I know Nathan, he is a great drummer!
Nocookies | The Australian
Nathan Sproule is no outlier in the scheme of things. The 28-year-old Perth local enrolled at university in 2009, spent some time studying music, but then decided he was more suited to taking up a trade as an electrician instead.
But five years after last turning up for class at Perth’s Edith Cowan University, Sproule is stuck with a $14,000 student loan and little prospect of repaying it anytime soon. It’s not that Sproule doesn’t work, he does. But as an apprentice electrician, he earns $32,000 — considerably below the repayment threshold of $54,186.
Not just that, but becoming an electrician cost him an extra $6000 in course fees.
“I think it would be pretty difficult to pay back all that debt while making not even $600 a week,” Sproule says.
“And I’m a diabetic but not eligible for any healthcare discount so I’m paying full price for insulin.
“It would literally make it impossible, there is no way I’d be able to be an apprentice and support myself.”
Last year, 522,000 students accessed the Higher Education Loan Programme, the world class government policy that relieves the cost of tertiary education for students until they can afford to repay it. Sproule is just one of millions of former students with all or part of that debt outstanding.
This week, alarm bells rang out across the sector as an analysis released by the Parliamentary Budget Office revealed the size of those loans on the government books has blown out to a mind-boggling $1.7 billion a year, leaving taxpayers sitting on a predicted $185bn time bomb as the scheme screeches out of control over the next decade.
The rapid escalation in the total debts owed to government — and the amount that will never be repaid — was triggered by a series of policies instituted by recent governments.
First, was the Rudd government’s 2009 decision to remove limits on the number of students universities could enrol. This effectively allowed these institutions to accept as many students as they deemed eligible. This is known as the demand-driven system.
Worse still, Labor decided to allow students at private colleges access to the loan scheme, adding millions more to the debt pile in a national scandal that accelerated out of control under the current Coalition government.
The situation is likely be exacerbated, the PBO modelling shows, if planned but unimplemented deregulation reforms proposed by the Abbott government are legislated. Those would cut subsidies to universities by one-fifth, but allow universities to charge whatever fees they like.
In effect, that would give universities the freedom to enrol as many students as they wanted and charge them as much money as they liked, all backed by buy-now, pay-later arrangements, totally guaranteed by the taxpayer.
Once held up as a gold standard policy, HELP is becoming an enormous nightmare for the government.
At its simplest, it allows students to borrow up to $100,000 in study loans to be repaid once they begin earning more than $54,000.
Fuelling much of the growth was the uncapping of university places from 2010 onwards, which pushed student numbers from 308,000 to 522,000 last year.
Universities have not been shy in increasing enrolments, and the funding that’s attached.
The Australian Catholic University grew from 20,000 students to 30,000 students in a mere five years, a 50 per cent increase.
Even Group of Eight universities, representing a swath of the most prestigious institutions in the country, are embracing growth as one of the few ways open to them to increase revenues.
It is no secret that a significant portion of that money, which is intended for teaching, cross-subsidises research activities upon which universities rely for prestige and ranking.
“It’s in everybody’s interests to ensure that our universities are as good as they can be and that takes money — not further cuts,” says Go8 chief executive Vicki Thompson. “We have what is effectively a distorted funding system. The actual issue lies in the fact that we are underfunded for research.
“These funding issues have not gone away and if anything have been exacerbated by the demand-driven system.”
To rein in the growth of bad debts or non-repayment of loans, the Grattan Institute’s higher education analyst Andrew Norton last month suggested lowering the repayment threshold to $42,000 from the current rate of $54,000.
It is a suggestion that has caught the ear of the government as it works through what measures to include in next month’s budget.
With graduate salaries basically static over recent years — the average is about $55,000 for those in their first year out of university — and with a significant number of vocational students with qualifications that will not produce high incomes, reducing that threshold reduction would instantly increase the number of people repaying their debts by 50 per cent.
Some students think such a policy is a sensible suggestion. At the University of Melbourne, third-year arts student Corey Mathrick, who studies politics and history and plans further study in law, realises he will leave himself with “a pretty decent bill” by the time he graduates.
“I’m not particularly worried about it, it’s not going to be as if I start earning $42,000 all of a sudden the world comes crashing down on my shoulders,” he says.
