Will changes to HELP fix Budget?

The findings of a Grattan Institute report reveal that many Australian graduates are either taking too long or failing entirely to pay back student loans.

Australia’s higher education system has been labelled “unscrupulous” by the report for granting loans for vocational and education training to Australians who will be unable to repay them.

Higher Education Program Director at the Grattan Institute, Andrew Norton, said that while the Higher Education Loan Program (HELP) is a “vital government program”, the problem is that “too many borrowers either do not repay what they owe or take too long to clear their debts”.

Since the introduction of HELP in 2009 an increasing number of people undertaking study in Australia are accepting financial assistance from the government to finance their education.

According to the report, “The number of students borrowing [for vocational education and training] has increased dramatically, from 5,300 in its first year to 203,000 in 2014. The scale of growth is due partly to unscrupulous vocational education providers enrolling large numbers of students with limited earnings prospects.”

“Most will never complete their qualification, triggering high rates of bad debt. Rapidly escalating average tuition fees have compounded the financial problems caused by enrolment growth”, the report said.

In 2014-15 Australian graduates were $7.8 billion in debt for their studies. Of that amount, it is estimated that $1.6 billion, or 20 per cent, will never be paid off. This is because many students will either not complete their studies or never achieve the earning threshold required to begin repayments.

Currently, graduates are required to begin making repayments when they start to earn $54,126. However, the report found that fewer than 30 per cent of part-time workers with bachelor degrees and 14 per cent of part-time workers with diplomas will earn enough to reach the repayment threshold.

To rectify the situation, the report suggests that, if the threshold at which graduates began repaying their debt was lowered to $42,000, nearly 50 per cent of those owing would be able to begin making repayments. It is estimated that this change would save the Budget at least $500 million per year.

Read more at grattan.edu.au.

Read more at theguardian.com.au.

Opinion: It’s already a struggle out there

The days of the Australian Government completely subsidising higher education are long gone. Yet, for many Australian students, the HELP loan still represents an invaluable chance to skill-up and become educated. 

Lowering the threshold at which graduates should begin repaying their loans might save a few hundred million in the budget but the cost to young workers who are just starting out in their professions will be astronomical. It’s a volatile time to be living on a low income, especially in Australia’s largest cities, where so many people more to study and work.

Graduates are struggling out there. The ability of graduates to pay rent (let alone buy a house), buy food and actually have enough to enjoy themselves hinges on maintaining a careful balance of study and work, and gaining skills and experience that can lead to a job. Imagine the added pressure that lowering the Help repayment threshold will have on graduates.

According to the report, people most affected by the threshold change would be women (who are more likely to work part-time), diploma holders (who are more likely to earn less than the current threshold) and students who fail to complete their studies altogether. In 2014, 60 per cent of all domestic students completing degrees were women, and women made up almost two-thirds of borrowers.  

Sure, $500 million extra in the Budget looks good. It could be put to use somewhere important – for example, back into the education system or to hospitals or into the welfare system. But we can all see what’s happening here: the mentality of robbing Peter to pay Paul is ongoing. Year-after-year Australians who are already struggling (pensioners, students, single-income families) are being asked to sacrifice more while those who could afford to pare it back a bit (politicians, multinational organisations, etc.) continue to duck their heads so they won’t be called on by the teacher.

I don’t know what the answer is, but it’s obvious to me that the stakes are already high enough for young graduates. The extra pressure of scraping together loan repayments before really having the means to do so is a terrible way to start off in life.

What do you think? Do you agree that the threshold be lowered to $42,000 as the Grattan report recommended? Can you think of better ways for the government to retain the budget? Are student loans being doled out too frequently by Australia’s educational institutions? 

Written by Amelia Theodorakis

A writer and communications specialist with eight years’ in startups, SMEs, not-for-profits and corporates. Interests and expertise in gender studies, history, finance, banking, human interest, literature and poetry.

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