How University HELP Fee Changes Could Saddle Students With Lifetime Debt [Updated]

In an article published yesterday and since withdrawn, we stated the proposed changes to higher education funding could result in "saddling some students with debt they cannot pay off in their lifetime."

University picture from Shutterstock

This may still become a reality for some students, but the example we gave to illustrate the issue was incorrectly calculated and left readers with the impression that more students would be affected than is the case. We wrote that:

"a student graduating with a $50,000 HECS-HELP debt would have to average about $80,000 a year to pay off his/her debt before retirement. Even then it would take 43 years to do so. This assumes full-time, uninterrupted employment, regular wage growth and a final salary well above $80,000 in order to become debt-free."

However this was based on a miscalculation of the HECS-HELP repayment rates. This miscalculation had two effects: (i) understating the annual repayment obligation of students; and consequently (ii) overstating the period of time required to pay back a loan.

Using the correct figures, in the scenario above the expected payback period is much lower, at 11 years.

Using the correct calculations a student on an average income of $80,000 would take 16 years to pay back a $75,000 HECS-HELP debt and 22 years for a $100,000 HECS-HELP debt. These numbers are still somewhat concerning, but not quite as significant as we initially calculated.

The incidence of unpaid lifetime debt is therefore considerably less of an issue than the difficulties the proposed system presents for low-income earners, the under-employed or unemployed. Our recommendations remain unchanged. They are that government consider:

  • A much lower level of interest on the HECS-HELP loan until the student graduates;
  • Suspending interest charges on HECS-HELP loans for specified periods when the former student outside the workforce (such as family or carer responsibilities) and/or situations of unemployment or underemployment;
  • Varying the interest rate charged so that it is on a progressive scale — ie. lower rates of interest for graduates on lower incomes and higher rates for those earning higher incomes;
  • Forgiving HECS-HELP debt after a certain number of years; and
  • Ensuring an equitable distribution of the scholarships created under the proposals.

The report from which these findings were drawn is currently being redrafted and will be made available shortly. We apologise for confusing what is such an important issue with incorrect information. We greatly appreciate how quickly members of The Conversation readership have brought this to our attention.The Conversation

This article was originally published on The Conversation. Read the original article.


Comments

    With a maxed out fee help debt of 96k at the ens of my course. Everyone is pretty freaked out about the proposed changes. The most startling thing is how little thought te government has put into this. It's clealry just ideological and they don't care about the impact.

    With talk of gettung debts when people die. So they're hanging the scheme, more many after they got into it. So they will now have an ever increasing life time debt which will be used to take their assets when they die leaving them nothing to leave their family.

    For all this talk of 'entitlement.' If the government is so entitled to our taxes, why aren't we entitled to get anything out of it? Why isn't society entitled to benefit.

    I can see a lot of talented kids just not bother with higher education, if this shit goes through... Bloody ridiculous way to educate a nation... Fear of failure alone will kill off most good intentions...

    We are very quickly becoming America. Uncapped uni fees, medical copayments. What's next, everyone gets assault rifles?

    They tried this in the UK and it has spectacularly backfired. Around 45% of UK university graduates will not earn enough to repay their student loans, the UK government now believes. If the figure reaches 48.6% experts calculate that the UK government will lose more money than it gained by increasing fees in England.

    Nice one Liar Tony.

      Considering his ties/interests to the monarchy, prob should be called King Liar Tony

    To start with I don't think the proposed changes are a good idea for the Hecs/Help system.

    However the good part is maybe it will force people to think about their academic choices before blindly jumping into a course/degree. If students think more about the job prospects at the end and how they have to repay the debt they won't be inclined to jump into that 3 year degree along with a thousand other students when there are only 50 jobs in the sector...

    For the areas of study where degrees are a legal necessity not just a way one-up'ing your peers e.g. law, medical, engineering etc it means those salaries will also jump in time in line with the increased costs of obtaining the professional qualifications, so they won't necessarily be paying it off for life.

      Finally a voice of reason.

      It is no more sustainable for the Government to continue to fund degrees that have little or no potential to yield repayments. There are many courses out there (and I'm not only talking about various Arts degrees, there are others!) which exist mainly because Universities are able to make a profit to fund their own purposes.

      Anybody with real talent and ability will not avoid doing a university course because of self-doubt. We need people going to university with the goal of adding back to society, and this could be the kick in the ass that's needed.

      There is still under supply in the trades because it has become natural for EVERYBODY to try their hand at a Bachelor's degree, even if it doesn't suit them. Now with loan funding for TAFE courses, we are likely to see people heading in a direction which is best suited to them.

      I haven't read anywhere about the Government having the ability to call the loan upon someone's death. I may be mistaken but the loan isn't secured to any asset.

        You prioritise STEM and 'in-demand field' courses by actually incentivising them (say through subsidies). Not by making everything more expensive.

