Your Guide to the Confusing World of HECS-HELP Debt Reform

In what feels like another potential blow to the wallet of young Australians, the federal government have proposed a number of scary reforms to the HECS-HELP system, leaving many screaming “if it ain’t broke, don’t fix it.”

This isn’t a new prospect either, a large portion of 2014’s failed budget was the deregulation of student debt, a move that would see university fees rise at an alarming rate. It’s left me, for one, asking the question; why the fuck would we want to introduce a system that clearly hasn’t worked for the United States, when ours seems to be trucking along just fine? Turns out it’s a complicated issue.

For current students and those who are familiar with a hefty HECS-HELP debt, it’s hard not to feel betrayed by policy makers who had such an easy ride in their day, paying little or no university fees at all.

For the government, it’s claimed that the cost of the HECS-HELP system to the budget will grow from $1.7 billion to $11.1 billion by 2025, taking into account loans that will never be repaid and the low interest rates they charge. A report by the Parliamentary Budget Office (PBO) blames Labor for uncapping student places, their expansion of loans to vocational students and the Coalition’s intent to completely deregulate fees. What a clusterfuck.

But it’s money that they’ll get back, right? Well, kind of.

“One aspect perhaps not widely understood is that HECS-HELP loans are not a direct cost to the budget. Your Help loan from the government is just that, a loan, and thus is treated as an asset for budget purposes because you are expected to repay it,” writes The Guardian’s Greg Jericho.

But they still need to pay interest on this debt, and it’s that figure that is creeping up with the compounded student debt that we, ex students, are struggling to pay back as it is, so it’s an awkward stalemate of a situation that doesn’t have an easy solution.

It’s unfair to slug students with even more debt that they’ll have to start paying back earlier, but the national debt can’t be ignored either. So where does that leave us? Let’s have a look at how and why it was introduced in the first place, as well as the proposed changes by the Turnbull Government.


In the beginning


Back in the 1940’s, the Curtin Labor Government was concerned that there were not enough university graduates in Australia. This, along with the need for increased civil and military research, was the catalyst for a slew of new scholarships offered to ordinary men and women, where previously only men could apply. At this time, students had to pay fees to study.

In the 1960’s, the Menzies Government funded new universities to cater to growing demand. They also granted a number of research scholarships that encouraged students to complete postgraduate studies. Priority was shifting to the need for an educated country.

On the 1st of January 1974, absolute legend Prime Minister Gough Whitlam abolished university fees altogether, making tertiary education more accessible to run-of-the-mill Aussies.

Unfortunately, the free ride just wasn’t sustainable.

The Higher Education Contributions Scheme (HECS) was introduced by the Hawke Labor Government in 1989, an idea that was proposed Professor Murray Wells, developed by economist and lecturer Bruce Chapman and backed by Education Minister John Dawkins.

The original scheme charged all students $1,800, paid by the government and re-payed by the student through the tax system when a certain level of income was reached.

Reforms were introduced by the Howard Coalition Government in 1996 by way of a three tiered fee structure. Students were then charged according to the perceived value of their course. In other words, if the fat cats thought your degree could earn you a heap of money in the future, they could justify charging you more for it.

Around the same time, fees increased by 40% on average and Universities were allowed to create “full-fee places,” where students who missed out on a HECS position could pay upfront to study. You see the pattern here, right?

Further deregulation by the Howard Government occurred in 2005, allowing Universities to increase their fees by a maximum of 25%.

From 2007, HECS positions were referred to as Commonwealth Supported Places (CSP) which introduced a cap of 7 years of full time study at HECS loan rates. After that period of time, you would need to use the post-graduate FEE-HELP system or pay for that shit up front, which, unless you had rich parents, is pretty well impossible.

HECS debt was then known as pre-2005 debt, while HECS-HELP debt was from 2005 onwards. It works pretty much the same way that HECS did, only the government pays it directly to the university on behalf of the student.

Now that you have an idea of how student debt has evolved over the years, lets see where further amendments are being debated.


 Deregulation


Since old mate onion-eater-Abbott was running the country, Education Minister Cristopher Pyne has been fighting an uphill battle for full deregulation of university fees. This would allow universities to set their own fees based on student demand, a move that some argue would encourage profiteering amongst schools.

In other words, it could allow universities to get greedy at the expense of those simply trying to get an education.

As a result, the PBO estimates that student loans will grow from roughly $60 billion currently to a whopping $180 billion in 10 years.


Lowering repayment thresholds


There are talks that the government will propose a lowering of the income required to begin repaying student debt through the tax system.

Currently, the income threshold is set at $54,126, but a report by the Grattan Institute is calling for this to be lowered to $42,000.

Turns out we’ve had an alright ride, too. If you live in England, you’d already be paying back your loan at $42,000 and in New Zealand, you’d be slogged even if you were earning a meagre $18,000.

This dropped threshold would result in an extra $500 million per year. They’ve also floated the idea of higher repayments for high income earners to pay back their debt sooner.


Prying it from our cold, dead hands


When you cark it, banks can recoup any outstanding mortgage or credit card debt you have from your estate. This doesn’t apply to student debt, but the Turnbull Government would like to see that changed.

According to higher education analyst Andrew Norton, taxing the dead for their HECS debt could save up to $800 million a year. However, this would only apply to households with an estate valued over $100,000. Many could, and have interpreted this as a desperate move by a government hell-bent on education savings.

Other options include making Australians living overseas pay back their debt, and scrapping a plan to extend government funding to private colleges.

Now, I’m not saying that one needs a university degree to be successful, there are many great examples of young Australians doing incredible things without the burden of student debt hanging over their heads. But if we’re meant to become a prosperous country of innovation and ideas, surely we need to place education at a high priority on our national spending, particularly in the midst of such a fragile economic shift away from the mining boom.

We’re told we have a national shortage of STEM graduates, (Science, Technology, Engineering and Mathematics) but how are we meant to encourage high school graduates to study in these fields, when in return they’re lumped with monumental debt and a re-payment threshold that’s $12,126 lower than what it once was? A generous subsidy for these areas, perhaps?

I don’t have a whole lot of faith in the current government, but I certainly do hope that what they propose is well thought out and doesn’t throw future generations under the bus before they’ve barely stepped into the real world.

Sure, we have a growing deficit in our federal budget that can’t be ignored, but this mess can’t be cleaned up by throwing more debt into the hands of those who are still sitting their high school exams. Labor higher education spokesman Kim Carr agrees.

“Today we see more evidence that the Liberals’ plan to Americanise Australian universities is not only bad for students – it’s also bad for the budget and bad for Australian taxpayers.”

Yet a recent Grattan Institute report states that the loans currently in place are “overly generous and poorly targeted” and debt will worsen without reform.

It’s a sticky, complicated issue that’s the source of much angst, but if you ask me, the burden should never be placed on young Australians that are trying to achieve a higher level of education.