The Australian Greens firmly reject the Committee's recommendation which is out of touch with the evidence considered and the reality of the cost-of-living crisis. We strongly believe this bill should be passed. We urge the Government, Coalition, and crossbench to listen to the loud calls from unions, students, graduates, young people, women, and experts to support this bill which abolishes indexation and raises the minimum repayment income to median wage.
It is, frankly, a complete failure on the part of the Labor Government to avoid its responsibility amidst urgent calls from the community to take action ahead of indexation on 1 June 2023.
By choosing inaction, Labor has chosen to make life harder for millions of people.
Overwhelming support for the Bill
The Australian Greens thank witnesses to the inquiry and those who made submissions for their time and expertise, and for sharing their very personal experiences of how student debt is harming them.
The vast majority of those who gave evidence and made submissions to the inquiry were unanimous in support of this bill.
The growing burden of student debt is making news every day and it's beyond clear that urgent intervention is warranted. The committee's recommendation completely ignores the reasons for supporting the bill which were provided by those who submitted to the inquiry, including that the bill promotes intergenerational fairness, reduces cost of living pressures, promotes take-up of tertiary education, reduces gender inequity, and reduces the mental health burden of debt. Student debt is already locking people out of the housing market and preventing them from accessing personal loans. Student debts really are becoming 'a tax for life' as the NTEU has put it.
Abolishing indexation and raising the minimum repayment income would provide much needed cost of living relief, restrain the astronomical rate of student debt growth, and promote the wellbeing and financial security of young people.
It is bewildering that in making its recommendation not to support the bill, the Committee has completely ignored the advice, recommendations and lived experience of so many who gave evidence to the committee and who have spoken publicly about the personal impacts of the heavy burden of student debt. The report also overstates concerns regarding the bill, giving criticism expressed by a small group of stakeholders undue prominence throughout the report to justify what seems like a foregone, ideological conclusion.
This bill is supported by Southern Cross Postgraduate Association, Monash Graduate Association, QUT Student Guild, Sydney University Postgraduate Representative Association, the Council of Australian Postgraduate Associations (CAPA), the National Aboriginal and Torres Strait Islander Postgraduate Association (NATSIPA), the National Union of Students (NUS), the Foundation for Young Australians, the Youth Affairs Council of South Australia, Curtin Student Guild, the Centre for Future Work and Think Forward, the National Tertiary Education Union (NTEU), Suicide Prevention Australia, National Association for the Visual Arts, the Australian Veterinary Association, Public Universities Australia, and Independent Higher Education Australia. Academics, such as Emeritus Professor James Guthrie, John Dumay, and Dr Ann Martin-Sardesai, and many individuals who made submissions, also support the bill.
Abolish indexation of student debt
Student debt is growing at an obscene and unsustainable rate as indexation is tied to inflation. Last year, Australians were hit with a record high indexation rate of 3.9 per cent which added $923 to the average student debt.
On June 1 this year, student debts are likely to be indexed by around
7 per cent—the highest rate in decades. Modelling suggests that with this rate of indexation, people with an average student debt of $24 770.75 will face an increase of at least $1700. The 585 000 people with debts in excess of $40 000 or more in 2021-2022, will see their debt increase by $2876.21. Others will face even higher rises.
This soaring student debt is made even more unfair by the fact that real wages are falling. In the 12 months to December 2022 real wages fell 4.2 per cent, which is the biggest fall since the ABS began keeping track in 1997.
Indexation is causing student debts to increase faster than they are being paid off. People are falling behind before they even start. As QUT Student Guild stated:
…many students are already paying back their loans, but despite their payments, the odds are stacked against them. Indexation means payments barely make a dent and is also taken out of their weekly income, already not enough to make ends meet as it is.
Larger debts take much longer to pay off. More than 300 000 Australians over 50 still have student debt. NATSIPA and CAPA stated:
If inflation continues to outpace wage growth, the long-term consequences of aligning indexation to inflation will increase the number of graduates who will spend their entire lives repaying their student debt.
The calls to scrap indexation are growing louder and louder as people struggle under the crushing weight of soaring student debt. The burden of student debt is making life harder for so many in the community and it will only get worse on 1 June 2023, unless the government intervenes. It is a disgrace that people are shackled with a life-long burden of ever-increasing debt, simply for pursuing higher education.
