April 13, 2016

Four questions for the Parliamentary Budget Office on the true cost of HECS-HELP

I do not fully understand the Parliamentary Budget Office report: HELP, impact on the budget.
The headline figure in is that in 2025-26 the annual cost of HELP on an underlying cash balance basis will be $11.1 billion. How does a suite of programs bobbing along at an estimated cost of around $2 billion suddenly and inexorably begin to rise from 2017-18 to six times the current level with lending only doubling?  This has been transformed into a flurry of concern that the main university funding system is out of control.
As I ponder the report four questions come to the fore.

1. What is the split of the $11.1 billion across the five distinct HELP programs?

The report does not break out HECS-HELP, the core program supporting undergraduate students in Commonwealth funded places. At a guess on the PBO assumptions HECS-HELP is about $6.6 billion in 2025-26.

1. What is the split of the HECS-HELP amount to show the current program plus the impact of the Government’s proposed changes?

At a guess on the PBO assumptions the current program would be at a cost of $4.5 billion in 2025-26.

1. What is the saving to the Government from its proposed major reduction in funding through the Commonwealth Grant Scheme?

Any assessment of the HELP programs should surely allow for the reduced call on direct Government funding. The saving has to be at least equal to the cost the loan increases to replace it.

1. On what basis does the PBO hypothecate all HELP costs to Government borrowing, ignoring the contribution of many other major Government programs and driving up the notional cost of HELP?

The counter, and equally self-serving argument, is that none of it does.
Read full Executive Director comment below.