SUBJECTS: HELP debt; Australian Universities Accord
BEN FORDHAM: Well, it's D-Day for anyone with a student loan. That's about 3 million Aussies. Their outstanding debt will increase by more than 7 per cent as of today. It's all on the back of inflation. HECS or HELP loans don't charge interest, but it's pegged to inflation. It is the highest increase since the early 1990s. There's a warning today, the National Tertiary Education Union says some degrees could take up to 44 years to pay off. So, graduate today and you're debt free by 2067.
Jason Clare is the Federal Education Minister, and he's on the line. Jason, good morning.
CLARE: G'day, Ben.
FORDHAM: Is there anything you can do about this?
CLARE: The cost of loans is going up, I think, by about $1,700 on average because of this increase. But it doesn't increase the amount that you have to pay each year. That's not the way HECS works. HECS is not like a mortgage where when interest rates go up, your repayments go up. The amount that you pay each year is based on your income. So, that's an important point to make here. We do know that students, like everybody else, are struggling with the cost of living, which is why in the budget, we've increased Youth Allowance and Austudy and rent assistance to help students with the cost of living. If we were to make a change to this today, it'd cost taxpayers money. It'd cost the people who are your listeners listening to this, who may not have a university degree, they'd have to cop the bill. And it wouldn't mean one extra dollar in the pockets of students today to help with those things, like paying for food and rent.
FORDHAM: All right, let me go through some examples. Your average HECS loan is 25,000. That amount will go up by 7.1 per cent due to inflation. With that loan, your debt increases $1,775. You start paying back HECS when you earn more than $48,000. On that income, you'll get back $480 this year. So, you'll be about $1,300 worse off. So, when it's tied to inflation, and when inflation is as high as it is, there are going to be people thinking, "I just can't afford to do this."
CLARE: I guess the important point to make here is going to university makes you money. Going to university is your ticket to the show today. Going to TAFE or going to university is what will make sure you get the skills you need for the jobs being created in the future. Nine out of ten jobs are going to require a uni degree or a TAFE qualification. I got to tell you, Ben, the average income of someone with a uni degree today is about 100 grand. The average income of somebody whose last year of education was year twelve at high school is about 68 grand. Now, that's a massive difference. That's a life-changing difference. That's why going to university is important, because it sets you up for the future.
FORDHAM: Okay, I thought we were trying to encourage people to weigh up their own circumstances and what they really want to do. And the message was going to be that not everyone has to go to university.
CLARE: No, it's university, it's TAFE, it's some other type of vocational qualification. But when the evidence shows us that almost every job is going to require these sorts of skills, it tells us that finishing high school today is more important than it was in our day or our mum and dad's day. You know, back when we were little kids, only about 7 per cent of people went to uni. Today, about one in two people in their 30s has a uni degree. But not everywhere. On the North Shore and in the Eastern Suburbs, about 70 per cent of people in their 30s have a uni degree. But not where I'm from in Western Sydney. There, it's only 30 per cent. In places like Fairfield, it's only 25 per cent.
FORDHAM: Sure, but if the HECS debt is going up, we now have banks saying you've got to include your HECS debt when they're calculating whether or not they'll approve a home loan. So, this is going to mean that a lot of people won't be able to get into the housing market.
CLARE: I think the big issue there is the cost of housing.
FORDHAM: But hang on, this is feeding into that, because banks want to know your HECS debt.
CLARE: Banks want to look at your ability to repay, both now and if interest rates go up, and the important point here, when they look at your ability to repay is that the way HECS works is that if there's an increase here, it doesn't increase the amount that you pay each year. The amount that you contribute in HECS payments every year is based on what your income is. And I'll repeat the point again, if you go to uni, it makes you money. If you go to university, you're going to have a higher salary than if you don't. So, that's what sets you up for the future.
Some people think that this is interest, like a bank. When you get a loan from a bank, you've got to pay the money back plus interest, and the bank makes a profit. Now, that's not what happens here with HECS. It's indexed to inflation so that the taxpayer, your listeners, get their money back. That's it. So, we lend $1 and you get the real value of that dollar back and that is it. If you make changes to this, then it's the taxpayer that cops the bill.
FORDHAM: Understood. The changes that are coming in today means that people are going to be in debt for longer. And when you spoke about people going to university, on average earning $100,000, well, the nurses and the teachers don't fall into that category. They're not earning 100 grand.
