Graduate debt relief expected in Australian budget

Student debt relief measures are anticipated in Australia’s 14 May federal budget, after prime minister Anthony Albanese acknowledged shortcomings in the Higher Education Loan Programme (Help).

Speaking on the Hit radio network, Mr Albanese said the government was examining the Australian Universities Accord’s recommendations to reform the student loan scheme – informally known as Hecs – and would be “making announcements pretty soon”.

Asked whether high debt repayments were discouraging university participation, Mr Albanese said the accord panel had produced ideas to make the system simpler and fairer.

“There’s a range of areas where we need to do much better with the younger generation basically, and Hecs is one of them,” he told programme host Bronte Langbroek, daughter of former conservative Queensland opposition leader and education minister John-Paul Langbroek.

“We, of course, have a budget coming up,” he added.

The accord’s final report recommended limiting Help indexation to avoid a repeat of last year’s 7.1 per cent increase to outstanding debt. The annual indexation mark-up is based on the previous two years’ consumer price index (CPI) figures, with this year’s hike – due to be applied on 1 June – projected at another near-record high of over 4 per cent.

The accord recommended setting the Help indexation rate at whatever was lower out of the CPI and wage price index (WPI), which has trended well below inflation in recent years – although the two measures are currently at almost identical levels.

The accord also recommended changing the timing of indexation to avoid a current anomaly, where borrowers are charged indexation on debts they have already repaid. More broadly, the report advocated a switch to a “marginal” system where repayments are levied only on debtors’ earnings above a repayment threshold.

Advocates for a marginal system include Australian National University economist Bruce Chapman, designer of the original 1989 Hecs scheme. In a paper prepared for the accord panel, he describes the current approach – where repayments are based on debtors’ total income – as a 35-year-old “mistake”.

The arrangement confronts some debtors with a “loan repayment cliff-face” when their incomes rise marginally, Professor Chapman explains, with pay increases of just a few dollars potentially increasing people’s annual repayment obligations by hundreds of dollars and discouraging them from accepting extra work.

His paper says introducing a marginal system would not be “complicated” and the costs to the government would not constitute “a significant barrier”.

Asked about the accord’s Help proposals on the day of the report’s launch, education minister Jason Clare said he hoped to see some included in the budget, but stressed that this would require approval from the Expenditure Review Committee.

The government is under considerable pressure to ease student debt. Shadow education minister Sarah Henderson drew attention to tax office data showing that Australians had paid a record A$2.9 billion (£1.5 billion) in voluntary Help debt repayments last financial year, up from A$780 million a year earlier.

“More and more Australians are caught in a student debt trap,” Ms Henderson said. “It is no wonder domestic university enrolments have fallen.”

A petition imploring Mr Clare to change Help indexation, initiated by independent MP Monique Ryan, has attracted more than 270,000 signatures. “Young people are facing a housing crisis, a cost-of-living crisis and a climate crisis,” it says. “They shouldn’t be facing a Hecs debt crisis as well.”

john.ross@timeshighereducation.com