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Youth Allowance: facts

1. Align Threshold for Parental Income Test with Value used by Family Tax Benefit

The threshold level for the parental income test to determine eligibility for Youth Allowance is one of the most urgent priorities for reform. 

The real value of threshold has been deteriorated significantly over the last 35 years. When the old Menzies era merit-based Commonwealth Scholarship Scheme was replaced with the means tested Tertiary Education Allowance Scheme in 1974 the grant began to be reduced when family income reached the Average Weekly Earnings (AWE).

The real level of this income threshold was rapidly eroded due to inadequate indexation during the high inflation era of the Fraser Government and has been stuck at this low level of just over half the average weekly earnings ever since despite the restoration of annual indexation adjustments since 1991.

For 2008-9 the combined parental income needed to be $32,800 or less for a sole child to be able receive the full benefit. The income threshold is adjusted for extra children and grant is reduced by $1 for every $4 the combined parental income exceeds the threshold. By way of comparison according to the ABS the annualised AWE in November 2008 was $57,312   Three decades of policy neglect have reduced the real value of the combined parental income threshold by over 42%.

NUS’s submission to the Bradley Review Committee argued that the income test threshold is so low that it actually undermines a coherent needs-based means tested policy for student allowances. As the children of most working families are excluded by the parental income test regardless of whether they are battlers or high flying professionals they are taking the gap year and qualifying though the non-means tested ‘independence’ criteria. Restoration of the real value of the income test would remove much of the need for the gap year for low-middle income working families and thus restoring the policy coherence of a means tested allowance system.

The Bradley Review Committee recommended that the Parental Income Test be aligned with the Family Tax Benefit Threshold ($42,559).  This is only 74% of the AWE so many low-middle income working families will continue to be hit by the Parental Income Test.  Nevertheless NUS supports this measure as an important positive step towards restoring the policy coherence of a progressive needs-based student financial assistance system.

2. Reduce Age of Independence to qualify for Austudy from 25 to 21

The reduction in the age of independence is another vital priority for reform.

The age at which a student’s eligibility for financial assistance is automatically no longer assessed using parental income is 25. This makes them eligible for Austudy ($371.40 per fortnight for a single person with no dependents) rather than Youth Allowance.   Therefore all students under this age need to satisfy strict criteria to attain income support. In contrast the Newstart Allowance  (accessed by the unemployed and some part-time students) is not assessed on parental income and is available from 21 years of age.  Long term unemployed people who return to study on Newstart are entitled to a maximum living away from home benefit of $449.30

NUS believes that adult students should be assessed for means tested financial assistance according to their personal income rather than their parents.  The difficulty involved in gaining independent status on Youth Allowance is the single biggest mechanism restricting eligibility for student financial assistance.  Failure to gain independent status means that student benefits begin to be reduced if the combined parental income is $32,800 (for a single child family).

Students on Youth Allowance who may actually be living away from but do not meet Centrelink’s criteria for the living away from home rate also have their maximum fortnightly benefit reduced from $371.40 to $244.40 (and are also ineligible for rent assistance of up to $110.20). These students face severe housing stress and welfare caseworkers report that many of these students are squatting, couch-surfing or living in their cars. 

The first use of the age 25 for a definition of maturity or independence dates back to the Mature Age Awards that formed part of the early 1950s Commonwealth Scholarship Scheme.  In the mid 1990s the age was progressively reduced to 22 by the Keating Government.  The most recent change was in 1997, when the Howard Government lifted the age of independence back to 25.

The use of the age 25 seems quite arbitrary when compared to any other determinant of adulthood and independence.  The virtual disappearance of the full time youth labour market means that it is quite wrong to assume that most 25 or 26 year olds in the 21st century have had seven or eight years of full time work to build up substantial savings, or should be subject to some underlying moral pejorative that they have been frivolous if they haven’t.  

The empirical evidence shows how outdated this assumption is.  The Managing Study and Work report shows that only 1% of students were living off their savings as their only source of income, and only another 7% were living off their savings as their main source of income.

NUS’s policy is that the age of independence should be reduced progressively to 18.  We argued in our submission to the Bradley Review Committee that a coherent first step would be to align the age of independence for students with the age used for unemployed persons (21 years).  This would still leave the parental means tests in place for the school leaver cohort doing the standard bachelor degree which is consistent with government views about minimising grant-based subsidies to high SES families.

