Blue Sidebar Evaluations and Investigations Program E I P

Investigation of the Source of Funds for Up Front Higher Education Contribution Scheme (HECS) Contributions and Postgraduate Fees Paid by Australian Students

98/12

Simon C E Smith
Carey J Ramm
Rebecca R Archbold

Centre for Applied Economic Research and Analysis

January 1998

Evaluations and Investigations Program
Higher Education Division
Department of Employment, Education,
Training and Youth Affairs		 Evaluations and Investigations Program

©Commonwealth of Australia 1998

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without permission from AusInfo. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Legislative Services, AusInfo, GPO Box 84, Canberra ACT 2601.

This report is funded under the Evaluation and Investigations Programme of the Department of Employment, Education, Training and Youth Affairs.

The views expressed in this report do not necessarily reflect the views of the Department of Employment, Education, Training and Youth Affairs.

Executive Summary

This research is the result of over 5,000 completed survey forms by HECS liable and fee paying postgraduate Australian students. The major findings of the research are:

Sources of Funds

  • Approximately 65.9 per cent of funds accessed by Australian students for the payment of postgraduate fees are sourced from personal savings. Employers and family members comprise 16.8 per cent and 5.9 per cent of sources respectively.
  • Almost 50 per cent of funds accessed by Australian students for the up front payment of HECS are sourced from personal savings. Family members and employers comprise 34.3 per cent and 12.1 per cent of sources respectively.

Reasons for Up Front Payments

  • Of those students who paid their HECS up front, 63.7 per cent did so because of the 25 per cent discount rate. Other reasons for paying up front were: payment made by other party (12.9 per cent) and an aversion to debt (11.8 per cent).

Mode of Payment

  • Of those students who pay their HECS up front, 25.9 per cent had changed to up front payments during the course of their studies.
  • Main reasons for the change to up front payments were an increase in personal income (32.4 per cent), an increase in the discount rate (23.1 per cent), employer contribution (13.6 per cent) and family contribution (12.6 per cent).
  • The major reason for not paying HECS up front was insufficient personal income, identified by 88.2 per cent of HECS liable students.
  • The majority of students not paying HECS up front (78.8 per cent) intend to pay their HECS debt through the taxation system, whilst 16.1 per cent intend to make use of the discounts available to voluntary lump sum payments.

Characteristics of Up Front Payers

  • Postgraduate fee payers are characterised as:
  • being enrolled on a part-time basis;
  • aged over 25;
  • in paid full-time employment; and
  • earning over $35 000 per annum.

  • Up front HECS payers are characterised as:

  • being enrolled on a part-time basis, aged over 25, in paid full-time employment and earning over $20 000 per annum; and
  • residing in urban areas of the State with an index above that of the State average on the Index of Relative Socio-Economic Disadvantage.

Characteristics of Deferred Payment Students

  • Deferred payment students are characterised as being:
  • undergraduate full-time internal students, aged between 16 and 24 years old, being unemployed or in paid part time employment and earning below $20 701 per annum; and
  • reside in urban areas of the State with an index above that of the State average on the Index of Relative Socio-Economic Disadvantage.

Factors Affecting Up Front Payments

The up front payment behaviour of HECS liable students is:

  • very sensitive to changes to the up front discount rate (i.e. they are more likely to pay up front with an increase in the discount rate);
  • very sensitive to imposition of a real rate of interest on HECS debt (i.e. they are more likely to pay up front with an imposition of a real rate of interest on HECS debt);
  • sensitive to changes in the annual level of HECS (i.e. they are more likely to pay up front with an increase in the annual level of HECS);
  • slightly sensitive to changes in the voluntary discount rate (i.e. they are more likely to pay up front with an increase in the voluntary discount rate); and
  • insensitive to changes in threshold levels for compulsory payments of HECS debt (i.e. an increase/decrease in the threshold levels is unlikely to influence up front payments).

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