On Thursday, my Higher Education Contribution Scheme (HECS) debt increased by $2445.87. I’m lucky — many other graduates are facing much steeper increases, some over $7000.
HECS debts are indexed to inflation on June 1 each year. But this year, inflation has soared to its highest level (7.1%) since HECS’s introduction in 1989 — at which time student contributions were only $1800 per year.
Many debtors took to Twitter dismayed at the historic hike, with some questioning HECS’ design and rationale. Critics and defenders of the scheme adopted their usual postures, with the Greens calling to “abolish student debt”, while others stressed its income contingency.
I find neither side compelling. Adam Bandt is a poor man’s Alexandria Ocasio-Cortez, and the decontextualised importing of American slogans suggests his staffers need to log off Twitter more often. Our system is not the US’ privatised nightmare (where funds are repaid to private banks, regardless of income, with interest), and refunding even well-off graduates is a terrible use of public money amid many more pressing demands on our dwindling public coffers.
But the kneejerk, unqualified defence of the current system from centrist wonks fails to recognise how far HECS has strayed from its original aims, imperilling equity and distorting student choices.
HECS was flawed but justifiable in its initial incarnation as a modest co-payment repaid upon gainful employment, but has since morphed into a complex, inequitable quagmire. A professor would surely give it a D-.
It started out B+
The original rationale, according to HECS architect Bruce Chapman, was to fund more higher education places while ensuring students only paid back their loan if and when their income was above average. They could then be said to have derived a personal benefit from their studies.
But HECS had problems from the outset. For starters, finance students who became merchant bankers paid the same nominal amount as graduate teachers, despite the former gaining a much larger personal benefit from their degrees. The banker not only paid off their debt quicker, but they also received discounts if they could afford to pay upfront.
John Howard later tried to align degree type to prospective income by introducing a tiered price structure. This has since been bastardised to the opposite ends, with the Morrison government subsidising agriculture and penalising those highfaluting gender studies majors.
HECS also weighs on graduates’ borrowing capacity just as many look to buy their first home, and concentrates repayments during many graduates’ most financially stressed period: when raising young children. Research shows this disincentivises new mums from returning to work.
The debt was also indexed to average prices, not wages, which sits at odds with its income contingency. If real wages are going backwards, why should students pay more?
A smaller tax on higher-earning graduates in perpetuity would have been a more efficient design — indeed, the Hawke government considered it. It also supported but abandoned a levy on businesses for the benefits they derive from an educated workforce.
Today, we should at least index loans to average wages and lower repayment rates to spread the burden across one’s working life. And thankfully, the government removed the upfront discount earlier this year.
Tradies in business class, baristas with PhDs
Instead of improving the system since 1989, subsequent governments made it much worse.
As the proportion of 25- to 34-year-olds with a tertiary degree grew to 54% by 2021, their wage premium significantly decreased. Meanwhile, male-dominated vocational pathways became more lucrative. There are now more men with TAFE certificates (Cert III to advanced diploma) earning above $65,000 than there are women with university degrees bringing in similar levels of income.
As Per Capita’s Shirley Jackson recently wrote, “the myth still persists that education is the best predictor of future employment outcomes, despite recent research showing that the causal relationship between education and employment has been eroded over time”.
This presented a fiscal dilemma: fewer graduates earning above-average incomes means repayments take longer. Rather than picking up the shortfall itself, the Morrison government dropped the repayment threshold to only $6000 above the minimum wage, abandoning the scheme’s original rationale. The amount of degree costs covered by students has also increased from around 20% to 48% over time.
Broken promises
As undergraduate degrees became more ubiquitous, demand for graduate degrees increased. Yet because Howard limited the number of Commonwealth-supported places in graduate degrees and introduced full fee-paying places (where students incur the whole cost on HECS, without a government contribution), many of our most educated students now exceed the total limit they can incur on HECS ($113,028 for most students). Any additional fees must be paid out of pocket.
This breaks HECS’ founding promise: that we could charge students without closing off access to working-class kids. Particularly in traditionally elite disciplines like medicine and law, access to the most prestigious courses is once again dependent on borrowing tens of thousands of dollars from one’s parents.
That’s without considering the biggest socioeconomic barrier: our paltry Youth Allowance and Austudy payments. The biggest predictor of dropping out of university is studying part-time, which many students do because they need to work to support themselves while studying. Again, students whose parents can support them financially are spared unsustainable workloads.
Stubbornly defending a broken system as if it were still the modest co-payment of the late ’80s is wilful blindness. An interim report on higher education is due to hit Education Minister Jason Clare’s desk next month ahead of the full report later this year. Let’s hope he takes to the system like an unimpressed professor with a red marker.
