Is it stepped at all? Do you owe nothing before 50k and then once you cross that threshold you now owe money? That would seem to incentivise staying below that threshold for a percentage of borrowers.
I also have difficulty seeing the first benefit you list as being a benefit. I don't have a problem with people pursuing degrees in fields that aren't big money makers, but I also don't know that the government should be in the business of incentivising people to study in these fields.
On the other hand, there is societal benefit to these fields being pursued in general. And the market economy may not adequately pay for the benefits it receives. As a society we wouldn't want everyone to major in poetry, though.
> I also have difficulty seeing the first benefit you list as being a benefit. I don't have a problem with people pursuing degrees in fields that aren't big money makers, but I also don't know that the government should be in the business of incentivising people to study in these fields.
It's actually one of the best things about the system. Maybe you want to be a social worker who will never earn much but will make a meaningful difference in peoples lives, or a lawyer that only works for non-profits, or a doctor that only works for doctors without borders, or any one of ten thousand other examples where a person can make an extremely valuable contribution to society, but doesn't earn a ton of money.
You made the mistake of assuming that only people earning a ton of money make valuable contributions to a society.
You make the mistake that the relationship between income and value to society is inverse. Delivery people, for example, or store clerks or the like are all not paid well, but their impact on society isn't particularly profound either. The loan payment structure gives people an incentive to have a lower paying job as opposed to a higher paying one, which isn't the right way to go about it.
Option #1: low-paid job. Probably routine job where you're not expected (or allowed!) to contribute anything that the last person who had the job could do. Live with roommates, rent your whole life, insecurity due to lack of savings, poor (if any) health insurance (US applicable).
Option #2: higher-paid job. Have to pay back loan, which might be a problem if you're just at the bottom of the "you have to pay it back" scale. May have your own apartment or possibly a house, savings, hopefully good health insurance, etc.
I've worked with people who would choose option #1 permanently. Their life was outside their work. They started thinking about the job when they clocked in and stopped when they clocked out. Most of them didn't go to college.
Others did go to college and graduated but didn't know what they wanted to do with their lives. Having the equivalent of a gap year or two (or ten!) after college without worrying about loan payments doesn't seem like the worst thing in the world.
> Is it stepped at all? Do you owe nothing before 50k and then once you cross that threshold you now owe money? That would seem to incentivise staying below that threshold for a percentage of borrowers.
You make no repayments below 50k but it when it kicks in starting at 50k it's something like 1.5% of income, with increments as you earn more. Combined with the fact that it's (1) real-interest free, (2) payments are collected by the Tax Office and automatically added on to your tax bill, and (3) Australia is really expensive, there's not much incentive to stay below 50k just to avoid paying it. Historically there have also been large discounts (10-20%) just for voluntarily paying it early too.
> I also don't know that the government should be in the business of incentivising people to study in these fields
That's interesting. So do you want government to only fund the vocational courses and allow the rich class to be the torch bearer in research, art, and culture because only they can afford it?
I'd think taxpayer money should be spent in ways that create measurable benefit to both the individual and the economy as a whole.
I'm not seeing the downside of only the rich being able to understand how Post-Impressionists like Suerat were different from Impressionists like Renoir.
> I'm not seeing the downside of only the rich being able to understand how Post-Impressionists like Suerat were different from Impressionists like Renoir.
You are picking the edge case here. Art and culture are much more then just rich class's pretense.
As far as wasting money is concerned, spending it just to create more replaceable cogs for capitalistic profit seeker is also a wasteful exercise. Why not ask the Industry to invest in producing those cogs and let government think the long term by focusing on things which cannot be measured in next quarter.
> things which cannot be measured in next quarter.
I'm all for long-term investments, but can these ever be measured? If not, it will take more than your claims to convince me that it's worth investing in.
There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, etc. These are all free or much cheaper than a course in a college. You haven't demonstrated how an academic setting is better and worth the cost.
Govt doesn't need to subsidise industry. I'd be fine if these loans are issued by private investors, as with Lambda school.
> capitalistic profit seeker is also a wasteful exercise
No, their benefit can be measured in GDP. Imperfect, sure, but 100x better than your hand-waving claims. No personal offence intended.
>There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, etc. These are all free or much cheaper than a course in a college. You haven't demonstrated how an academic setting is better and worth the cost.
Academics is necessary to teach people how to create, understand and appreciate Art and Culture. People writing books (not necessarily, but most probably) have a degree in Language and Literature, people creating documentaries have a degree in Film-making etc. If you think these skills can be obtained from reading books, watching videos on YouTube etc, then the same thing can be said about STEM fields as well.
Here is the OECD report http://www.oecd.org/education/ceri/arts.htm which stresses the importance of Arts in education and benefits of arts to students (even students of non-arts subjects). They also conclude that
"The arts have been in existence since the earliest
humans, are parts of all cultures, and are a major domain of human experience,
just like science, technology, mathematics, and humanities. In that respect, they are
important in their own rights for education."
Some Universities have Arts appreciation course for non-arts students who are interested in knowing, understanding and
appreciating Art.
>just that they needn't do so on taxpayer money
May I know the rationale behind this? If I understand correctly, what you're trying to say is that letting people study these subjects on taxpayers money is a waste of public money, which I think is not true. There are people with Academic arts background who have contributed to the society. Even (for the sake of argument) if these are not economically rewarding areas of study, is it justified that the whole field of arts which has been there almost since the beginning of mankind to be not funded by the government just because the system under which we currently live doesn't find it profitable? Is it justified to deny access to an entire group of people who are interested to study Arts but they can't because they don't have the money to pursue it?.
Thanks for a reasonable disagreement, unlike the other respondent to my post.