Recommendation
Indexation on all student loans be abolished.
Raise the minimum repayment income
The low minimum repayment income is an act of cruelty. It is excruciatingly low.
People on low incomes, who are struggling to survive and who are yet to realise the financial benefits of higher education, are having desperately needed income taken away each paycheck to cover their student debts. In recent months, we have seen testimony after testimony of students and graduates struggling to afford groceries, medicine, menstruation products, train and bus tickets, rent and weekly bills. Graduates and students are working multiple jobs but barely making ends meet. These financial pressures are taking a severe mental and physical toll.
The low minimum repayment income is making the cost-of-living crisis worse. Nicole, appearing in her private capacity, told the Committee:
...at the current amount people are having money taken away from them before they can even get their feet under them. So many people are unable to build safety nets and afford things like health insurance because the repayments start at such a fiscally detrimental amount. As such, they are more reliant on government services for longer, costing the government even more over time.
Laila, who participated in the inquiry in her personal capacity, painted a very grim picture:
Last year, for example, the indexation percentage applied to my debt and I only credited a couple of hundred dollars towards this debt. Paying such small amounts each year increases the life of the debt and that means I'll continue to have compulsory payments deducted from my pay every fortnight—my minimal fortnightly payments—which could be better spent on living expenses for my family. I often wonder how long it will take me to pay off this debt. My husband and I are barely able to keep up with the rising costs of living—the mortgage and its rising interest rates, health insurance with rising premiums, childcare fees, utility bills, the price of petrol and so on, and this is with him working three jobs.
Australia's student loan system was built on the fundamental premise that a graduate should not have to start paying their student debt until they earn an average wage and can afford to. However, the previous Coalition government lowered the minimum repayment income so drastically that it is now only
$48 361. That is a mere $6000 above the minimum wage.
Lowering the minimum repayment income disproportionately affected students and graduates on low-incomes and completely abandoned the principle that students should only begin repaying their debts when they earned roughly the average wage. Labor, in opposition at the time, voted against the cuts to the minimum repayment income, calling them unfair.
The ATO confirmed that if the minimum repayment income was raised to the median wage, an additional 420 000 individuals would fall below the minimum repayment income and would not have to make repayments, which will leave them more money for day-to-day expenses. As an example, someone earning the current minimum repayment income of $48 361 would have an extra $483.61 in their pocket in the 2023-24 tax year. Someone earning $60 000 would save $1500. That's much-needed money in people's pockets at a time when the cost of living is high and getting worse.
Recommendation
The minimum repayment income be raised to median wage.
Student debt is exacerbating inequality
Many submissions and witnesses highlighted the disproportionate impact of growing student debt on people from marginalised backgrounds including First Nations people, rural and regional people, people from low socio-economic backgrounds, young people and those on low incomes. As explained by the Centre for Future Work:
...the increased financial burden of these educational debts is affecting already disadvantaged groups the most. People between the ages of 21 and 34 have the largest educational debts and earn 13.4 per cent below average weekly incomes. The burden of educational debt particularly hurts those graduates who end up working in lower-wage occupations.
Student debt is especially exacerbating gender inequality, with women having larger study debts and earning less than men. Of those with student debts, 60 per cent are women, and they hold 58 per cent of the total debt. This is a double whammy for women as they owe more debt and earn less income than men.
Young people also bear a disproportionate burden. Of those who hold student debt, 54 per cent are under 40 years old.
Student Financial Supplement Scheme (SFSS)
The SFSS debt is especially unjust and egregious.
From 1993 till 2003 the SFSS encouraged students, including minors acting without their guardians' authority, to trade in their Youth Allowance for a loan.
For every dollar of income support a student gave up, they incurred $2 in debt. Although the debt doesn't accrue interest, it does increase in line with CPI every year, effectively forcing people to pay much more than the original loan amount.
