New figures predict a sharp rise in Australian student debt
Apr 7 , 2016 | News | by The Learning Press staff
The deregulation of university fees will help fuel an explosion in student debt over the next decade, new figures show.
A shock report from the independent Parliamentary Budget Office projects the annual cost of supporting the Higher Education Loans Program will rise from $1.7 billion currently to more than $11 billion in 2025-26.
It estimates the impact of the loans program on national debt growing from $13.4 billion to $48.1 billion over the next decade, with student loans accounting for almost one fifth of Australia’s debt by 2025.
It is likely the HELP loans system will be drastically overhauled following the release of the new figures and last week’s Grattan Institute report, which recommends lowering the salary threshold at which student loan repayments begin.
The Turnbull Government’s higher education policy is yet to be revealed, but education minister Simon Birmingham has indicated higher course fees will feature and lower thresholds for loan repayments are also on the table.
Higher education looks to become one of the major election battlegrounds, with the Coalition blaming Labor for the botched introduction of loans for vocational education and Labor blasting the Coalition over proposed fee hikes.
The PBO report attributes the loan cost blowout to the policies of both major parties.
The Gillard Government’s uncapping of student places in 2013 and the expansion of loans to cover vocational education are both identified as drivers of student debt, along with the proposed deregulation of university fees and accompanying cut in direct Government funding.
"The growing impact of HELP is largely due to policy decisions taken since 2008, particularly the introduction of (the) demand-driven funding model and the announced policies to reduce government subsidies and to allow universities to set their own fees," the budget report states.
"The size of the HELP loan portfolio is projected to grow rapidly through to 2025-26, driven mainly by projected increases in student fees from 2017 due to the announced higher education reforms.
"The reforms recognised that the lower direct subsidies from the government would mean that student contributions would rise.
"Under the reform package, higher student contributions could be expected to see an expansion in the HELP loan portfolio in the form of larger HELP loans."
THE PBO report projects the cost of unpaid loans will jump from the current $1.9 billion to $4 billion over the decade as students either struggle to meet repayments, fail to finish courses or never achieve salary repayment thresholds.
The scandal-plagued vocational sector, through which training providers have signed up students for unsuitable courses funded by Government loans they are unlikely to ever repay, is a major factor in that projected rise.
The PBO report says governments in recent years have failed to be "fully transparent" about the probable cost impact of unpaid debts when introducing policies allowing more people to access the scheme.
The National Tertiary Education Union’s Jeannie Rea said: “HELP is in serious danger of becoming Australia’s subprime loans crisis if the government proceeds with its policy to cut funding per student by 20% and increase student fees.”
But Education Minister Senator Birmingham has this week confirmed the Government’s commitment to the controversial university fee deregulation plan which has twice been voted down in the senate.
He told Sky News: "We only ever said that we were deferring implementation of those reforms by 12 months.
"That is what is reflected in the mid-year economic update [and] has been crystal clear ever since I made that announcement.
"The growth in higher education spending over the last 20 years or thereabouts has essentially gone at double the rate of the economy, so that is not of course a sustainable trajectory for higher education to continue on.”
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