Commonwealth of Australia Explanatory Memoranda

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HIGHER EDUCATION SUPPORT LEGISLATION AMENDMENT (STUDENT LOAN SUSTAINABILITY) BILL 2018

                           2016-2017-2018




   THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA




                   HOUSE OF REPRESENTATIVES




   Higher Education Support Legislation
Amendment (Student Loan Sustainability) Bill
                  2018



         SUPPLEMENTARY EXPLANATORY MEMORANDUM




       Amendments to be moved on behalf of the Government




(Circulated by the authority of the Minister for Education and Training,
                    the Hon Simon Birmingham MP)
     Higher Education Support Legislation
  Amendment (Student Loan Sustainability) Bill
                    2018
                                 OUTLINE

These amendments to the Higher Education Support Legislation Amendment
(Student Loan Sustainability) Bill) 2018 (SLS Bill) will:

      set FEE-HELP loan limits for 2019 for FEE-HELP loans, VET
       FEE-HELP loans and VET Student Loans
      delay the combined HELP loan limits for HECS-HELP loans,
       FEE-HELP loans, VET FEE-HELP loans and VET Student Loans by
       one year to 1 January 2020
      allow for renewable HELP balances, beginning with HELP debt
       repayments in 2019-20 adding to HELP balances in 2020.

The existing arrangements for FEE-HELP loan limits in the Higher Education
Support Act 2003 (the Act) will continue for the 2019 calendar year. The
amounts of the FEE-HELP loan limits for 2019 mirror the combined HELP
loan limits for 2019 originally proposed in the SLS Bill. For fee-paying
students in medicine, dentistry and veterinary science courses the loan limit
for 2019 will be increased to $150,000 and for all other fee-paying students
the loan limit for 2019 will be maintained at $104,440.

From 1 January 2020 loan limits will also apply to new borrowing under
HECS-HELP. The FEE-HELP loan limits will become HELP loan limits and a
person's FEE-HELP balance will become their HELP balance. The amounts
of loan limits in 2020 will be the amounts that would have applied had the
FEE-HELP limits for 2019 been indexed in the usual way. Accordingly, HELP
loan limits are not indexed again on 1 January 2020.

A person's HELP balance will become renewable from 2020. The introduction
of an amendment to make the HELP balance renewable provides a way for a
person's HELP loan balance to be re-credited by HELP debt repayments
made during a financial year. They will then be able to re-borrow those funds,
up to the prescribed loan limit. The renewable component will commence in
2020 and apply to the financial year commencing on 1 July 2019 and each
financial year thereafter. That is, a HELP debtor's compulsory and voluntary
repayments during the 2019-20 financial year (and each year thereafter) will
offset their HELP balance.

Financial Impact

The amendments to the Bill have $4.3 million financial impact in underlying
cash terms over the forward estimates 2017-18 to 2020-21. In fiscal balance

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terms the amendments to the Bill are a cost of $4.1 million over the forward
estimates 2017-18 to 2020-21.




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            PROPOSED GOVERNMENT AMENDMENTS
The Government proposes the following amendments to the SLS Bill.


New FEE-HELP loan limits from 2019 - Amendments (1) and (3)

Amendment (3) inserts a new Schedule 2A into the SLS Bill, consisting of
three items. Amendment (1) amends the table in clause 2 of the SLS Bill to
provide that the new Schedule 2A commences on 1 January 2019.

Items 1 and 2 of the new Schedule 2A to the SLS Bill will adjust the current
FEE-HELP loan limit (set out in section 104-20 of the Act) to $104,400, and
$150,000 for persons enrolled in medicine, dentistry or veterinary science
courses.

Item 3 is a transitional provision that ensures that the new amounts inserted
by items 1 and 2 are not also indexed on 1 January 2019 under Part 5-6 of
the Act.

Renewable loan limits - Amendments (2) and (4) to (16)

Amendment (2) amends the table in clause 2 of the SLS Bill to delay the
commencement of Schedule 3 to the Bill until 1 January 2020. Consequently,
amendments (6) and (11) to (15) amend other date references in Schedule 3
to the Bill.

Amendment (10) inserts a new section 128-25 into Part 3-6 of the Act (which
is inserted by item 54 in Schedule 3 to the Bill). Section 128-25 will provide
that the Secretary must re-credit a person's HELP balance with the amount of
any compulsory and voluntary repayments of the person's HELP debt that the
person has paid in the preceding financial year, as notified to the Secretary by
the Commissioner of Taxation after the end of that financial year. The first
time this will occur is in 2020, with a person's HELP balance credited shortly
after the end of the 2019-20 financial year with the amount of their
repayments in that year. Amounts repaid in previous financial years will not
re-credit a person's HELP balance.

Amendment (5) amends paragraph 128-15(1)(a) by inserting reference to the
new section 128-25 of the Act.

A person's HELP balance at a particular time is the maximum amount of
HECS-HELP assistance, FEE-HELP assistance, VET FEE-HELP assistance
and VET student loans that they can be loaned. Under section 128-15, every
time a person is paid an amount of HECS-HELP assistance, FEE-HELP
assistance, VET FEE-HELP assistance or VET student loan, their HELP
balance is reduced by that amount.

Similarly, under section 128-15, every time an amount is re-credited to a
person's HELP balance under the Act or the Student Loans Act 2016, their
HELP balance increases.
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The effect of the amendment to paragraph 128-15(1)(a) and the new section
128-25 is that any repayments that a person makes on their HELP debt during
a financial year is added to the amount of HECS-HELP assistance, FEE-
HELP assistance, VET FEE-HELP assistance and VET student loans that
they are able to be loaned thereafter. In effect, the amount that a person
repays on their HELP debt allows them to receive a like amount in further
HELP loans.

Amendment (4) amends the guide to Part 3-6 in section 128-7, by adding a
paragraph (c) to reflect that a person's HELP balance is affected by any
re-crediting of that balance (including re-crediting occurring under new section
128-25).

Amendment (7) amends subsection 128-15(2) as a consequence of the
amendment to paragraph 128-15(1)(a).

Amendments (8) and (9) amend the amounts of the HELP loan limit in
section 128-20. Section 128-20 replaces section 104-20, which is repealed
by item 9 of Schedule 3 to the Bill. The new FEE-HELP loan limits (of
$104,400 and $150,000) come into effect on 1 January 2019 (see amendment
(3), described above).

In order to ensure that the HELP loan limit is set at the correct amount on 1
January 2020, amendments (8) and (9) change the dollar figures in section
128-20 to the amounts that would have been the FEE-HELP loan limits on
that day, if section 104-20 had not been repealed, and the amounts set out in
that section were indexed in the normal way.

Amendment (16) repeals and replaces the current transitional item 147 in
Schedule 3 to the Bill. This is consequential to the amendments made by
amendments (3), (8) and (9) - ensuring that the HELP loan limits that come
into effect on 1 January 2020 under new section 128-20 are the amounts set
out in that section, not those amounts as indexed (since the amount under
new section 128-20 are already the amounts as if they had been indexed on 1
January 2020, applying indexation again on 1 January 2020 would double the
annual indexation of those amounts).




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