Attachment: CAPA Paper
By 30 June 2003 Australian students and graduates will owe more than $9 billion to the Commonwealth Government for the cost of their Higher Education Contribution Scheme (HECS) fees. The higher education reform package, to be released this year by the Federal Minister for Education, Dr Brendan Nelson, is predicted to increase student debt considerably by:
Student debt affects the capacity of graduates to own a home, have a family, and access private finance such as mortgages, personal loans and credit cards.
In Australia, compulsory student debt repayments delay the capacity of graduates to save a first home deposit and make mortgage repayments. This has influenced the following trends.
Student debt has also meant that Australians are delaying having their first child, and choosing to have fewer children.
The proposed changes to student loan schemes in Australia – in particular the decision to charge interest on student loans – will make the Australian loan system more like the New Zealand system. Both countries have an income-contingent repayment scheme, however student loans in New Zealand accrue interest while Australian student debt is adjusted for CPI but is currently interest-free.
The New Zealand student loan scheme has been the subject of intense domestic and international criticism.
In 2000, the number of Australian-born people emigrating from Australia was the highest ever recorded, having doubled since 1995. These people were more likely to be aged 25-34 years, and more likely to be moving to the USA, Singapore and Canada – destinations which indicate that employment was a major motivator for emigration.
Student debt is not just an issue that affects students and their families. As doctors, lawyers, dentists and vets accrue increasing amounts of debt for their degrees, compulsory debt repayments will compel them to increase the fees they charge their clients.
All Australian taxpayers will have to pay the costs associated with an ageing population, as student debt restricts the number of children that families can afford to raise and contributes to more graduates leaving Australia. An ageing population will mean that public spending on health, housing, aged care and superannuation will increase at the same time as the working-age population funding this spending through taxation decreases.
Before student debt is considered as a policy solution for inadequate public investment in higher education, the wider social and economic impact of this debt should be researched and monitored.
CAPA believes that increasing student debt is not an appropriate substitute for public investment in higher education.