The Bradley Review Committee opted for restoring the age of independence to its pre-1998 level of 22.   The annual cost for lowering the age to 22 was $87.5 million (19,000 additional recipients).   The annual cost for lowering the age to 21 was $262.5 million (54,000 additional recipients).

While NUS is supportive of any reduction in the age of independence NUS believes that the current economic crisis strengthens the case for lowering the age to 21.  This measure will  accelerate the up-skilling of the workforce through the recession and also provide some limited economic pump-priming to a constituency who will spend on essentials rather than hoard the money away.

3. Retention of current workplace participation eligibility criteria

The Bradley Review Committee recommends scrapping of two of the three workplace participation criteria for qualifying for independent rate of Youth Allowance (by working for at least 15 hours a week for 2 years or earning over $18K a year over an 18 month period).   The only criteria remaining would be to work for 30 hours a week for 18 months in a two year period. 

The Committee was concerned that workplace participation criteria are acting as a upper-middle class rort to circumvent the means test. 

While the parental income means test remains below Average Weekly Earnings (AWE) NUS cannot support the removal of these workplace participation criteria as they remain an important point of access by students from low-middle income working families.  The lowering of the age of independence to 22  (as recommended by the review committee) will also reduce the necessity for using this pathway.

4. Raise The Increase Personal Income Threshold to $400 per fortnight

The current framework for personal income assessment seem designed to guarantee students stay in poverty whatever they do in terms of balancing part-time work with their grants.

There has been a long standing tension in Australian student financial policy circles about whether grants to students should be treated as allowances or income supplements. When student lobbyists have raised the issue of the student poverty trap in government forums over the last twenty years we have been told that students benefits are not meant to be a liveable income – the benefit is only meant to be an income supplement to personal or family wealth or wage earnings. However, as soon as students start to make any significant earnings – above $6000 a year ($236 a fortnight)– their benefit is cut by 50c, and then 60c for each $1 earnt.  The stringent income bank arrangements mean that it is not really an income supplement at all.

When TEAS was introduced in 1974 the student earnings during the vacations (the main pattern on student work at the time) was not counted as assessable income for the personal income test. In the United Kingdom student earnings from casual and part-time work are not counted for the personal income test. Unfortunately in Australia since the mid seventies governments have got interested in micro-managing the small amounts of casual and part-time income that full time students earn.  It is unclear what the policy intent for this is.

The introduction of the annual income bank in the early 1990s was an improvement on the previously existing fortnightly assessments where students had their benefits cut if they made significant additional vacation earnings that they planned to supplement their allowance with over the year.   However, the current arrangements put obstacles in the way of working full time students. The income bank of the personal income test (the additional amount one can earn before payments are reduced) has stayed frozen at $6,000.  This amount has not been indexed since 1993.

NUS argued for the income bank to be increased to $470 a fortnight to allow for students to find a work: study balance based on a more realistic appraisal of study and lifestyle costs. The Bradley Review recommended that the income bank be increased to $400 a fortnight, an amount that at least restores the real value of the income bank lost through 15 years of non-indexation.   NUS supports the Bradley Review recommendation as a positive first step.

5. Eligibility for benefits to students enrolled in all masters by coursework programs

Most students doing postgraduate by coursework (ie Masters) are currently not eligible to apply for income support.  This policy seems to be based on the premise that all postgraduate by coursework students are professionals seeking to upgrade their qualifications for promotions and hence unworthy of public subsidy beyond the small subsidy implicit in the FEE-HELP loans for full cost tuition fees.
The logic of this view is that little social benefit flows from postgraduate coursework study, it is almost entirely a private benefit.  This view is fundamentally flawed as many public benefits flow from the postgraduate coursework sector which has a central place in the up-skilling of Australia’s workforce. Even for the narrowest economic viewpoint the Commonwealth gains from the extra future tax revenue generated form the higher incomes associated with postgraduate degrees.

