Lobby groups have backed an Australian senator’s bid to ease the burden of student debt by removing indexation and lifting the repayment threshold.
A coalition of academic and postgraduate associations has supported a bill to freeze outstanding debt and remove repayment obligations on graduates earning less than the median wage.
In a submission to a Senate committee, Public Universities Australia (PUA) says years of tweaking have altered the loan scheme so profoundly “that it no longer functions in the manner originally intended”.
PUA says the original premise of the Higher Education Loan Programme (Help) was that graduates would face repayments only when they “began earning a comfortable income”. But repayments are now required on salaries above about A$48,000 (£26,500) – far below the median income of A$65,000.
A second premise was that students’ outstanding debt would maintain its “real value” through annual indexation aligned to the consumer price index (CPI). But with CPI now nudging 8 per cent, this year’s indexation – due to be applied on 1 June – was likely to exceed the repayment rate for many graduates, leaving them with snowballing debt.
This is “unethical” at a time of economic uncertainty and rising inflation, the submission says. The current inflation rate might not be a “one-off” given the CPI’s exposure to “volatile global markets”, it adds, saying that if indexation is to be retained it should be tied to the “far more stable” wage price index: “If wages continue to grow with inflation – as they should – the disparities we have highlighted would not exist.”
In a separate submission, the National Union of Students (NUS) warns that graduates’ repayments “will be completely wiped out by inflation”. It says the government will profit by around A$670 from the average student loan next year, by obtaining money at the Reserve Bank of Australia (RBA) cash rate – currently 3.6 per cent – and effectively loaning it to students at CPI.
The NUS says indexation should be frozen for two years while inflation remains “elevated”, and then reapplied at the RBA cash rate.
Greens education spokeswoman Mehreen Faruqi, who introduced the bill into parliament, said the submissions to the Senate committee had revealed “overwhelming support” for her proposals.
“Rising student debt is impacting people’s mental health, causing young people to rethink further study and making it harder for them to access personal loans,” Dr Faruqi said. “[It] will further entrench inequality, with women and young people…bearing the brunt.”
Former education senior civil servant Mark Warburton has condemned the current structure of student contributions as “an inequitable mess”. In a submission to the Universities Accord panel, Mr Warburton says repayments should be levied at a single rate – not 18 separate rates, as occurs now – and only on the “marginal” earnings above the repayment threshold.
The threshold should vary according to debtors’ family circumstances, he adds.
University of Melbourne policy expert Gwilym Croucher said that, although Help had been “one of the most important elements” in Australian higher education’s success, it warranted periodic review.
“We’ve got an overall good system, but that doesn’t mean there aren’t areas for improvement. If [there are] particularly poor outcomes for certain groups of people, then we should absolutely look at it and see what the remedies are.”
The Senate committee is conducting a public hearing into Dr Faruqi’s bill in Sydney on 17 March.
