Australia¡¯s government does not expect to incur additional costs from its student loan scheme, despite a relaxation of repayment rules that could amplify levels of unpaid debt.

Government support for a scheme to help international students stranded by college closures is also projected to shrink, rather than expand, despite visa policy changes, as further details emerged from the country¡¯s pre-election budget.?

Education Department financial projections in the?federal budget?revealed on Tuesday offer an unexpectedly optimistic view of the government¡¯s liabilities over the coming years. Predictions of expenses associated with the Higher Education Loan Programme are virtually unchanged from estimates in last year¡¯s budget, apart from the massive cost of cancelling 20 per cent of student debt.

The government also proposes major changes to repayment arrangements, including a A$12,565 (?6,134) increase to the earnings threshold at which graduates must start making good on their student loans. ¡°[This] will slow down repayments, which will increase the interest costs for the government,¡± said Monash University policy expert Andrew Norton.

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¡°I would expect it would also cause greater doubtful debt, because there will be more people who are below the threshold so often that they never repay, or never repay in full.¡±

Norton said the budget figures could reflect an ¡°actuarial assessment¡± that previous estimates had been unrealistically pessimistic. The calculations are complex because the debt cancellation measure, which overrides the government¡¯s right to reclaim some A$16 million of borrowings, would include a few billion dollars of doubtful debt that would never have been repaid anyway.

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Nevertheless, Norton said the projections appeared to lack credibility. ¡°I¡­think these [figures] will need to be revised upwards for future years. It¡¯s basically impossible that they could be stable in the face of significant changes that would affect two of the major drivers of these costs.¡±

In another apparent anomaly, expenses associated with the Overseas Students Tuition Fund are projected to decline by almost 60 per cent next financial year and to remain low from then on. The fund helps displaced students of collapsed institutions by paying their fees at alternative colleges, or refunding fees if no alternatives can be found.

Commentators expect a spike in bankruptcies because of last year¡¯s visa policy changes, which have already forced the closure of a large, respected college called International House.?Times Higher Education understands that expenditure estimates from the fund have been updated to reflect International House¡¯s collapse, but future years¡¯ estimates remain unchanged.

The budget projections may add to concerns that the Overseas Students Tuition Fund could .

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Norton highlighted a positive change in the budget¡¯s treatment of A$2-plus billion of ¡°needs-based funding¡±, the government¡¯s vehicle for?diversifying university enrolments. It will now be classified as part of the Commonwealth Grant Scheme, which means that parliamentary approval rather than a ¡°legislative instrument¡± would be needed to abolish it.

¡°This will put needs-based funding on a much more solid legal foundation,¡± Norton said. ¡°If universities are expected to make major changes on the assumption this is an ongoing revenue stream, I think it¡¯s only reasonable that it goes in legislation rather than being essentially a discretionary grant at the whim of the minister.¡±

On the downside, the budgetary papers have renamed the Commonwealth Grant Scheme the ¡°Core Commonwealth Funding for Teaching and Learning in Higher Education¡±. Norton said he did not expect the change to last.

¡°I¡¯m hoping this is just kind of a stand-in name,¡± he said. ¡°I won¡¯t even be able to fit it in a tweet.¡±

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john.ross@timeshighereducation.com