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Letter from Australia: Minding the cap

In her letter from Australia, Julie Hare asks whether a government cap on total student loan debt could cause unforeseen problems.
This article is more than 5 years old

Julie is Wonkhe's Associate Editor in Australia.

As all wonks know, where there is policy there are unintended consequences. A decision last year to limit the government’s exposure to student loan debt could just have some fairly significant equity considerations and play badly as we move into the fourth industrial revolution.

Last year the government passed legislation to put a lifetime cap on how much students can borrow under the various student loans schemes.

On a superficial level, it looks like a fiscally responsible thing to do.

After all, annual student loans have ballooned fro $3 billion in 2009 to nearly $7 billion in 2016. The total amount of outstanding HELP (Higher Education Loans Program) debt in 2017 was $55.4 billion with estimates that around 20% will never be repaid (Australia doesn’t forgive debt after 30 years as in the UK and the average time for full repayment is around 10 years, even though we have a generous repayment regime – I guess relatively healthy graduate employment prospects help on that front).

However, the government’s view is that some students are just taking the piss.

“A small number of people have treated this as a blank cheque to a lifetime of university education, rather than as a stepping stone into a fulfilling career,” then vocational education minister Karen Andrews said when speaking in support of amendments to the relevant act (which also lowered the repayment threshold from $55,000 to $45,000).

Andrews didn’t give any figures to back up this claim but I would expect the number of individuals becoming career students would be very small indeed. Indeed, the issue of high rates of attrition and non-completion, especially among part-time, online and disadvantaged students, would seem like a very big cost to both government and individuals.

Andrews’ point was that the government isn’t the personal ATM for people aspiring to a better job.

But as a new article by PhD student Nigel Palmer and friends for the most recent issue of Australian Universities Review reckons the capping of loans could have costly consequences for a growing number of students and have some pretty devastating equity repercussions.

The new reality

First a bit of background. Currently, students have access to HECS-HELP (for government subsidised places) and FEE-HELP (for full fee places).

Due to various accidents of history and ad hoc decisions by government ministers, about 32% of postgraduate masters by coursework places are government subsidised, which means the price is capped. The rest are at the mercy of a deregulated market in terms of both fees and enrolments – both of which have been in a pretty steep upward trajectory in recent years.

The reasons are obvious – as undergraduate participation becomes the norm, graduates look to bolster their employment prospects with additional degrees. It’s called competitive advantage by some, credentialism by others. Either way, it’s a fact of life.

There are also a number of professions, such as psychology, which require a postgraduate qualification in order to practice.

Anyway, the new lifetime gap on how much students can borrow is set at $104,440 (or $150,000 for those undertaking medicine, dentistry or veterinary science). The fact that a medical degree at Bond – our only private university – is $378,000 means that only very rich kids with very rich parents and a small handful of scholarship recipients can get a Bond degree. For that matter, an arts degree at Bond costs around the same as the limit ($101,928).

The equity issue

Now this is all well and good if students are in government subsidised places and complete their qualifications in the shortest possible time frame with no fails or incompletions. But it won’t suit a growing number of students who are using the postgraduate market to get a leg up.

“Rather than pose a niche problem for a small number of students, combined caps on fee debt would have serious implications for a number of students from diverse backgrounds who aspire to improve their qualifications and acquire technical skills at a professional level,” the paper says.

Indeed, Palmer reckons the loan cap will deter rather than enable participation among disadvantaged students – those who have the greatest to gain from additional qualifications.

Palmer points out that the number of individuals with sizeable loans is increasing over time – no doubt as fees outpace inflation.

A quick scan reveals the size of the problem. A juris doctor (JD) at Melbourne University, for example, costs $127,000 – and holding an undergraduate degree as an entry requirement – which means an existing debt of around $20,000 plus. Melbourne University does have a few government subsidised places in its JD program, but students need an ATAR (school leaving rank) of around 99.9 or higher – in other words be in the top 0.1% of students in the country) are guaranteed entry into a JD with a supported place.

Sure there are only 14,000 graduates with debts currently in excess of $100,000, but it’s a small number that’s growing.

It might not look like a problem at the moment, but it’s one that could sneak up on us without us realising.

One response to “Letter from Australia: Minding the cap

  1. Australia has at least 1 other private university, Torrens University Australia Ltd, and the University of Divinity’s programs are funded privately.

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