“This is something I voluntarily went into, I want this education, society is paying for it, so it’s only fair I should foot at least some of the bill at some point in my life.
“Even if they lower the repayment threshold, it’s still going to remain an income contingent loan.
“In that sense it doesn’t take away the opportunity to have a crack at higher education, or any further training for that matter.”
While few are brave enough to call for the outright dismantlement of the demand-driven system — concerned it will push those less-likely to enrol in universities out of the system altogether — some call for it to be reined in.
There are concerns that students who didn’t do well at school are nonetheless being enrolled in courses they have little chance of passing, often allowed by the ATAR entry system that is itself under scrutiny from the government for being inconsistent and opaque.
Others say the labour market is set to be flooded by graduates with useless qualifications.
Among those who call for the system to be curtailed is, somewhat surprisingly, Labor’s higher education spokesman Kim Carr. He says that it is “not satisfactory for universities to enrol students they know are likely to struggle with university, only to see them drop out after accruing a debt”.
He says Labor would oppose any move to lower the repayment threshold for the loan scheme “on the grounds of fairness and impact”.
“As the Grattan report itself acknowledges, if the threshold is lowered it will be women, lower income earners, people in part-time work and recently graduated young people who would be paying more, sooner.”
Gabby Brackenbury-Soldenhoff, education vice-president at the University of Technology Sydney Students’ Association, says any lowering of the repayment threshold will worsen already-present disparities in loan repayments.
“They are struggling already and changing the threshold will impact specifically, it already takes female students three and a half years longer on average than males to repay loans, and it’ll make that problem worse,” she says.
Whatever the decision on what the repayment threshold should be, the government faces a more divided sector.
While fees deregulation had previously won widespread public support from university vice-chancellors, some held private reservations. And most have since reversed their position.
The PBO report shows just what sort of financial impact deregulation would have on the government’s books.
“People need to be very clear that beyond compensating for reductions, fee deregulation is an expense not a savings because of its impact on the loans scheme,” Norton says.
If loans to university students spiral further out of control, those made to students enrolled at private colleges have well and truly careened off a cliff.
Unrestrained by proper regulation, a number of colleges spent the past two years enrolling enormous numbers of students — often improperly describing the courses as “free” and luring potential students with the promise of free computers and even cash.
In one egregious instance, Sydney’s Empower Institute picked up $46m under the vocational loan scheme to run online courses for 4000 students. It managed to graduate just four of them.
During its investigation, the Australian Competition & Consumer Commission revealed Empowerr, which is owned by Jim Yang and his company Cornerstone Investments, paid recruiters commissions of up to $3700 per student.
In one instance, an indigenous man in Bourke, who did not have access to a computer and who had left high school in Year 7 with limited reading and writing abilities, was allegedly enrolled into a course while in a pub, given $50 and promised a laptop.
HECS-style loans to vocational students (known as the VET Fee-Help) increased 147 per cent per year over the last five years, the PBO figures show.
Much of this debt will never be recouped because students don’t graduate, are often unfit for the training in the first place, or are unsuitable for fulltime employment — let alone work that comes with a salary of greater than $54,000.
Melbourne’s Consumer Action Law Centre represents a number of students taking legal action who alleged they were misled into signed up for courses.
“Calling these debts ‘bad debts’ is a cop out,” says Consumer Action’s chief Gerard Brody.
“Thousands of students have been subjected to high pressure sales and poor quality courses that didn’t live up to their promises ... in many cases they should have never been sold the courses in the first place.
“Our research estimates the government could claw back almost $1.5bn if it investigates the legitimacy of recent sales in the industry ... all uncompleted VET Fee-Help linked courses should be investigated to determine if the sale of the course was genuine.”
So far no redress scheme, but the government has put a pause on any growth in the loan scheme for vocational students as it consults on redesigning the system.
Meanwhile, the ACCC pursues Empower, as well as three other providers, for hundreds of millions of dollars in funding made under the loan scheme the government will otherwise likely never see again.
The HECS/HELP scheme, introduced in 1989 by the Hawke government was designed to allow for more students from non-*traditional backgrounds to access university. The scheme, which was exported to countries around the world, has been a wild success.
But political tweaking and intervention have changed the original intention of the program as have policy changes dramatically increasing access to it.
If there is one sure bet for the federal budget, HELP will be tweaked, again. Let’s just hope that finally some real help is on the way.