Refresh of student debt required as part of university sector overhaul, major report recommends

Aussies could soon expect changes to student debt after a review into the university sector recommended major reforms were urgently required.

A refresh to how student debt is accumulated is required as part of an overhaul to Australia’s university sector, a report canvassing proposed reforms has declared.

The Australian Universities Accord Interim Report, released on Wednesday, recommends revising student contribution amounts, payment for mandatory placements, and debt relief for graduates “in valued occupations”.

“Australia’s signature policy (HELP) is now over 30 years old and needs a refresh. As a result of this lack of policy attention, access to student income support is declining, and services that might support student success are lacking,” it said.

“This should include giving consideration to revising student contribution amounts and HELP repayment arrangements and providing remuneration for mandatory work placements.”

An overhaul to how student debt is calculated is being considered.

Targeted debt write-offs, already in place for doctors and nurse practitioners who work for a period of time in rural or remote areas, could also be expanded to nursing and teaching, the report suggested.

“Issues with employment in these occupations are not purely from a lack of qualified people. The shortages are also driven by poor retention within the occupation, so the incentive could be tied to continuous employment,” the panel, led by Professor Mary O’Kane AC, said.

Education Minister Jason Clare presented the recommendations to the National Press Club in a speech on Wednesday.

“This report makes it pretty clear that the most recent changes, the JobReady graduate scheme, haven’t worked and, to quote the report, needs to be redesigned before it causes long-term and entrenched damage to the Australian higher education system,” Mr Clare said.

The interim report made more than 70 recommendations, including five immediate actions to expand First Nations’ student access to higher education and the abolishment of the 50 per cent pass rule, which were adopted by the government on Wednesday.

The panel encouraged the government to undertake bold and long-term change to the system. It argued complacency could not be tolerated and put university governing councils on notice to improve their governance.

The report provided a scathing establishment of the Morrison government’s “job ready graduates” scheme.

The share of student contributions has increased to nearly 50 per cent. Picture: NCA NewsWire / Nicholas Eagar

Since its establishment the on average student share of tuition increased to 48 per cent, while the Commonwealth’s share dropped to 52 per cent.

But the panel found there were cases where students paid closer to 90 per cent of base funding costs, including in business, law and humanities degrees.

“It is not fair for some students to make such a high contribution, even if expected earnings are likely to be higher than average,” the report said.

Tuition fees for full-time domestic students studying a bachelor’s degree and a master’s degree at a public university in Australia are now the sixth and the fourth highest respectively of the OECD countries.

Mr Clare last month left the door open to changes to student debt after HELP balances soared following the 7.1 per cent indexation.

HELP debts are indexed in line with inflation each year and hovered around 2 per cent over the last decade. But as inflation skyrocketed, the indexation rate for the three million Australians with loans has too.

The panel said the effects of high inflation and repayment burdens were concerns and suggested a system of marginal repayment could ease the pain felt by those on the “repayment cliff”.

Jason Clare launched the report at the National Press Club on Wednesday. Picture: NCA NewsWire / Brendan Read

“Basing repayment on total income means that the amount of debt that a person repays can increase significantly over small income ranges. This is particularly noticeable at the first repayment threshold where earning $1 more means a person must repay $483,” the report said.

Instead, it canvassed basing the repayment calculation only on the income above the repayment threshold, meaning a person would not pay more than they earnt in additional work.

“While a marginal system would likely reduce repayments for those at lower incomes and therefore increase their disposable income, the income contingent nature of the HELP scheme means these people are likely to repay for longer as their annual repayments are lower,” the report said.

The panel also floated a HELP-style program to allow students to borrow money to help meet living costs and ease the burden of mandatory work placements.

“The option to borrow money to help meet their living costs could help students balance paid work and study commitments, reduce financial hardship, and enable more students, especially those who need to relocate, to participate successfully in higher education,” it said.

A final report is due to be handed down in December.

Originally published as Refresh of student debt required as part of university sector overhaul, major report recommends