HECS fee relief could flow by July under proposed university debt overhaul

Cash-strapped Australians paying off university debts could save $1000 by mid-year under a fee overhaul Labor has declared a cost-of-living fix, as the government contemplates ambitious changes to reform the way HECS fees are repaid.

Education Minister Jason Clare on Sunday released the landmark Universities Accord report, suggesting sweeping reforms to double the number of university places over the next 25 years and to reach a point where four out of five Australians hold a degree.

The Albanese government’s Education Minister Jason Clare.Credit: Alex Ellinghausen

Clare has not committed to adopting any specific proposal as he spends time considering the findings of the review.

However, he gave in-principle support for changes to the HECS-HELP system, which recovers the money loaned to students for their tertiary education through the taxation system once graduates earn at least $51,550 a year.

The report said this method was complex, expensive and potentially discouraging enrolments.

The eminent education figures behind the report urged Clare to consider a series of changes to the debts incurred in tertiary studies after student advocates and crossbench MPs argued university fees should be made cheaper for young people struggling to buy homes and paying high rates of income tax.

Clare said he hoped to make some policy moves in the May budget, meaning benefits may flow by tax time.

“This is something that could provide an immediate cost-of-living benefit for people after they finish uni and they’re in the workforce,” Clare said on ABC’s Insiders, in comments likely to fuel a battle with the Greens for the support of young voters.

The minister affirmed Labor’s long-standing support for the HECS system that “blew the doors” of universities open for a whole generation of Australians.

“This report says we’ve got to make it fairer and simpler,” he said.

The report recommends tying yearly indexation of HECS payments to whichever figure is lower – annual wages growth or inflation – with the aim of protecting students from the one-off spikes in inflation that have added thousands of dollars to graduates’ debts.

Bruce Chapman was a key figure in the Hawke government’s design of HECS, which replaced the free higher education introduced in the Whitlam era.

He told this masthead he had urged the review’s authors to upend the way HECS fees are collected.

Instead of the Tax Office collecting repayments on a person’s entire income, Chapman wants repayments levied only on earnings above the relevant income threshold, as is the case with income tax.

For example, a person earning $86,000 would only be taxed the 5 per cent repayment rate on the income above the threshold at which the rate kicks in, being $84,430. All income below that threshold would be levied at the lower rates.

“It’s become a bigger issue over time and I think now is the time to fix it,” Chapman said, noting Australia’s repayment system differed from the UK and New Zealand.

On Insiders, Clare said that if the government were to decide to implement Chapman’s reform, the average graduate earning $75,000 would pay about $1000 per year less in HECS fees.

Australian National University economics professor Bruce Chapman.

Chapman said the government could create a more progressive repayment scale that lowered costs for middle and lower income earners. This masthead has confirmed Labor will consider this type of policy.

Opposition home affairs spokesman James Paterson and education spokeswoman Sarah Henderson argued the report was in effect a long and expensive wishlist.

“I think it’s very telling that Jason Clare, on releasing this report today, hasn’t been able to commit to a single idea … and has said it will take the federal government months to respond,” Paterson said on Sky News’ Sunday Agenda.

But Clare, asked if Labor was willing to spend the sums required to improve education standards, said: “I’m determined to drive reform in higher education, but also in school education and early education.”

In relation to a contentious proposal that top unis have described as a “wealth tax”, Clare said he had an open mind and noted some unis hated it and some liked it.

The “tax” refers to a recommendation for the creation of a $10 billion higher-education future fund with matching co-contributions from universities and government. It does not describe the financial contribution as a wealth tax or identify how much universities should pay under the levy.

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