Last week, the federal government announced some significant changes to Australian higher education policy, with a change to Higher Education Contribution Scheme/ Higher Education Loan Program (HECS-HELP) indexation and the commencement of paid student placements. On the eve of the federal budget, Woroni looks at what these changes mean for students, and what other facets of Australia’s current tertiary education sector might be set to change. 

HECS-HELP Indexation

On Sunday the 5th of May the Federal Education Minister, Jason Clare, announced the surprise decision to wipe an estimated $3 billion in HECS-HELP student debts. This comes in the wake of increasing pressure mounted by Independent members, the Greens and students across Australia to overhaul the HECS-HELP system which has experienced record-high indexation levels in recent years. 

HECS-HELP has previously been indexed according to the Consumer Price Index (CPI). Under the new system, student debt will be indexed according to the lower of either CPI or the Wage Price Index (WPI). This will be applied retrospectively, meaning that the all-time high indexation rate of 7.1 percent last year will be reduced to 3.2 percent. The average student debt of $26,000 will be reduced by around $1200. 

An ANU student told Woroni that this change “is a step in the right direction” and that they “[felt] a certain sense of relief.” They conceded however that “more needs to be done.” 

ANU Professor in the Practice of Higher Education Policy, Andrew Norton, cast some doubt on the extent of relief this change might make for students in the long term. The Professor told Woroni, “High indexation has drawn attention to how much money some students and former students owe. The number owing $50,000 or more has increased from less than 100,000 in 2014-15 to 383,140 in 2022-23. Last year’s indexation on $50,000, before the policy change, was $3,550 — enough to cause bill shock.”

Norton acknowledges that the policy change for lower indexation will speed up repayment of debts, with “someone owing $50,000 and making an average annual repayment the policy change could see their debt paid off about 6 months earlier than otherwise. That’s helpful.” However, he notes that pinning indexation to the lower of CPI or WPI does not account for the possibility of a future year in which both figures could be high.

He suggests a more effective alternative would be to limit the indexation rate to a fixed cap, such as 4 percent. 

Norton notes that most of the “growth in large debts happened before the student contribution increases in 2021.” Despite limited government data on student lending, he highlights that “media reports often match my main concern which is that students taking full-fee postgraduate courses, financed by FEE-HELP, immediately or soon after finishing their undergraduate degrees start their careers with excessive debt relative to their medium term earning potential.”

Concerns regarding the implications of student debt on the ability to purchase a home also remain front of mind for many. When seeking a home loan, individuals are mandated by the financial regulator Australian Prudential Regulation Authority (APRA) to disclose their HELP debt. 

According to Norton, this results in people with HELP debt “[able] to borrow less than previously.” 

Paid Placements

Prime Minister Albanese also recognised the struggles faced by nursing and teaching students who have previously been required to complete numerous hours of unpaid placements. He noted that ‘too many students have a hard time completing the unpaid practical placements that are crucial to graduates.’ 

Nursing, social work and teaching students will now receive a means-tested weekly payment of $319.50 to assist in their completion of their mandatory practical placements. This is a welcome change for many students who have been crippled by the cost-of-living crisis. 

However, criticism has been voiced by medical students who feel sidelined due to the decision not to extend this critical change to medical placements. 

What else might be addressed on Tuesday?

Although these recent announcements are good news for some, there remain points of contention in other aspects of Australia’s higher education sector. 

Many of these were brought to light in February’s Australian Universities Accord Report, which recommended bold changes with an underlying aim of making access to university more equitable.

Significantly, the Coalition’s controversial 2021 Job-Ready Graduate scheme was deemed by the Accord to have failed, with its overhaul recommended alongside those to HECS. With only 1.5 percent of students having been reported to have altered their study patterns due to the policy, the recommendation proposes providing funding to specific degree choices according to calculated future earning potential, rather than perceived fields of national need.

The incumbent system saddled humanities students with a massive student contribution increase in order to push prospective students into disciplines like education, science and health, leaving certain graduates with debts that are statistically higher than their medium-term earning potential, driving up the time it would take for them to pay it off.

According to Norton’s forecast, the student contribution scheme is unlikely to get a makeover in this budget, with the government more likely to “defer changing student contributions until the proposed Australian Tertiary Education Commission devises new rates.” Norton believes, “the humanities student contributions need a faster fix but the government has never shown much interest in making quick changes.”  

He also noted that despite the government’s backdating of the HECS indexation change coming as a “surprise”, “nothing the government has said to date” indicates that a similar retrospective approach might be taken to alleviate past effects from the Job-Ready scheme in the event of student contribution reforms. 

In terms of what else is likely to be addressed in Tuesday’s budget, Norton predicts that the HELP indexation rate will likely “be moved from 1 June to later in the year, after tax returns are processed. This is so compulsory repayments can be deducted from the balance for indexing purposes in a more timely way.” He outlines an example:

“For example, on 1 June 2024 the compulsory repayments for 2022-23 will be deducted prior to indexation. However, HELP debtors earning more than the first threshold for repayment – $51,550 this financial year – will have had estimated HELP repayments deducted from their wages during 2023-24. So they will be indexed on money that, in cash terms, they have already repaid.”

Changes may also be made to the repayment system, which could alter the “current total income system” to one based on marginal income. Norton’s example from this year is to propose that under the current system, “someone who earned $51,550 exactly would repay 1% of that total, $515. Under a marginal system they would only pay a % of income above $51,550. Say their income was $52,550 and the marginal rate was 10% – $1,000 over the threshold =$100 repayment. Essentially it would work the same way as the income tax system.”

It remains to be seen if other recommendations from the Universities Accord, such as an increase in “Commonwealth supported places available for postgraduate study in areas of national priority and skills shortage”, regulations on the allocation of Student Services and Amenities Fees to student-led organisations, or providing reform to the Australian research funding model, including increased investment in the Australian Research Council and Research Training Program, will be acknowledged by the government in the budget or otherwise. 

Woroni will be attending the budget lock on Tuesday. We will continue to provide coverage on the budget.

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