Several submissions spoke of the pain and hardship that this debt from this scheme continues to cause. One individual said:
How is it fair or appropriate to make some of our most vulnerable population pay back income support? This scheme was ended with the acknowledgement that it was not helpful. “Trading in” a support payment that is intended to sustain basic life, and to then have to pay it back is cruel. The effect it still has on my life is brutal. Every time I see the debt sitting there in the ATO console I feel sick. Not only because of the desperation and hard times that I was experiencing way back then – the ripple effect is still very prominent in my life.
Another individual stated:
…after nearly 20 years of paying back my SFSS loan, I was horrified to learn my debt was over $30,000 and then later with CPI applied had gone up to over $32,8000! I had in effect, and in very simple terms, paid back just over $2000 in 19 years – that’s only $115 per year!
It is an abomination that people continue to have to pay their SFSS debts, despite the scheme being acknowledged as fundamentally flawed by Government. While the measures in this bill apply to all student debt including under the SFSS, given the really egregious nature of this debt, the SFSS debt should be completely wiped.
Recommendation
The SFSS debt should be completely wiped.
A fundamentally broken system
The student loan system is deeply unfair. It's causing immense financial and emotional stress for too many people.
More than 3 million Australians currently owe in excess of $74 billion in student debt. This is no small problem. And it’s only going to get worse come June 1 when people are slugged with a likely indexation rate of 7 per cent. Combined with low wages, university fee rises and a very low minimum repayment income threshold, we are in a student debt crisis.
These problems were exacerbated by the Coalition's disastrous Job-Ready Graduates Program, introduced in 2020. The program hiked fees on students and cut university funding. It massively shifted the cost of delivering a university education away from the Government and onto students.
The fee changes were not small tweaks either. They more than doubled the fees for degrees like arts and commerce to more than fourteen thousand dollars a year. On average, the package drove up fees for women by 10 per cent compared to 6 per cent for men.
All the scheme has done is condemned generations of people to decades of debt and pushed universities further into strife. It has further entrenched gender inequality as women overwhelmingly study the courses which were hit hardest by the fee hikes and are incurring more and more student debt.
Recommendation
Reverse the fee hikes and funding cuts introduced as part of the Job-Ready Graduates Scheme.
The current system is crushing dreams of study and making people regret their decision to pursue higher education. That is a devastating indictment for a system apparently designed to promote access to higher education. As the NTEU rightly argued in its submission:
Ensuring that income contingent loans do not become a life-long debt burden is crucial to ensuring access to and take-up of tertiary education.
The Government’s argument that the Universities Accord process, which will take years to complete and implement, is looking into affordability of higher education fails to acknowledge the need for urgency. Student debt is an immediate and growing problem that must be addressed now - people cannot afford another round of brutally high indexation. The government can't keep pretending that the system is working. They can't keep sitting on their hands or kicking the can down the road.
The Labor Government has introduced multiple higher education bills over the last few months notwithstanding that the Accords process is underway. There is no reason that they cannot act on student debt.
The Labor Government has chosen to commit $368 billion for dangerous nuclear submarines and gifted $254 billion to the wealthiest through Stage 3 tax cuts. They can make a different choice, one that will support those who most need it. A clear and immediate step to remove some of the unfairness in the system is to abolish indexation on all types of student debt and raise the minimum repayment income to median wage. Then, at least people will be paying off only what they actually owe and only once they start earning a decent wage.
The government can afford to act on student debt by funding the measures in this bill. The only question is whether they care enough to.
Ultimately, university and TAFE should be free, and all student debt wiped. No one should be shackled with tens of thousands of dollars of debt that can take a lifetime to pay off, just to pursue higher education.
Education should be free for everyone, whether they are leaving school, changing careers, retraining later in life, or looking to gain new skills and knowledge for the future. Education is a right, not a privilege reserved for just those who can afford to pay for it, and the benefits of tertiary education extend well beyond the individual to society as a whole.
Recommendations
Recommendation
Indexation on all student loans be abolished.
Recommendation
The minimum repayment income be raised to median wage.
Recommendation
The SFSS debt should be completely wiped.
Recommendation
Reverse the fee hikes and funding cuts introduced as part of the Job-Ready Graduates Scheme.
Recommendation
That the Senate passes this bill.
Senator Mehreen Faruqi
Member
Greens Senator for New South Wales