Understanding recent HECS–HELP price misunderstandings

Abstract

In October 2020, the Australian Parliament legislated what appear to be significant changes in HECS–HELP prices, the tuition charges levied on domestic undergraduate students. Through this policy change, the Government aims to influence student choices in order to help deliver the skill changes presumed to be required for the economy's post-COVID make-up. This paper examines, in conceptual and empirical terms, a key aspect of the motivation for the reform, the true meaning of prices in the HECS–HELP world of an income-contingent loan (ICL). We explain the conceptual basis of ICL charges and, with 2016 Census data, illustrate the meaning of the price changes between disciplines, by gender, and for a suite of expected future graduate lifetime income distributions. Our analysis points strongly to the conclusion that the true price changes are far less than they appear to be, highlighting the potential of there being quite muted consequences for student discipline choices.