The following is a short email that I wrote to the ABC in response to the linked article about indexation of student loans under the HECS system. I did not receive any response from the ABC, so I decided to share this letter on my blog, in case anyone else might find my perspective on the matter interesting. My original email follows.
I wanted to provide a different perspective regarding your recent article ‘Once considered a good ‘social policy’, students say HECS loans are a burden on an entire generation’.
Like the 11 students featured in your article, I am a current student at the University of Melbourne. Having pursued multiple degrees over my now close to 14 years in higher education, after the indexation last year my total HECS-HELP debt now stands at $144,505.66. Unlike the students featured in the article, however, I am not at all worried about my debt, in spite of it being unusually large. This is not because I come from a wealthy family – neither of my parents are university educated, and they have not financially contributed to my higher education in any way.
Rather, the reason I am not worried about my debt is because of a number of facts which I believe were insufficiently highlighted in the original article. First and foremost, it was my choice to take on the debts I have incurred. I love learning and have made informed decisions throughout my years of higher education as to what I wanted to study and how much it would cost. I do not regret any of my choices, and am very happy with the education I received. I expect the same level of thought and care from any other student capable of studying at an Australian institute of higher education.
Second, and apparently unlike some of the students in the original article, I am aware that I will not be required to repay a single cent of this debt until my taxable income exceeds $51,550. This is slightly less than the median taxable income, meaning that I will only need to start repaying my debt when my income reaches about the top half of the distribution, and even then, at that income it would only be a modest rate of 1% of income. As such, it is really impossible for me to be impoverished because of my debt. This differs greatly from the US system, where debts are often charged interest well above inflation, and become repayable regardless of income.
Third, I am aware that my education provides me with enormous benefits in the workplace. According to the Deloitte report The importance of universities to Australia’s prosperity (2020), ‘the gross private market benefits associated with a bachelor level qualification relative to no post-school qualification is $680,000’. Like several of the students featured in your original article, I have postgraduate qualifications and so this premium will be even larger, though I have not been able to find precise figures for this. The figure on page 15 even shows the expected private benefits by year, and after graduation they are never less than about $7,000. This certainly puts the few thousand dollars I’d expect to repay each year (at lower income levels) into perspective.
Of course, I realise that having a degree is no guarantee of earning more money. Nonetheless, public policy of this sort should be designed for the typical case, and on average the differences in employment and earnings are enormous. Furthermore, there is already a built-in safety net for those struggling to find work in that they don’t have to repay anything if their income does not exceed the threshold.
Overall, I think the HECS-HELP system in Australia is incredibly fair and reasonable. Higher education is heavily subsidised by the government as a reflection of its large social gains (these are also discussed in the Deloitte report). At the same time, a large fraction of these gains are reaped by the individual through higher expected earnings, and as such it is reasonable they should make substantial contributions to the costs of their own education.
I also wanted to comment on the recent rework of the HECS-HELP loans indexation system, which was the subject of another recent article. While these changes will personally benefit me by about $6,000 for last year alone, I nevertheless think this is bad public policy and fundamentally unjust. It amounts to a substantial transfer of wealth from taxpayers to university graduates. Since university graduates have higher lifetime earnings compared to the average taxpayer, this represents a net transfer to relatively privileged, highly educated Australians. I don’t see why non-university educated Australians who make much less than I will, should be required to pay even more of my fees just to ensure that my debt (which I don’t need to repay immediately anyway) never rises faster than average wages. After all, working class Australians don’t have any such guarantees for their debts, so why should university educated people receive such a taxpayer-subsidised guarantee? I would prefer to see the money used to fund this change instead spent on helping those most in need in our society, such as the homeless, those with disabilities, working single parents, and Indigenous Australians (to mention a few examples).
In the future I hope to see more balanced reporting about this issue, reflecting multiple perspectives and adequately considering all important factors, rather than reporting which uncritically presents Australian university students as a marginalised or vulnerable group in our society. We are not.
James Fodor 