The first loosening in this policy of unwillingness to provide any public subsidy for postgraduate coursework students came in the 2007-08 Federal Budget.  This measure extended the eligibility for student income support (Youth Allowance and Austudy) to students undertaking certain course-work masters degrees that they are required for professional entry, are the only professional-entry courses offered by a university following a restructure, or provide the fastest pathway to professional entry.

NUS argued to the Bradley Review Committee that in light of the current imperatives to increase lifelong learning opportunities, upskilling the workforce and to increase mature age participation that eligibility should be extended to all postgraduate coursework students.  Most will continue to be excluded by personal income levels and tendency to be in part-time study.  However, a minority of financially needy students will be able to benefit.  The Review Committee has adopted this recommendation.

6. Extend the Commonwealth Scholarships program by making all students on Austudy or Youth Allowance eligible for education and accommodation costs

The previous government introduced commonwealth education costs and accommodation cost scholarships to support some disadvantaged groups.  These are administered by the universities but eligibility for Centrelink benefits are used as a criteria for eligibility. The number of scholarships was increased in the previous federal budget.

NUS sees merit in the scholarship schemes being run by Centrelink and expanded so that they are more generally available to AUSTUDY and Youth Allowance recipients.  Indigenous scholarships for ABSTUDY holders should remain separate.

7. The funding for access and participation of under-represented groups be increased to a level equivalent of 4% of total grants for teaching

Low SES, Indigenous, rural and remote students remain substantially under-represented in higher education.  This under-representation is magnified further within the system, with the prestigious metropolitan Group of Eight universities generally having the worst participation rates.

The rather limited improvements in the participation rates despite decades of equity programs shows that there is no simple magic bullet for improving participation.  But there is a broad consensus that the further improvement is possible through universities adopting a broad range of  programs such as equity scholarships, outreach programs to disadvantaged communities, peer networks, admission and selection processes, and possibly targeted HECS discounts.

NUS is strongly supportive of this proposal as it ensures that all universities will have both the funding and the obligation to endure that these equity programs are delivered consistently and with adequate resources.

8. That the base funding for teaching and learning in higher education be increased by 10% from 2010

While student contribution through HECS and full fees to university funding have increased from 25% to 38% since 1996 the Commonwealth has reduced its funding from 58% in 1996 to 42% in 2007.  Australia is the only country in the OECD to have decreased its public funding to higher education over the last decade. 

Commonwealth funding per subsidised place (including HECS loans)  fell from $12,335 in 1989 to $10,802 in 2008.  This decline has been associated with the 57% increase in student:staff ratio from 1990 to 2007.  The cost pressure associated with this shift in teaching load has considerably increased academic working hours and stress, diminished opportunities for one-to-one contact with students, led to much larger tutorial groups, and leaves less time for academic involvement in the sustained scholarship and research to keep at the cutting edge.

The Review Committee concluded that the current student:staff ratio is now too high and was having an impact of the educational experience provided to students. This 10% increase will go some way to restoring the lost funding and improving the quality of teaching experience for both academics and students.

9. Reduce HECS-HELP debts for graduates who work in nursing and teaching by $1500 per annum

The previous government sought to remedy the labour market shortfall for nursing and teaching by not increasing the HECS rates for these disciplines when the HECS rates for other disciplines were effectively increased by 25% during 2004-5.   The Bradley Review Committee found that the measures were actually counter-productive as universities scaled down their activity in these areas as the funding level meant that these disciplines needed to be cross-subsidised.

The Review Committee’s innovative solution is to align nursing and teaching with the HECS Band One (which increases the HECS contribution and income to the departments) which is then offset by a HECS reduction for the graduate of $1500 per annum (paid by the Commonwealth) for each of the first five years a graduate works in that profession.

NUS is supportive of this trial approach which may lead to better outcomes for both the student (lower HECS and better funding for teaching) and labour market outcomes.

10. Remove the OS-HELP loan fee

While Australian higher education is the most dependent of any OECD country on international students studying at Australian universities we have a very low flow of students the other way. This is particularly concerning for a country with such a major export focus for many industries. Less than 10,000 Australian students study abroad despite the introduction of OS-HELP loans scheme to help with costs.  The Bradley Review Committee recommends that the 20% administrative fee imposed on the OS-HELP be removed to make the scheme more financially attractive.

NUS concurs

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