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Doubtful debt called key to certainty
Consultants suggest recouping more HELP loans from overseas students, deceased. By Antonia Maiolo
The federal government should collect unpaid debts from deceased estates and people living overseas to recover money owing under the student loans scheme, a new report suggests.
The Grattan Institute report Doubtful Debt: The Rising Cost of Student Loans shows that the government could recoup more than $ 800 million a year with the proposed recommendations.
Under the Higher Education Loan Program( HELP), doubtful debt – money not ever expected to be fully reclaimed – is projected to reach $ 13 billion by 2017, the report states.
HELP lends students more than $ 6 billion a year to finance their education. About 17 per cent of new lending is now classified as doubtful debt. The expense is projected to reach $ 1.1 billion this financial year.
“ The scale of borrowing under HELP is much greater than could have been envisaged in the late 1980s,” when the scheme was first introduced, the report explained.“ Since then, the number of Australian higher education students has more than doubled. On average, students borrow much more now than they did then.”
The report calls on the government to stop writing off HELP debt in deceased estates – the biggest cause of doubtful debt – when they are worth more than $ 100,000. It also recommends that graduates living overseas repay a flat annual amount of their debt until it’ s gone. Debtors do not have to repay loans if their income is below the income threshold amount, now $ 51,309 a year, or if they move overseas. And unlike a lot of other liabilities, a HELP debt dies with the debtor.
Grattan Institute higher education program director Andrew Norton – co-author of the recent review of higher education – said HELP’ s repayment system was never designed for lending on the scale we see today.
“ A few targeted reforms could radically improve HELP’ s finances and free up money for teaching and research, without creating hardship for students, graduates or their families,” Norton said.“ With these modest reforms, we can achieve the goals of HELP at a much lower cost.”
The chairman of the Regional Universities Network, professor Peter Lee, welcomed the recommendations made in the report.
“ In an environment where the budget is under significant pressure, the report makes some constructive proposals for savings that could be achieved by reducing doubtful debt and altering the rate at which the loan repayment threshold starts,” Lee said.“ The report shows that pegging indexation of the earning threshold for repaying HELP debt to the consumer price index instead of average weekly earnings will generate significant savings.”
University of Adelaide vice-chancellor professor Warren Bebbington also supports reforms on student loans, urging education minister Christopher Pyne to take the report seriously.
“ Unless something is done soon, universities could face more of the massive cuts already projected for the sector,” Bebbington said.“ More alarming is the risk that government may be tempted to bring on reforms that might dilute the great benefits to students the HELP scheme brings.”
Bebbington said the solutions proposed in the report would make a profound difference to the future government funding of universities.“ It would mean the kind of cuts currently proposed to teaching and research under the‘ efficiency dividend’ would be unnecessary,” he said.“ We need this kind of major policy reform to ensure the Australian university sector can not only survive but flourish in the long term.”
However the National Tertiary Education Union has warned the recommendations could result in increased university fees or the use of loans as a form of student income support.
“ While the NTEU shares the report’ s concerns about the financial sustainability of HELP, we do not share all of the authors’ proposed solutions,” NTEU national president Jeannie Rea said.“ Going to university shouldn ' t be like taking out a mortgage but for a [ person ] enrolling as a government-supported student in 2014, their tuition( HECS) fees will range from $ 20,000 to $ 65,000 depending on the degree in which they enrolled.”
Rea said the most effective way to reduce the cost of doubtful debt is to make sure the amount students accumulate is kept manageable by reducing the cost of studying at university. ■
6 | campusreview. com. au