HIGHER EDUCATION CONTRIBUTION SCHEME 1 Essay Example

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Should government provide HECS for poor university students in Australia?

Higher education contribution scheme (HECS) plays quite a significant role in the higher education sector in Australia. It is government loan scheme under common wealth which is usually available to eligible students providing them with support as far as the payment of their fees for their course studies is concerned. This system of HECS was introduced in Australia in the year 1989 prior to which students were required to make full payments of fees in order to continue their learning in higher education (Aungles et al., 2002, p.15). HECS government loans translates to a HECS-HELP debt which students are required to pay once they have secured some form of employment after the completion of their education and are earning income that is not below the minimum threshold. The debt undergoes recording in the country’s department of tax against the students Tax File Number (Aungles et al., 2002, p. 20). The students can therefore not default payments once they get employment. This system ensures that students do not lose the chance of advancing their studies in higher education level. There are a wide range of reasons that support the provision of HECS by the government to poor university students in Australia. In line with HECS a major issue that has always been a key point of in the government is whether it should provide these loans for poor university students in Australia (Soutar and Turner, 2002, p.44). Herein focus is on these reasons which place greater emphasis on the understanding that the poor university students need to be supported by the government in their education in order to accomplish their educational and professional goals among other life objectives.

Poor university students deserve the opportunity to develop their education and professional goals through studying in the university; this is best option that will contribute to poor university students based on the point that these loans provides the students with an opportunity to further their education and accomplish their professional goals (Aungles et al., 2002, p.15). It is quite evident that many students who come from poor backgrounds experience adverse financial problems and therefore not able to continue with their studies (Cardak and Ryan, 2006, p. 66). With the Australian government taking the initiative of giving HECS to poor university students they would positively contribute in the development of expertise that the country needs for economic development and growth. The students will have an opportunity to acquire knowledge and skills that will make them employable and therefore qualifying for different positions in different organizations including in the government (Soutar and Turner, 2002, p.44). On this note, the government should assist poor university to access higher education facilities through provision of HECS.

The Australian government should provide HECS for poor students in the university is the idea that this will contribute to the betterment of the society (Dollery et al., 2006, p.89). Within any given society there are all kinds of people which include the employed and unemployed. Most of those who lack employment do have the skills much less the knowledge needed to qualify them or rather make them employable. In this respect they end up in streets thus increasing the level of insecurity in the country. This is so because such people without employment engage end up engaging in a wide range of social evils as means of survival Cardak and Ryan, 2006, p. 32). On this note poor university students are bound to become susceptible to leading such a life due to lack of funds to further their educational, career and community goals. There is need for the government to recognize how lack of security in the society is linked to educational aspects for the poor communities (Beer and Chapman, 2004, p.158). From this point of view the Australian should therefore provide HECS for poor students in the university and therefore working towards the enhancement of security in the country.

The importance of HECS being provided by the government for poor university students is also based on the understanding that capital market markets finds it difficult to finance higher education (Dobson, 2003, p.32). Poor students lack the capacity and eligibility for loans to fund their education from banks. This problem is rooted to the general understanding that commercial banks are not in a position to provide loans aimed at funding investments on human capital (Chapman and Ryan, 2005, p. 496). The main concern posed by banks in the context of providing poor university students with loans is that such loans are high risk loans and not to their benefit. In comparison with the house capital market educational loans lack saleable collateral of any kind of default in payment. In addition, banks identify that there exists no market for slavery where the human capital under development can be sold. A deeper re-assessment of the issue demonstrates that returns from investing in higher education sector are highly uncertain and variable (Chapman et al., 2007, p.17). This therefore reflects that there is actually a real risk to commercial banks in line with the risk of default whereby a student who had previously received an educational loan is earning a low income (Chapman and Ryan, 2005, p. 504). It is from this point of that the Australian government should intervene and provide HECS for poor students in the university.

