This is a problem of the Coalition Government’s making - slogging students to pay for their tax cuts, and the low wages growth that is biting graduates.
This is all about priorities. The Greens believe now is the time to be investing more in education and training, not less. This Government wants to sink public money into the falsehood of trickle-down economics through handouts to the wealthy and big business.
The fact that level and proportion of student debt that is not likely to be repaid shows that there are fundamental weaknesses in the labour market. It shows that wage levels have fallen to such a degree that the wage premium from tertiary education is no longer being captured by the HELP thresholds as they stand.
The solution is not to lower the threshold, so that graduates earning no greater benefit instead incur a greater cost. We will not become the smart, innovative, forward-leaning Australia of the future by saddling students with debt for degrees that provide them with little economic benefit.
The Government's wrong priorities mean they are focused on a symptom rather than a cause. And in doing so, they are pushing us as a nation to lose our grip on why we have long cherished the principle of universal access to higher education in the first place.
Some of the benefit of university education is public; some of it is private. The public benefit is enjoyed by all of us. The private benefit accrues to the graduate.
We subsidise the cost of degrees for students because we recognise that as a society we benefit from their study. It is a compact at the heart of our higher education scheme: that investing in three or four years of study is a gamble, and if it pays off, it pays off for all of us. We will take the risk if students are willing to take the risk.
Asking students who are receiving no private benefit for their study to pay us anyway is a breach of that compact.
And that is exactly what this bill does.
Doubtful debt
It should not be surprising that the current amount of HELP debt is growing. The uncapping of university places saw a boost in the number of Commonwealth Supported Places being offered; and the demand-driven scheme has put university within reach of thousands of people who might otherwise not have had the chance to attend.
We subsidise their attendance in university because we believe that they should be able to attend, and that they have just as much a right to be there as anyone else.
More enrolments mean more debt issued.
As the value grows, so too will the value of debt that is likely to never be repaid.
It is a feature of the system that not all debt will be repaid. It is not designed to recover every dollar of every loan from every student.
The purpose of the income-contingent loan scheme is to encourage people to study.
Asking students to take on a greater share of their tuition costs means asking students to take on higher HELP debts. Simply pushing additional costs onto students, to be funded by debt, means ballooning debt with no corresponding increase in the capacity of students to service that debt.
The share of total debt that is doubtful has expanded because we have expanded university access to students who wouldn’t have otherwise had a chance to attend.
If we had high wage growth, we would not have this problem. Graduates are seeing less and less private benefit for their degrees. Their persistently low wages are an expression of this phenomenon. This is a challenge for the labour market, not for students. Asking graduates to pay more because they are not earning enough is a bizarre miscalculation of where the problem lies, and what the solution should be.
Thresholds
The reason we have the threshold we have is because repayment thresholds are linked to wages by design. It’s not a simple oversight.
When the Hawke Government introduced HECS in the late 1980s, the threshold was set so that graduates would have to earn roughly what the average worker earned before they began to repay their student debt. Today’s thresholds remain indexed to average weekly earnings because of that legacy.
It’s true that other government schemes are not indexed to so generous a rate.
These schemes are not intended to repay a debt, but to support those who rely on the welfare system. Direct comparisons are not applicable.
It is unreasonable to ask people with existing debts, who entered into that debt arrangement under one set of conditions, to then have those conditions changed. They have made historical decisions with no opportunity to change them. No grandfathering arrangements are provided for in this amendment; historical debt is treated exactly the same as newly-issued debt.
These changes disproportionately affect those on low-incomes, from disadvantaged backgrounds, people with disabilities and Aboriginal and Torres Strait Islanders. A reduction in repayment thresholds hits regional, rural and remote graduates far harder, at exactly a time when the Coalition Government is trying to decentralise jobs away from concentrated centres of activity.
Lowering the thresholds has disincentives for labour force participation when what we should be encouraging is greater participation by reducing disincentives.
Threshold indexation rate
No effort has been made to justify why the Consumer Price Index should be favoured over any other indexation rate.
The Committee Report simply suggests that we should adopt the lower rate of the CPI because the 2014 Commission of Audit recommended using the CPI.
The Commission of Audit also recommended cuts to Newstart, the pension, homeless funding, the National Disability Insurance Scheme and family payments.
The Commission of Audit recommended charging people $15 to visit their GP. It recommended raising tuition costs for university students and recommended the Government abandon the ‘Gonski’ schools funding model. It recommended an end to universal health care. It recommended a 10 year freeze on the minimum wage.
In short, the Commission of Audit is a how-to document on how to dismantle Australia’s safety net. Taxpayers have already been billed $2.5 million for the production of this fantasist utopian manifesto on how to overthrow the welfare state; it should not cost them a dollar more.
There is no merit to linking an income-contingent loan’s indexation to anything other than income. Inflation is already factored in to average weekly earnings, which is in theory a function of changes in both inflation and productivity.
This proposal simply punishes graduates for every increase in productivity.
Some have noted that under current conditions of stagnant wage growth and rising costs of living, the change may help students with debts.
It is a condemnation of the Coalition Government that this would be its best idea for helping graduates meet the costs of their debts.
It is because of stagnant wage growth that graduate’s debt is not being sufficiently repaid; rather than changing the way repayment thresholds are indexed to account for flatlining wages, the Coalition Government should instead focus on why wages are flatlining in the first place.
Lifetime HELP cap
The idea of a lifetime limit on HELP loans should be rejected outright.
Some courses currently on offer would exceed the value of the proposed HELP cap before the student has even graduated. These include offerings from the University of Melbourne, the University of Sydney, the University of Technology Sydney, Bond University, the University of New South Wales and Monash University.
This proposed limit would prevent a student who graduates with a Bachelor of Laws from Bond University from ever accessing the higher education system again, throughout their life. They would not be able to retrain, upskill, shift careers or further specialise.
The public benefit of this restriction is apparently so that their debt is not incurred. This represents a significant departure from long-term bipartisan consensus, and the empirically supported conclusion, that university graduates generate a wage premium for both themselves and for all other workers, including non-university educated members of the labour force. The HELP scheme has been structured to recapture that private benefit and return it to the Commonwealth so that others may be similarly benefited.
This proposal is a retreat from that concept. It says that it is better not to offer the loan at all, better not to have it repaid, better not to have it reinvested and better if there is no public benefit from a highly-trained workforce.
This erodes support for universal access to higher education. It turns willing students away at the door. In doing so, it hurts us all.
The Department’s argument that this cap will impact only a few students is an argument for why it is unnecessary in the first place.
No other cap options were canvassed, and no attempt was made to demonstrate that this cap level was the correct one. It appears to be simply decided that a cap is necessary, and that therefore this cap should be supported.
We should not be surprised that such a poor policy process has delivered such a poor policy outcome.
Recommendation 1
The Australian Greens recommend that the Senate oppose the bill.
Senator Sarah Hanson-Young
Member