An Analysis of Fee-Help in the Vocational Education and Training Sector

14 Pages Posted: 15 Apr 2008

See all articles by Bruce Chapman

Bruce Chapman

Australian National University, Research School of Social Sciences (RSSS) - Economics Program; Australian National University (ANU) - Crawford School of Public Policy

Mark Rodrigues

affiliation not provided to SSRN

Chris Ryan

University of Melbourne - Melbourne Institute: Applied Economic & Social Research

Date Written: 2007-09

Abstract

The public vocational education and training (VET) system is one of the few areas in Australia's tertiary education system where students are required to pay upfront fees without access to loan assistance. These arrangements may lead to sub-optimal educational outcomes to the extent that prospective students reject a VET education on the basis of short-term financial constraints. In this paper we analyze some of the important issues related to the adoption of FEE-HELP (a 2005 federal government financial instrument based on the Higher Education Contribution Scheme (HECS)). It is argued that income contingent loans of this kind are associated with the advantages of both default-protection and consumption smoothing. Using data from the first three waves of the Household Income and Labor Dynamics in Australia (HILDA) survey, we examine various empirical issues associated with the adoption of FEE-HELP in VET, including the extent of private salary returns to VET qualifications. As well, we explore issues related to the public subsidies inherent in the adoption of FEE-HELP in VET, and illustrate the time periods involved in loan repayments for various assumptions concerning the size of the charge and the future income of VET graduates. Administrative issues are considered, as are the implications for the Commonwealth government with respect to potential subsidies associated with the design parameters. In the 2007-08 Federal Budget, the former government announced a small extension of the FEE-HELP system into Australian VET, a reform consistent with improved tertiary funding arrangements.

Suggested Citation

Chapman, Bruce James and Rodrigues, Mark and Ryan, Chris, An Analysis of Fee-Help in the Vocational Education and Training Sector (2007-09). Australian Economic Review, Vol. 41, Issue 1, pp. 1-14, March 2008, Available at SSRN: https://ssrn.com/abstract=1120500 or http://dx.doi.org/10.1111/j.1467-8462.2008.00473.x

Bruce James Chapman

Australian National University, Research School of Social Sciences (RSSS) - Economics Program ( email )

HC Coombs Building
Australian National University
Canberra, Australian Capital Territory 0200
Australia

Australian National University (ANU) - Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Mark Rodrigues

affiliation not provided to SSRN

No Address Available

Chris Ryan

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

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