        A system that by the way, already exists with CGS places for post-grad which tier contributions according to demand.

        http://www.csu.edu.au/courses/fees-and-costs/commonwealth-supported-places

        The US has no generous HECS/HELP repayment system. They have the same glut of non-STEM graduates. It's pretty clear your argument is ideological and not based in fact or evidence.

        Last edited 30/05/14 9:41 am

      Actually, it has been shown that any form of higher education, whether it is used directly in response to their chosen profession or not, is of greater benefit to society as a whole than not.

      People are doing degrees simply to "one-up" their peers in the job market is a good thing, and not to be discouraged. It shows that they are they have a vested interest in gainful employment at any cost and breeds competition. Competition is also a good thing as it raised the bar to entry, in turn, raising overall skill levels adding value as a skilled and educated member of society.

      Rather than stripping funding out of education, and penalising those choosing to enter higher education, funding should be made available to encourage that choice for both new high school leavers and returning mature age students, in all fields.

      @kilaw
      Yes, this was announced today. The Abbott government is looking to introduce the ability to allow recovery of any unpaid tertiary education fees from deceased estates

      Last edited 29/05/14 1:57 pm

      I think those degrees that don't directly correlate to a career/job in the field still have a place in modern society. Whilst the Bachelor of Arts and History student intake don't correlate directly to jobs there is something to be said about passing on the knowledge and maintaining our understanding and heritage.

      Force people to think about choice of degrees?

      I have a PhD and during those years of study in science, nobody explained the horror story of contract positions, publish or perish (to the detriment of research), continuous search for funding, the horrible working hours of certain projects etc. I got a reality check and changed careers. Chose pathology and whilst the institution was happy to take the fees, nobody owned up and stated the industry was contracting. Even worse for students starting these careers today. So choosing a degree is a hell of a lot harder than one thinks. Unless your lucky or well off enough to like or afford the choice degrees such as law, medicine or engineering.

    I duxed Brisbane State High School in a couple of subjects, but the next fifteen years of my life were spent doing factory work. Production lines. Meat works, pineapple cannery, tannery, battery egg farm. A stint as a bottom level clerk in Veterans Affairs that nearly killed me with boredom. A stint naively delivering rebirthed cars. A stint washing cars in a bikini. My family were working class for generations back and my father had a (work caused) accident when I was 11 that left him in hospital for years and hemiplegic. No disability support. My mum hadn't gone past year 8, got a job waitressing. I supported myself through senior years at high school working in a nursing home 20 hours a week, junior wages and female wages (female award wages wereabout 2/3 male wages). Uni was not even imagined.

    I did my degree mostly externally finally finishing in my thirties, hand washing nappies at the same time. In those years there was something like 40% unemployment for young unqualified women, and no child care. Had there been fees and interest on fees, I wouldn't, couldn't have done it. The debt would have blown out to inconceivable levels before I could get a job that paid enough. Considering it as an investment in future earnings isn't possible when you have no free money to "invest". But free tertiary education was introduced, and instead, here I am with post grad qualifications, doing real work and paying real taxes, with a son who has postgrad qualifications in intensive care paramedics, a sister now doing her PhD, two brothers with degrees and a mother who ended up with two degrees (done part time while working and paying taxes) and not retiring till well into her 70s.

    Education changes lives. Education is about equality of opportunity. Education is about dissolving generational privilege. I actually don't disagree with HECS - it's a kind of progressive taxation. But the interest needs to be inflation indexed, not compounding, and the repayments need to start at the same level as the highest level of income tax. Otherwise there's a whole generation of young people, especially young women, who will become really really good at boxing a dozen eggs in two moves, just because their brains cannot bear to do nothing.

    Why not scale the HELP system so degrees in needed fields are subsidised while useless degrees like Gender Studies are funded entirely by the student?

    Why is higher education so expensive?
    https://www.youtube.com/watch?v=8GTa_swC-OE

    The economics of subsidies
    https://www.youtube.com/watch?v=w3-_r_t7AZU

    >However the good part is maybe it will force people to think about their academic choices before blindly jumping into a course/degree.

    17 yr olds aren't giving much thought to long term academic choices because life at that age is commonly focused on instant gratification, and society itself is not much different, rarely thinking about long term goals or consequences.

    The best way to do that is encourage it is giving them choices in earlier education, to let them try electives earlier, freedom to change their mind and try something else (a one-two week trial period of sorts) before the real lessons begin (I remember switching from Commerce to electronics, it took a while for me to catch up), rather than making them commit to electives they have a vague interest in and can't change for 2 years and then throwing a board of studies handbook at them in yr11 to choose a degree
    High schools need to teach basic economics and philosophy, that would go a long way to preventing the sense of entitlement and irrational thinking that is so prevalent in society

    But independent people are not easy to herd
    https://www.youtube.com/watch?v=eeEWPbTad_Q

    Thank goodness for the internet, we can educate and free ourselves
    Without debt, you are free

    Even then it would take 43 years to do so
    Damn, and I thought taking 7 years to pay off my HECS was bad enough :S

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