Australia’s Student Loan Scheme is Broken
More than three million Australians – most of them young working Australians – are today, more deeply in debt than they were yesterday.
Inflation-indexed increases in HECS and HELP debts will see the average loan will increase by more than $1,000. An increase that could have lifelong impact on their borrowing capacity and ability to enter the housing market.
Tertiary education is more than a cost; it is an investment in our future. A better educated workforce means greater productivity and greater community prosperity.
I met with Education Minister Jason Clare yesterday and he pledged to review the HECS / HELP debt system, this review should happen as a priority.
There are other immediate options the government could take:
- Determine indexation based on either the CPI or the more stable Wage Price Index, whichever is lower at the time (as occurs in the UK).
- Tie indexation to the RBA’s trimmed or weighted mean which more accurately calculates underlying inflation which would effectively compensate for the current and future burden of higher cost of living pressures.
- Indexation should not be applied to debts unless it is applied to “real debt”.
Concerned members of my North Sydney community have contacted me to express the distress they, and their children, are feeling considering the 7.1 percent increase which comes into effect today. One mother said:
"The indexation has resulted in terrible stress on my children and other students. Given the current economic environment, this decision is causing their debts to balloon, placing great financial pressure on them. As an example, my daughter (who has two degrees, studied medicine and works in the public hospital system) has a debt that was increased by $14K."
I’ve also been contacted by North Sydney young professionals who point out that because the indexing comes into effect today, they are paying hundreds, and in some cases more than a thousand dollars in additional repayments.
The interest is added to their loan before any payments they made in the previous year are deducted - how can this be fair? To me, it makes no sense.
Inter-generational equity is one of the biggest challenges of our time: in the tax system, on climate change and on a forward focused economy.
The existing scheme also perpetuates gender inequity, with women holding 60 per cent of HELP debts and 58 per cent of the total $74.3B debt pool.
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