Little hope Federal Budget will end the Student Loan Tax

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There is increasing pessimism that today’s federal budget will move the student loan tax, resulting in thousands of students having a student debt higher than necessary according to the Independent Tertiary Education Council Australia (ITECA), the peak body representing independent skills training, higher education, and international education providers.

“The current tax on learning, charged in addition to a loan some students take out from the Australian Government when they study with an independent tertiary education provider, should be one of the first things to be removed in today’s federal budget,” said Troy Williams, ITECA Chief Executive.

The current student loan tax is grossly inequitable and discriminates against students based on their study and career choices.  Most students studying with an independent tertiary education provider who access a higher education FEE-HELP loan, or a skills training VET Student Loan are slugged an additional 20 per cent student loan tax on their borrowing. Thus, a student’s $26,000 debt to the Australian Government becomes $31,200.

“It’s discriminatory and wrong that most students who study with an independent skills training or higher education provider have to pay this loan tax over and above their student debt.  The travesty is that these students are treated differently from those studying at public institutions and don’t incur the additional liability that comes with the student loan tax,” Mr Williams says.

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“In the middle of a skills crisis, we want students to invest in study to get the skills to prepare them for a productive role in the workforce.  Instead, the Australian Government is sending a negative signal by penalising those students with a 20 per cent additional tax on their student debt.”

Loan tax makes higher education harder

The Australian Government has stated that the student loan tax is required to recognise the cost of loans unlikely to be repaid, but both loan programs are repaid through the tax system when a student enters the workforce and earns above the prescribed threshold.  This inequitable tax only applies to some students: only higher education students at independent providers and VET students who are not lucky enough to be in a subsidised place (the vast majority of whom are at independent providers).

“By adding a loan tax, the Government is making it 20 per cent harder for students at independent tertiary education providers to pay back that loan, contribute to their communities, the economy and get ahead in life,” Mr Williams says.

In the lead-up to the Federal Budget, ITECA advised the Australian Government to waive the loan tax.

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“Employers face skills shortages, and the Australian Government has sent several strong signals that it is willing to implement reforms to address these shortages.  Removing this most egregious tax on students wanting to skill or upskill themselves would be a positive move,” says Mr Williams.

Independent Registered Training Organisations (RTOs) support 89 per cent of the 4.5 million students in skills training and independent institutions support 10 per cent of the 1.6 million students in a higher education awards program.

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