Young people feel short-changed, and student debt is a key reason why

Rising student debt, fuelled by the misguided Job-Ready Graduates package, is compounding young Australians’ sense of a cost-of-living crisis, and the feeling they are being short-changed.

That’s one of the key findings from the Bankwest Curtin Economics Centre’s report Youth in Focus: Navigating Wellbeing in a Changing World.

Students attending university feel short-changed as their debt continues to grow. Credit: Dionne Gain

Drawing on views voiced during a youth forum held in late 2024, the report sheds new light on the issues that matter most to young people – loosely defined as 15 to 24-year-olds.

These included mental health, experiences of discrimination based on gender, race, sexual orientation and body image, and the effects of social media. As a global issue, climate change was their key concern.

However, mirroring the national political discourse, the cost-of-living crisis emerged as the most pressing concern, and our young participants view this through the lens of rising costs and the declining accessibility of housing and education.

More than 40 per cent of this cohort will go to university. In 1989, Australia introduced a novel approach for funding higher education, the Higher Education Contribution Scheme, in which university students contributed to the cost of their education in the form of a loan to be repaid through the tax system once their income passed a certain threshold.

Adopted by several other countries, HECS was an acclaimed example of Australian public policy success.

However, today’s version is a far cry from the original proposal put to the Wran Committee’s review of higher education funding by the scheme’s architect, Professor Bruce Chapman.

The committee recommended a “fair” student contribution of around 20 per cent of course costs. Today’s students contribute up to 93 per cent for courses in many disciplines including law, accounting, economics, society and culture and social studies.

These fees amount to around $17,000 per year of study.

The income-contingent philosophy underpinning HECS was designed for students to begin repaying their debts when taxable income reached average weekly earnings.

Today students start repaying at a threshold barely over half of that amount.

Initially, the additional tax to recoup loans progressed from 1 to 3 per cent depending upon income. It now ranges from an additional 1 per cent to 10 per cent on top of graduates’ marginal tax rates.

For someone on average weekly earnings, this means an additional 6 per cent.

Much of the higher cost burden falling on students is due to the Job-Ready Graduates Package, announced in 2020 by then-Liberal education minister Dan Tehan.

While the package lowered students’ share of costs in some courses, it saw sharp increases in others. For example, humanities student fees more than doubled, rising by 113 per cent.

Why? Well, as Tehan explained in his address to the National Press Club, the changes aimed to “incentivise students to make more job-relevant choices, that lead to more job-ready graduates, by reducing the student contribution in areas of expected employment growth and demand”.

Teaching, nursing, agriculture, and STEM (science, technology, engineering and mathematics) were singled out as fields in growing demand.

But data and research have shown the assumptions underpinning the policy are false.

Census data reveals that recent graduates with degrees in society and culture, as well as commerce – fields hit with the highest student fees – have better employment outcomes than STEM graduates.

Our modelling also shows that while demand for health and IT qualifications is growing, demand for STEM skills overall is not increasing at the rate anticipated.

Over the past 15 years, it has been outstripped by demand for qualifications in society and culture fields.

Student enrolment patterns have not responded to the differentiation in fees. Economists predicted exactly that given students don’t need to start paying until well into the future.

Agriculture, environment and related studies, billed as a growth area and attracting the lowest student contribution of just 13 per cent of course costs, has seen declining enrolments, the slowest growth in qualifications demand, and, at best, modest graduate outcomes.

The government’s pledge, if re-elected, to arbitrarily wipe 20 per cent of student debts could be seen as an admission that the burden on students has become unfair under the current system, but fails to address the flawed elements of that system.

Key aspects of the Job-Ready Graduates Package are pointlessly stifling the educational aspirations of many young Australians under a mound of debt and based on a swathe of false assumptions.

The upcoming federal election is shaping up as a close contest and young people’s votes could well determine the outcome.

Housing affordability is difficult to tackle. The cost of university is not. Young Australians should demand pledges for a fairer deal from both major parties.

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