Summary

Background

The number of student allowances recipients rose by 5 percent in both 2006 and 2007 reaching 62,500 in 2007. These increases followed a period of falling uptake.

The number of student allowances recipients dropped by 19 percent from its maximum of 70,200¹ in 2001 to 56,800 in 2005. In this four-year period, student allowances expenditure¹ decreased by 13 percent, from $399 million to $347 million. The downward movements in volumes and values mostly resulted from two factors: the parental income test thresholds being fixed since 1999 (for students under the age of 25 with no dependents), and a decrease in unemployment.  The latter improved the availability of part-time jobs for young people and also had the effect of boosting family incomes meaning fewer families had incomes under the fixed parental income threshold.

Figure 1: Gross expenditure on student allowances

The changes in student allowances observed in 2007 resulted from a number of policy initiatives designed to widen access to allowances for targeted groups of students.

One such targeted group is students under the age of 25 with no dependents whose parents have low or middle income. Eligibility for allowances for such students depends on their parents' incomes.  Student allowances are abated if the combined parental income is above a lower threshold, but below an upper threshold or cut-out point.

In 2005, mainly as a result of a 20 percent increase in the lower parental income threshold (in place from January 2005), the number of parental income-based allowances increased by 15 percent.  However, some other measures introduced at the same time and designed to improve targeting, remove anomalies and ensure compliance with human rights legislation more than offset the increase in the parental income-based allowances. As a result, the total number of recipients dropped by 7 percent.

In 2006, the number of recipients increased by 2,600 (5 percent) and reached about 59,400. Allowances expenditure increased by $28 million (8 percent) and reached $374 million. The average annual gross allowance increased by 3 percent to $6,300. This increase in the average annual allowance was mostly due to the increase in the personal income threshold introduced in January 2006³. So the year 2005 can be considered as a turning point in student allowances uptake and expenditure.

Footnotes

1. To avoid unnecessary detail, the numbers of allowance recipients are rounded to 100 and the average annual allowances are rounded to $100.
2. Student allowances expenditure consists of the amount paid to students in a particular year and is net of any repayments.  It differs from the official general ledger figure calculated on an accrued basis by less than 0.4 percent a year due to not accounting for payments to the previous years' students.
3. From 1 January 2006 the personal income threshold increased from $135.13 per week gross to $180 per week gross and a cliff-face exclusion for personal income over the threshold was replaced with a 100 percent or 'dollar for dollar' abatement regime.