Australian student debt could double

Universities Australia has called for a rethink on the design of the proposed changes to the student loan programme

The peak body representing Australia’s universities has called for a rethink on the design of the proposed changes to the student loan programme and the 20 per cent cut in the Government contribution to student fees.

The call comes as Universities Australia released new modelling on the combined impact that the proposed changes to the Higher Education Loan Program (HELP) and the reduction in Commonwealth support would have on student debt an payback periods.

Applying reasonably conservative assumptions, the modelling shows that student debt levels are likely to at least double.

Amongst the changes announced on budget night was the proposal to increase the annual indexation applied to HELP debts from the existing CPI to a rate equivalent to the yield on the Treasury 10 year bond rate capped at six per cent a year. The modelling applies interest rates of CPI, four, five and six per cent. 

It also provides three fee scenarios: low, medium and high. At the medium fee increase scenario, and with a four per cent interest rate, an engineering graduate working full-time faces a HELP debt of between $98,952 and $113,169 and would repay it over a period of 20 – 25 years. This is compared with $46,701 to $49,284 debt and 14 to18 years repayment time under the existing arrangements.

A nursing graduate under a medium fee increase scenario who works part time for six years after working full time for six years will pay off their student loan of $51,620 over 20 years, compared with 17 years to repay a HELP debt of $24,646 under the existing arrangements.

Universities Australia’s Chief Executive Belinda Robinson said: ‘the combination of higher HELP debt levels and the cut to the government contribution to course fees could be expected to result in students facing higher debts and longer repayment times than needs to be the case in a more competitive, fee-deregulated environment.’

‘This modelling shows that parents taking time out to work part-time to raise children would be particularly hard-hit by the new arrangement.

‘In reviewing these two key aspects of the Government’s reform agenda, we should apply a principles-based approach that puts access, affordability as well as quality ahead of all other considerations,’ Ms Robinson said.

The modelling can be accessed here.

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