Arguably, that is the whole point. When HECS started it was supposed to maintain access for all students able to qualify for university. What has happened since, described very well in the article, is only ‘broken’ if you still believe in universal access. On the contrary, it’s just one more victory for the wealthy who are committed to class war: the re-imposition of serious barriers keeping out the proles and protecting their grip on the best opportunities of higher education. Inequality is the objective, keeping the lower classes in their place, and the wealthy are winning.
Yep, merely another example of the fact that the single biggest factor in “success’ in life is how much one’s parents were worth……….
Yes. Between HECS, school funding, home ownership and health, we are heading rapidly back to a feudal society, which is the wet dream of wealth; to not just accumulate, but to be granted peerage.
Our son went to University, studied hard and became a pharmacist, and has since gone on to do very well.
He did this all on his own volition and ability, part time jobs and study, as we did not have the recourses to provide the additiona cash needed. He repaid his Hex debt promptly. He now is 39 years of age, has a lovely family and building a new home
and we are incredibly proud of his achievements.
Is HECS, being given to the right people, or are we just filling spaces in a system that is out of touch?
The HECS nightmare is only a reflection of the much bigger underlying problem……………..
………….the mutation of Universities from centres of learning to centres of earning.
The corporatisation of Universities has proved an unremitting disaster, and should be reversed before it is too late.
Do we really want to go down the American-disaster route? Where the biggest deal on campus is no longer the quality of education and research, but who can score the most valuable TV deal for their college football team.
Little wonder that the Americans are losing their lead in technology to the Chinese – the Chinese Universities are lodging twice the number of Patent applications as their American counterparts, and the gap is accelerating.
Meanwhile in Australia, those who run Universities are no longer Academics but “Managers”, and the focus has shifted accordingly.
Absolutely nailed it. However, I fear that the corporatisation of universities, even though indeed an unremitting disaster, is beyond being reversed.
While we have had our differences in the past Thuc, I fully support your comments here. Well said!!
Exactly. The Dawkins reforms were the beginning of the end. Every child gets a prize and every employer requires an undergraduate degree for the most menial of jobs.
Its taken funding away from what should have been vocational colleges and provided for vocational education at a university.
Meanwhile, what should be the basis of university study, research, has suffered.
Then throw into the mix all these poor kids who were sold a lie that a university education would be the path to a better well paid future are left to ponder what on earth went wrong as they grapple with an ever increasing debt for no real benefit.
The entire system needs a complete overhaul.
There are too many universities for the size of the population. The standards for both entry and graduation have dropped. Insufficient kids are being streamed into trades which is where the need is …. because…. elitist employers insist on degrees.
We need to rethink the entire structure of tertiary education, and the manner in which we pay for it.
In the meantime something needs to be done about the HECS debts.
Jack “the Artless Dodger” Dawkins AND the easily Duchessed PJK.
I love the naive assumption here that a professor would mark something
Haha!
Gold
Lol. Now you’re being naive. Plenty of Professors marking assignments these days.
As an undergraduate Number 11, I had the occasional professor who was also my lecturer and who marked my work.
I retired last year (as a professor). If I had 5 cents for every apostrophe mistake I corrected or every time I provided a clearer statement of an essay’s central claim, I could have retired much sooner. I began marking first-year papers in 1985 as a PhD student and I was still marking them the semester I retired. There are, of course, disciplines where this is much rarer, but in the impoverished Humanities disciplines, it’s often the case that the professor and head of department may be your first-year tutor.
Thanks for that reply 42. I hope that you have a most enjoyable retirement. I am not at all surprised by your revelations. Although my background is in the physical sciences, I bitterly resent what has been done to the Humanities disciplines. It has been nothing less than educational vandalism in the name of utilitarianism and profit.
I had better leave it at that or my blood pressure will go through the roof!
education is an investment in our nation and the future of humanity – any barriers to education are therefore counterproductive and stoopid!
Not everyone is suited to university. There are other areas of education which need more subsidising.
That doesn’t need saying. EDUCATION, without any qualifying adjective, is fundamental to life.
For example, people generally unable to learn need assistance to survive, and someone has had to learn how to care for them.
That knowledge is delivered in different ways, ranging from a grandmother’s care to a medical specialist providing care for a sick child. Placing a different cost on different forms of information adds little to improving education in general. It might just help if the grandmother’s assistance works in a complementary way to that of the medico.
I entirely agree with the sentiment contained in your post roberto.
The whole thing is class war. Conservatives believe that some people are better than others and that they are the better ones. Therefore they are entitled to all the good things. That means no one else is entitled to them. That means its ok to put up barriers to those lesser people getting access to education, higher incomes etc. Not having access to these good the things keeps the “others” in their place. Its pretty much the same idea the Taliban have in relation to women. Lack of opportunity keeps them in their place. Other oppressive regimes all operate on a similiar mentallity.
Hit the nail on the head, Michael.