The Abbott Government has indicated that it will ditch its plan to apply real interest rates to outstanding student debts after it received advice from the architect of the HECS repayment scheme that it would unfairly punish to poor graduates. From The Canberra Times:
Modelling by education economist Bruce Chapman has found poor graduates could pay 30 per cent more for a degree than their high-income counterparts if the government indexes student debts at the government bond rate rather than inflation. Women who take time off work to have children would be among the hardest hit…
His modelling found low-income graduates (those in the bottom 30 per cent of earners) would amass total repayments of $105,000 from a starting debt of $60,000 under the government’s plan. By contrast, the top 25 per cent of earners would pay only $75,000 in total repayments on the same debt – $30,000 less than low earners…
It is true that the Government’s proposed changes to university fees would punish those in lower paid professions and women, and the back-down on fee interest is welcome.
In June, the National Centre for Social and Economic Modelling (NATSEM), which is attached to the University of Canberra, released estimates of how the May Budget’s changes to university fees are likely to impact on various courses, and found that the impact would “be felt most strongly for low-pay occupations such as nursing or education, and across the board the impacts are larger for females”. The modelling “assumed that students will face a repayment interest rate of 5% which is around twice that of the CPI (the existing indexation) but lower than the typical 10 year Treasury bond rate (the proposed loan interest rate) of 6% over the past decade” (see below table).
Equity issues aside, there is also the risk that the Coalition’s university fee changes could lead to shortages of essential workers like teachers and nurses. A shortage of nurses, in particular, is precisely what you do not want as the population ages. Moreover, the changes would also work against the Abbott Government’s paid parental leave scheme, which is being marketed as a measure to promote greater workforce participation from women.
