NEWS
campusreview.com.au
Should super HELP?
Proposal to allow graduates to pay off education
loans with retirement savings draws criticism.
L
etting graduates raid superannuation to repay HELP loans is a
bad idea, the Grattan Institute has warned.
Liberal Senator Chris Back has urged the treasurer to allow
graduates to use retirement savings to pay off their student debt.
Speaking on ABC radio, Back proposed letting people dip into
superannuation and then requiring them to make catch-up payments
later in their careers to ensure they’re not short of cash in retirement.
Back argued this would ease financial pressure on recent
graduates in their 20s and 30s and provide $500 million in savings if
incorporated into the next federal Budget.
Andrew Norton, the Grattan Institute’s higher education
policy director, warned against this proposal. He said that as
superannuation investments have compounding interest, for recent
graduates, of 5 per cent to 10 per cent annually, taking out sums
early could have long-term financial consequences.
Money that graduates would accrue from leaving their earnings
in superannuation would outpace their debt, Norton explained, as
HELP debt interest is 2 per cent to 3 per cent. He summarised that
“superannuation offers a much better deal”.
This plan is also open to rorting, he warned.
“People could salary sacrifice into superannuation, [cutting]
their marginal tax rate [by half or more], and then use the money
to repay HELP,” he told Campus Review. “There would need to be
a tax on withdrawals from superannuation to avoid this, but that
would increase the negative impact on retirement savings.”
If government wants to save on HELP, there are other ways,
Norton argued. They include recovering loans from deceased
estates – a plan Christopher Pyne floated during his time as
education minister. Other options include introducing loan fees for
HELP, and lowering the repayment threshold from $54,000.
Robert Simms, Greens higher education spokesman, warned,
however, that lowering that threshold could unfairly hit low-income
earners. Last year, the government lent $30 billion in HELP loans.
Next year, that’s expected to grow to beyond $50 billion. ■
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