The Australian government is better placed than the banks in the provision of HECS loan for the poor university students. This is due to the fact that if the loans are provided by the government there is default protection based on the approach of income –contingent repayment. The income-contingent approach involves loan repayment by students through the system of taxation (Chapman, 2008, p.742). In this respect the debt repayments are dependent on the amount of income earned. Government intervention through HECS may be linked to the advantage attached to the income-contingent strategy which poor students cannot at all enjoy if provided loans with banks (Johnes and Jill, 2006, p.7). Different from bank loans income-contingent loans do not require debt payment to be made with a specified period of time. These loans basically provide students with protection from exigency costs associated with investment financial returns in education thus offering some kind of default insurance debt in the consequence of periods in future when one would be earning low income (Harman, 2005, p.210). In the contrary bank loans are associated with default risks which could at some point be very high. With such a clear understanding of the operations of the capital markets the Australian government should provide HECS for poor university students in the country.

The aforementioned reasons as to why the Australian government should provide HECS for poor university students in the country presents a broader perspective of how the Australian system of funding educational needs for the poor should operate (Elisa and Miller, 2008, p.18). As demonstrated herein, there are several positive outcomes arising from government intervention through HECS in the facilitation of education for the poor. One of the positive outcomes is that HECS for the poor students means that they will have the opportunity to further their education and accomplish their professional goals. Furthermore, the government could view supporting these students financially in their education as point of strength. This is due to the fact that they stand a chance of making a positive contribution in the development of expertise that the country needs for economic development and growth (Elisa and Miller, 2008, p.18).

Poor university students will have an opportunity to acquire knowledge and skills that will make them employable and therefore qualifying for different positions in both the government and other private organizations (Harman, 2005, p.210). Another key positive contribution from government intervention through HECS in support of education for the poor university students is that the number of the unemployed individuals in the society will reduce. In this respect the society stands a chance being more secure since the majority of the people are educated and are employable. Herein it can be identified that education financial assistance through HECS has more merit that through the banks. The main reason provided is that banks lack favorable terms of repayment including the fact that they are not in favor of providing such loans due to lack of saleable collateral (Chapman et al., 2007, p.16).

The call for the Australian government to provide HECS for poor university students in the country is based on the understanding that government loans are associated with default protection based on the approach of income –contingent repayment. As discussed in this paper the income-contingent approach involves loan repayment by students through the system of taxation (Chapman et al., 2007, p.16). Therefore, debt repayments are dependent on the amount of income earned either low or high without any pressures regarding the amount of interest to be paid as in the case of normal banks. Up to this point it can be clearly demonstrated that the government should provide HECS for poor university students in Australia.

References

Aungles, P., Buchanan, I., Karmel, T. and MacLachlan, M. (2002). HECS and Opportunities in Higher Education, Research, Analysis and Evaluation Group, Commonwealth Department of education, Science and Training, Canberra.

Beer, G. and Chapman, B. (2004). HECS system changes: impact on students,

Agenda, 11(2), 150–71.

Cardak, B. and Ryan, C. (2006). Why are high ability individuals from poor backgrounds under-represented at university?,” La Trobe School of Business Discussion Paper A06.04, La Trobe University, Melbourne.

Chapman, B. and Ryan, C. (2005). The access implications of income related charges for higher education: lessons from Australia, Economics of Education Review, 24(5), 491–512.

Chapman, B., Rodrigues, M. and Ryan, C. (2007). HECS for TAFE: the case for extending income contingent loans to the vocational education and training sector, Treasury Working Paper 2007–2, April, Commonwealth Treasury, Canberra.

Chapman, B. (2008). Conceptual issues and the Australian experience with income contingent charges for higher education, The Economic Journal, 107(442), 738–51.

Dobson I. (2003). Access to University in Australia: Who misses out? “International Perspectives on Higher Education Research, 2, 29-58.

Dollery B., Murray D., Crase L., (2006). Knaves or knights, pawns or queens?: An evaluation of Australian higher education reform policy, Journal of Educational Administration, 44(1), 86 – 97.

Elisa B., Miller P., (2008). The impact of income-contingent provisions on students’ loan-taking behaviour, Journal of Economic Studies, 35(1), 4 – 25.

Harman G. (2005). Internationalisation of Australian Higher Education, International Relations, Emerald Group Publishing Limited, 3, 205-232.

Johnes G. and Jill J., (2006). Policy Reforms and the Theory of Education Finance, Journal of Economic Studies, 21(1), 3 – 15.

Soutar N., and. Turner J. (2002). Students’ preferences for university: a conjoint analysis, International Journal of Educational Management, 16(1), 40 – 45.