Crippling HECS debts are forcing some young Australians to choose between buying a home and an education, a landmark universities review has heard, sparking calls to overhaul the way banks assess student loans.
Universities Accord panel chair Mary O’Kane said authorities should look at the impact of HECS-HELP on home loan assessments as parliamentarians and university leaders urged them to ensure banks did not unfairly use student debt to lock people out of the housing market.
Professor Mary O’Kane says young Australians shouldn’t have to choose between an education and a home.Credit: Luis Enrique Ascui
“People said to us that they’d encountered problems trying to get home loans. We’re trying to make sure HECS doesn’t interfere with that important part of our life,” O’Kane said.
“We’re trying, particularly in the time of high cost of living, to make sure people aren’t forced with the choice of a home or education, we want them to have both.”
Asked whether she believed people were being forced to choose, O’Kane replied, “I’d have laughed at that question before I did the review. I certainly don’t laugh now … it was certainly raised enough to be startling.”
In its final report released on Sunday, the accord panel called for the government to ensure banks recognised that HECS-HELP – which recovers the money loaned to students for their tertiary education through the taxation system once graduates earn at least $51,550 a year – was not like other types of loans. Among dozens of recommendations, it said HECS-HELP should not be treated in a way that unduly limited peoples’ home loan borrowing capacity.
“HELP debts are not like other debts such as credit card debts or personal loans, as it is not possible to default on them. Unless someone earns sufficient income, there is no obligation to repay and as such they should be treated differently,” the report says.
University of NSW vice chancellor Attila Brungs encouraged the government to support the recommendation, saying, “banks must play their part in increasing housing affordability for young people”.
University of Sydney’s vice chancellor and president of the Group of Eight, Mark Scott, said it was a “smart recommendation of the board that needs significant investigation”.
“Those who graduate from university are that much more likely to get better jobs and earn more money through their careers. Is that being taken into account or does this just look like the same thing to a financial institution as a Bali holiday?” he said.
The government is also facing calls to reduce the cost of student contributions to certain areas of study, such as humanities degrees, that were dramatically increased under the Coalition’s Jobs-ready Graduates package.
Education Minister Jason Clare said the government was considering the report’s recommendations.
“I want to make the point though that going to university makes you money,” he said.
“The average annual income of an individual with a university degree is approximately $30,000 more than the average annual income of someone whose last year of education was year 12.”
The Australian Prudential Regulation Authority in 2022 issued guidance to banks to treat HECS-HELP the same as credit card and mortgage debt.
Australian National University higher education policy expert Andrew Norton said that meant people were being denied home loans or had to borrow less and called on APRA to reverse its decision.
Finance Brokers Association of Australia managing director Peter White said the feedback from his members was that HECS-HELP was not creating a huge issue for borrowers. But he acknowledged it was a factor that influenced how much could be borrowed.
Independent MP Allegra Spender said banks should be assessing loan applicants’ post-tax income, where the HECS-HELP debt had already been taken out, arguing its current treatment worsened the housing situation for young people “who are locked out more than previous generations”.
“It’s time for the government to really jump on this,” the Wentworth MP said.
“Young people in my electorate and around the country are doing everything they can to try and get secure housing and get into the market.”
ACT independent senator David Pocock also encouraged the government to urgently act on the recommendation, while Greens education spokesperson Mehreen Faruqi instead called for the government to make all university and TAFE free and wipe all student debt.
“People are being locked out of the housing market and being denied personal loans because they carry the heavy burden of student debt, which is rising faster than it can be paid off,” Faruqi said.
A spokesperson for the Australian Banking Association said it would wait for the government’s response.
“Ultimately, existing debt, whether it’s a car loan, a credit card or a HECS debt, will impact a customer’s ability to take on and to repay new debt, and therefore is considered in a loan assessment,” the spokesperson said.
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