For the purposes of background, the Education and Other Legislation Amendment (Abolishing Indexation and Raising the Minimum Repayment Income for Education and Training Loans) Bill 2022 (the bill) seeks to amend the: Higher Education Support Act 2003, Social Security Act 1991, Student Assistance Act 1973, Trade Support Loans Act 2014 and VET Student Loans Act 2016 to remove indexation on certain education and training loans; and Higher Education Support Act 2003, Social Security Act 1991 and Student Assistance Act 1973 to: define 'median wage'; and raise the minimum repayment income and amend the percentage of income a person is liable to repay the Commonwealth for certain education and training loans.
Coalition Senators note that tertiary education students are confronting daily harsh cost-of-living pressures brought about by the haphazard mismanagement of the Australian economy by the Albanese Labor government.
Coalition Senators further note that since the introduction of the Higher Education Contribution Scheme (HECS) by the Hawke Labor government in 1989, and later its replacement of the Higher Education Loans Program (HELP) from 2005, tertiary education and the student loan system has largely enjoyed major political party bi-partisan support.
Coalition Senators note there is a 'diversity of views about HECS' and that it has, since its introduction, been 'a foundational part of the way we fund universities for a much larger number of people.
Coalition Senators note the recent published comments of Bruce Chapman, widely considered the architect of HECS:
Abandoning HELP would be highly regressive because the costs of graduates not paying anything will have to be covered by all taxpayers, including from the millions of disadvantaged without the financial privilege of a degree… The indexation adjustment has been going on for the whole period since the policy begun 34 years ago, so why is there concern and alarm about the CPI indexation now, and for probably the first time? The answer is that price inflation is the highest it has been for the last 30 years. With inflation at extraordinary levels for the last 30 years, this is the time when we might expect the biggest indexation concerns to be raised, and that is exactly what is happening no matter how unimportant the issue is… It would be a great shame if the bell tolling being undertaken by Senator Faruqi is increasing the anxiety levels of the many out there with HELP debts.
Coalition Senators note the substantial contribution taxpayers have historically provided, and continue to provide, to facilitate the HELP loan scheme. As the Department of Education observed in its submission:
This significant financial commitment by government supports a system that provides genuine choice and appropriate support for students, removes barriers for underrepresented groups and allows institutions to excel and innovate to deliver world class education. At the same time, it is important to ensure this system remains financially sustainable and affordable into the future.
While there have been changes to the repayment rates and thresholds since 1989, what is not highlighted by proponents of 'free' education and abolishing student debt is that it is the existing system that has provided so many Australians with a pathway to attaining a tertiary education qualification. This point was emphasised during the inquiry hearings:
Senator O'Sullivan: Has the HECS-HELP scheme increased access to tertiary education for students?
Ms Jackson: Hugely. We're about 40 per cent of young people getting a university education now; that’s local students… When my mum went to university, we were in single figures, but it was dramatically lower at the point of introduction of this scheme. When I was at university, it was below 20 per cent. It’s a mechanism that has democratised the system and allowed significantly large numbers of individuals to be able to get the life-changing opportunity that is university education.
According to the Parliamentary Library, in 2005/06 1.188 million people had a HELP debt and this had increased to 2.851 million people in 2019/20.
The advantage of HECS/HELP providing greater access to tertiary education was supported by Universities Australia which told the hearing:
…we educate now around 40 per cent of young Australians. We would have had no hope of funding that number if they had not been the mechanism that was designed expressly for students to make contributions and taxpayers also to make contributions… student contributions are made on an income contingent basis, so the policy intent of HECS is to remove barriers for students so that they are not paying too much too early.
In its submission, the Department of Education noted the basis of the existing system:
The current funding system for higher education is based on the principle that costs should be shared between individual students, who generally receive a significant personal benefit from the higher lifetime earning potential associated with higher education qualifications, and the Australian Government - ultimately, Australian taxpayers. The shared approach is in recognition of the broader economic, social and cultural benefits for society as a whole linked to higher rates education [and] qualifications.
Without doubt, Australia is facing a cost-of-living crisis, unprecedented in a generation, in which students are carrying a heavy burden of economic mismanagement by the Albanese Labor government. However, aside from the cost prohibitive factors, removing the indexation—as proposed by this bill—is a short-sighted way to directly address cost-of-living pressures for students.
During questioning from Coalition Senators, Universities Australia confirmed the proposed bill would have a negligible effect on cost-of-living pressures for tertiary education students:
Senator O'Sullivan: What would the impact on universities be if indexation were abolished?
Ms Jackson: If indexation were abolished or frozen today, one thing it would make no difference to is cost pressures for students.
Senator O'Sullivan: Have you got anything that you want to say to the committee about the measures that could be taken to relieve the cost of living for students?
Ms Jackson: We're thinking of something that is specific to the cost of living, either an allowance for students along certain criteria or possibly some sort of scheme that dovetails in with HECS. But certainly, even if you removed indexation right here right now, it would make absolutely no difference.
This had been underlined in comments made during Universities Australia’s opening statement where it pointed out that:
There is enormous cost of living pressure, but the one thing that is not increasing in the next two weeks or in the next months for students is their HECS debt. It is, of course, true that CPI indexation means that the debt will get bigger over time. But that means they'll be repaying it for longer. That does not mean they're paying more immediately, and it's really important to make that distinction because students have enough to worry about without worrying about this as well.
Regarding changes to the repayment threshold, the Department of Education observed that 'repayment of the debt is based on income, with the repayments only going up as income goes up. Changing the repayment threshold may mean a cohort of people do not start to repay or may make lower payments, but this will mean that they carry debt over a longer period'. This obvious point has not properly been considered by proponents wishing to lower the threshold—that by lowering the threshold the debt will only continue to burden university students for longer.
Coalition Senators note the alarming figures put forward by the Department of Education that the 'conservative estimate…based on long term indexation levels the cash cost of removing indexation over the forward estimates would be in the order of $2 billion, and $9 billion for ongoing revenue effects. Any decision to remove indexation has an opportunity cost to Australians in terms of spending on other government services, and/or to taxpayers'.
Finally, Coalition Senators note that the Department of Education commented in its submission that this bill overlooks the former Australian Government program VET FEE-HELP, and that debts from this historic program will be directly affected by this bill.
Recommendation
The Education and Other Legislation Amendment (Abolishing Indexation and Raising the Minimum Repayment Income for Education and Training Loans) Bill 2022 is not passed by the Senate.
The Albanese Government apologise to Australian university students for failing to address acute cost of living pressures including skyrocketing power, grocery and housing costs which have impacted significantly on those seeking to undertake their studies at this time.
Senator Matt O'Sullivan
Deputy Chair
Liberal Senator for Western Australia
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Senator Kerrynne Liddle
Member
Liberal Senator for South Australia
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