HECS architect defends scheme
The economist that designed Australia’s student loan system says it is not unfair to women.
According to Professor Bruce Chapman, the economist who designed the Higher Education Contribution Scheme (HECS), the student loan system in Australia is actually skewed in Under the income-contingent loan system, women receive an implicit subsidy as they repay lower percentages of their debt, or none at all if they have low incomes.
Recent reports have found that women make up the majority of university students but earn less than male tradespeople with Technical and Further Education (TAFE) qualifications.
Due to the student loan system, women carry more debt than men and take longer to repay it. Single mothers are particularly affected by the current system as they lose on average 70 cents in every extra dollar earned due to reduced family benefits, increased tax, Medicare, and student loan repayments.
Mark Warburton, an honorary senior fellow at the University of Melbourne's Melbourne Centre for the Study of Higher Education, says that the “repayments are punitive and undesirable” in the case of single parents earning between $48,000 and $100,000 a year.
His analysis shows that most students finish their degrees with average debts of between $50,000 and $60,000 and take around 12 years to repay it. However, many are still repaying their debts into their 30s and even 40s, and inflation is set to have an even more dramatic effect on debt levels.
Andrew Norton, a higher education policy expert from the Australian National University, says that indexing income-contingent loans for study to the consumer price index will lead to a real political issue as students who already have substantial student debt will not be pleased when their debt starts increasing by 7 per cent per year.
Professor Chapman says that the debt crisis is largely theoretical because wages could reasonably be expected to stay in line with inflation in the medium term.
While indexation will add to the size of the debt and increase the time it takes to repay, in real terms, it generally does not matter since borrowers will still be paying a proportion of their salary.