is added the amounts involved will be more transparent than might otherwise have been the case. [Update 28/2/25: In Senate estimates yesterday the Department said that FEE-FREE Uni Ready funding equivalent to historical enabling places as of 2022 were included in the funding agreements. Funding for new FEE-FREE Uni Ready places is yet to be released.]

The headline figures to date are Commonwealth Grant Scheme (CGS) – $8.2 billion, estimated HECS-HELP lending of $5.9 billion, and estimated upfront student contributions of $700 million. Overall, about $14.8 billion, with 95% coming from the Commonwealth in cash flow terms. That percentage will go up when we get the FEE-FREE Uni Ready information.

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Update on Accord student funding policies

Andrew Norton7 Comments

With a break between jobs and other things going on I did not comment in December on the Accord-related MYEFO student funding announcements. Compared to last year’s consultation papers, the announcements included a policy change on over-enrolments, more detail on how under-enrolments will be handled, and funding amounts.

Over-enrolments

One of the worst ideas in the June 2024 managed growth consultation paper was a hard cap on Commonwealth supported places. Currently the main CSP category has a soft cap – once a university enrols CSPs valued at its maximum basic grant amount it gets only the student contribution for additional students. These student contribution-only places are known as ‘over-enrolments’. Under a hard capped system over-enrolments would receive zero funding. I explained why hard caps are a bad idea in this post.

In its MYEFO summary the government backed off a little from the hard cap idea. Now universities ‘will continue to receive student contribution amounts for a small proportion of additional students’. The reason given was the practical difficulty of hitting a precise enrolment target. [Update: At a Senate estimates hearing on 27/2/25 the Department said that ‘the overenrolment buffer will be between two per cent and five per cent’.]

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Robert Menzies and the Murray review of universities

Andrew Norton5 Comments

An earlier post looked at Robert Menzies and higher education, first as Opposition leader and then as Prime Minister, from 1945 to 1956. Despite important structural changes in the early 1950s, with the Commonwealth commencing grants to universities via the states and directly financing Commonwealth scholarships, the university sector remained small and financially weak.

In March 1956, Menzies agreed to a university policy review, what became the Murray report. This post draws on my chapter on the Murray report in The Menzies Ascendancy: Fortune, Stability, Progress 1954–1961, edited by Zachary Gorman and published last month.

The appointment of Keith Murray to review universities

By the time Menzies agreed to the review he had already decided that major changes to university policy were needed.

In his book The Measure of the Years, Menzies says that prior to his trip to England in 1956, where he first met Keith Murray in person, he told Treasurer Artie Fadden that he was initiating an enterprise that could not fail to be ‘vastly expensive’.

In December 1956 Murray was appointed as chairman. The four other members included CSIRO Chairman Ian Clunies-Ross, believed to be the subsequent report’s main author.

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Robert Menzies and higher education, 1945 to 1956

Andrew Norton3 Comments

I’m not an historian, but decided to accept a Robert Menzies Institute suggestion that I give a paper on the 1957 Murray report on universities for their 2023 conference on Menzies, which covered the years from 1954 to 1961. The book chapter version of that paper came out in December 2024.

As well as describing events surrounding the Murray report I tried some counter-factual history, in an attempt to understand the distinctive contribution of Menzies to Australian higher education policy. The post-WW2 period saw higher education expand in all the countries with which Australia compared itself. With or without Menzies, Australia’s pre-WW2 model of one impoverished, low-enrolment university in each capital city was not a plausible long-term system.

But what would have happened if Labor had remained in power after 1949, or won the close 1954 election? What would have happened if someone other than Menzies had led the Liberal Party (or the main non-Labor party, given Menzies’ role in creating the Liberal Party)?

This post looks at what happened up to 1956. A subsequent post examines the Murray report and its consequences.

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Budget treatment of student debt policy announcements

Andrew Norton3 Comments

One criticism of the weekend’s big proposed changes to student debt – a new repayment system and a 20% cut to student debt balances – is that they are ‘off budget’, concealing their true cost.

The Budget includes several different takes on the government’s annual finances, including fiscal balance, headline cash and underlying cash. The Budget papers also report the value of government assets, including student debt.

The ‘underlying cash balance’ is the most commonly used Commonwealth’s Budget metric. When the Treasurer boasts about the government’s fiscal performance he uses an underlying cash measure. Unfortunately from a ‘Budget honesty’ perspective underlying cash is the weakest measure of student loan costs and of the financial impact of proposed changes to student loan policies.

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