I was saying that govt should perhaps not give subsidised loans to individuals (as in the Australian example) to study things like art because:
- the subsidised loan program needs to have a positive measurable ROI for it to continue. Otherwise, the next govt may bring it to an end, because there are hundreds of projects competing for government resources.
- in a world where poverty still exists, programs that are more bang for the buck may have the maximum positive impact on people. I live in India where millions are poor. Some amount of money should definitely be spent on arts / culture, but probably 100x more should be spent on pulling people out of poverty, and the way to do that is to identify high ROI investments in people.
- there are already other venues than Australian-type student loans for govts to subsidise arts / culture-type education, like university grants.
- I'm not sure about the ethics of giving a loan to a student for a course that may not pay back financially, but the loan will with the student for life, even if payment is delayed till his income increases. If arts are considered important to society, is it ethical to burden a student with the loan?
It was just a thought. I'm not adamant about it. I'm happy to see that we've had a good exchange of views, which is supposed to be the purpose of a forum like this.
Thanks for sending the link to the OECD report. I'll read it when I'm free to learn more about this topic.
> There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, et
And who becomes incharge of those museums? Who makes those documentaries and those books?
Probably a lot of culture that gets attention is counter culture but that's does not happen in vaccum. In order to create the counter culture, one needs to learn the culture first. It can happen outside universities as well but that does not discount the importance of art and culture education.
> Is it stepped at all? Do you owe nothing before 50k and then once you cross that threshold you now owe money? That would seem to incentivise staying below that threshold for a percentage of borrowers.
Once you earn over the threshold your HELP repayments apply to your entire income. So, yes, at low incomes you get a pretty significant tax increase when you cross the threshold. I think they should make it marginal like regular income tax is...
Technically you always owe the money, you just don't have to repay it when you have a low income. It is stepped in the rate of repayment -- it might be 2% of income at $50k and 8% at $100k. It certainly seems like your biggest raise ever when you pay it off.
>That would seem to incentivise staying below that threshold for a percentage of borrowers.
That only makes sense if its not implemented like taxes are. For example if when you exceed 50k and your repayment rate for the first 10k of income past 50k is 2%, and you earn 59k, you would take home $58,820. Why would you not want to take home this extra income.
Is of course is assuming it works like taxes in the US (which it probably does). The same kind of bad logic occurs in the US when people won't take a raise because they don't want to "jump tax brackets", but they don't realize you only pay the higher bracket rate on the income that was in that bracket!
Our taxes work the same way, but HECS repayments don't work the same way as tax. When you hit the threshold, you pay the percentage on your entire income, not just the income over the threshold. There are also multiple thresholds, so when you hit $57,730 you go from paying 2% of your total income to 4% of your total income. Personally, I've turned down overtime due to being just below one of the thresholds.
The link I sourced [1] answers this better than I can. Please give it a read. Although in conjungtion I would note that hardly any university-educated students would wish to live below 50k AUD (~35K USD) forever. I'm not sure that avoiding such a relatively small payment each year would be worth stunting your earnings growth. It could be possible, but I don't see why anyone would shoot themselves in the foot like this.
I understand your problem with the first benefit I have listed. Here are a few things to consider though:
1. Should a student be penalised for not making the best degree choice (most doing so at the age of 18 or so)?
2. Even if the degree choice is perfect for them (in a potentially risky profession), should one not be allowed to give it a go?
3. In university you see many students who have graduated, started working, decided they hated their profession, and then subsequently returned to university to reskill. Rising debt interest would have prevented many of these students from taking the new risk of changing industries. The threshold allows people to re-enter education without being drowned by their payments for the duration fo their degrees.
I agree with you that the arts are an important part of society. However, I don't believe that, given the chance, absolutely everyone would pursue them fully. I believe those who do embark on the potentially risky career of the arts should be allowed and supported to do so, as well as being able to change career paths if they so need.
How long can you be on HELP? For as long as you are a student? In my country, we have a similar system but you can only be on loan for _exactly_ as long as a medical doctor degree is which is 6 years. Say for instance you study an engineering degree (5 years), that leaves you with one more year that you can take a student loan which is rarely enough to reskill.
Up until recently, if you left the country, Australia had no real way to make you pay back the loan since they wouldn't track your income and would see no tax return. Last year new rules came into place to claim back income from people who had left without paying their loans, and will claim a % of your income (before tax, I believe) if your income is > $13,968 ... I ended up paying the whole loan in one sum so I didn't have to keep double reporting incomes, so I guess the system has worked.
The only % you pay, is on the money above the threshold amount. So if you earn 52k, you only pay the 8% of your student loan back on the 2k above the threshold.
So yes, it is stepped, and no, there is no incentive for staying below that threshold.
re: your second point, there is no 'incentive' to study in those fields, it is merely possible to do so. It is good, as fields that are low-earning like literature and art; are not reserved only to people in society who have parents with disposable income. It's an egalitarian policy, more in line with Australian cultural values than American.
re your third paragraph: indeed. The result of our system however is that the vast majority of students major in commerce & science; perhaps because the incentive of a lucrative career is enough to stop everyone pursuing arts.
HECS repayments are one of the only Australian taxes I can think of that actually isn’t progresssive and the percentage is applied to your whole income, not just that above the threshold. Which is why it’s also such a gradual tax, not even hitting 8% until a fair way past 100k.
I also have difficulty seeing the first benefit you list as being a benefit. I don't have a problem with people pursuing degrees in fields that aren't big money makers, but I also don't know that the government should be in the business of incentivising people to study in these fields.
On the other hand, there is societal benefit to these fields being pursued in general. And the market economy may not adequately pay for the benefits it receives. As a society we wouldn't want everyone to major in poetry, though.