CLARE: One of the big things that I kicked off last year is a review into our whole higher education system, including the way HECS works. And we've engaged Bruce Chapman, the bloke who was the architect, the creator of HECS, to help us look at this.
FORDHAM: Are you open to this group of MPs, including the member for Fowler, Dai Le, who've said, can you do something about the student debt so it's not tied to inflation?
CLARE: We had a group of independents come and talk to us yesterday – Dai wasn't there, but I talk to Dai all the time – about what are the changes we might want to make to HECS to make it fairer.
FORDHAM: But are you open to that one, to not tie the figures to inflation?
CLARE: No, I'm not, Ben, because this is the way that's worked for 35 years, and if you make that change, then taxpayers pay more. The cost of degrees is important, but the cost of kids in Western Sydney missing out in going to university at all is a massive problem. And if I've got more money to invest in higher education, that's where I want it to go, to more kids from poor backgrounds to go to uni.
FORDHAM: Yeah, but those poor kids are going to be in debt for longer.
CLARE: I think you started this interview, Ben, saying that people might be paying off for 44 years. The average is nine and a half years. The average is nine and a half. One of the things this review wants to look at is whether you do an arts degree or whether you do a medical degree, that everybody pays off their HECS at roughly the same time, so that your HECS is set based upon what your earning capacity is. And that report that came out today is based on some changes the last government made to HECS that massively increased the cost of some degrees. It was intended to get more people to do teaching, and nursing hasn't worked for a whole bunch of reasons. This review, that Bruce is involved in, is having a look at all of that and what do we need to do to fix that.
FORDHAM: All right. Are they going to look at student service fees and amenities fees? Because on top of paying for their subjects, you've got to pay a fee for the upkeep of the campus. And this was paid even when they were told, "no, you can't come into uni, you've got to study from home."
CLARE: The short answer to that, Ben, is yes. One of the things students have said to me is student services aren't up to scratch. That before you make a decision about what courses you're going to pick or what subjects you pick in a course before what's called Census Date, there's no-one there to help you and tell you what's right and what's wrong, after Census Date, you're on the hook for the HECS. So, one of the things I've asked the team to look at is the sort of support that students get on campus, both mental health, but also selecting the right courses.
FORDHAM: I've got a note here from Sarah saying, "My daughter finishes year twelve this year. I've told her not to consider going to university. I don't think it's worth it. My degree hasn't helped me at all." You'd hear that from time to time, Minister, wouldn't you?
CLARE: Some people will say that, but the vast majority of people will tell you that going to university got them the qualifications for the profession they're in today that helped to set them up for the future. The other thing people will often tell you, mate, is that you change jobs throughout your career and in the future people won't necessarily just be going to university for a degree, they'll be going there to do a short course, to reskill or to upskill.
FORDHAM: Are you comfortable with the bosses of the university's, the Vice Chancellors, giving themselves $200,000 pay rises this year?
CLARE: Look, I think they probably earn, they earn a lot of money, a lot more money than I do, or you do. I want to make sure that they're paid a decent wage but nothing over the top.
FORDHAM: You've got the University of Wollongong Vice Chancellor Patricia Davidson. Her pay jumped from about $780,000 to more than a million dollars, including super, while the university posted a $28 million deficit. So, what would you say to the students listening at the moment because you know that they're feeling the pain today?
CLARE: What I'd say to students is we get that you're feeling the pain and that's why we've increased Youth Allowance and that's why we've increased Austudy, that's why we're increasing rental assistance. What I'd say to the great people who work in our universities too, is we get that casualisation and wage theft in universities is an issue too, which is why we've asked the team doing this review to look at that. The other thing I'd say, mate, I think there was a bloke called Ben that contacted the show yesterday and talked about this issue where you might have a 20 grand loan and then you pay off two grand over the course of eleven months and then you're on the hook for the indexation on the original 20 grand. That doesn't make sense to me, so I've asked the team to look at that as well and what we need to do to fix that.
FORDHAM: Okay, I'd love to hear from anyone who's caught up in this and I do appreciate you jumping on the line. We'll catch you in the studio sometime soon.
CLARE: No worries, mate. Great to be on the show.
FORDHAM: Good on you. Jason Clare, the Federal Education Minister.