Inside the government's plan to reduce student debt

Did you know Australians contribute more to their tertiary study than those in most other OECD nations?

It’s a situation many students say is unfair and needs changing.

In Australia, university graduates are forced to pay back the government for the cost of their university education under a system known as the Higher Education Loan Program (HELP). Under this system, the amount you are required to pay back depends on your income level.

Rising student debt has become an increasing issue in Australia, with the situation not looking like improving anytime soon. Since 2006, the average HELP debt in Australia has more than doubled.

In a bid to address this growing issue, the Albanese government recently announced that if re-elected, it will cut HELP debts by 20 per cent.

As part of the proposed changes, the government will also increase the minimum threshold for making HELP payments from $54,000 to $67,000.

So, do these changes go far enough and could there be any unintended consequences?

How much will students save?

Under the proposed changes, which would likely not go before parliament until after the next election, students would save an average of $5,500. Those with debts over $50,000 will save $10,000 and considerably reduce the length of time it would take to pay back the loan.
By reducing their debt, this could also make it easier for some people to obtain a home loan.

What else needs to be done?

Many see the government’s decision as a temporary move, a stepping-stone to a more comprehensive reform of the university sector. They argue the changes won’t make a substantial difference to the level of debt incurred by Australian students.

It’s rumoured that the federal government plans to introduce an Australian Tertiary Education Commission to set and regulate university fees. This could potentially lead to a more equitable fee structure, with fees being charged based on the earning potential of the course.

Advocates would welcome such a move.

Experts say that courses should be charged based on future earning potential. For example, those studying law and medicine should be expected to pay more than those studying arts. This approach helps avoid the situation where graduates are charged high fees that they may never be able to repay.

Are there any downsides?

There are concerns about how this policy will be paid for. Though the government claims it is off-budget, considered the same as unpaid HELP debts, it is still estimated to cost $11 billion money that has to come from somewhere.

Critics argue that the majority of Australians who don’t go to university will be forced to pay for those who do, despite university graduates having higher earning potential. Many also see it as unfair to those who have already paid back their HELP debts.

However, advocates say education should be seen for what it is: a benefit not just to the student but to society as a whole. This is because graduates deliver some of Australia’s most vital services, including healthcare and transport services. In addition, better-educated societies are more innovative, more productive and healthier.
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