Give them a break: Cutting student debt is a good investment

The Albanese government’s plan to cut $16 billion from Commonwealth student debts has come in for strident criticism since the scheme was announced at the weekend.

The federal opposition has branded the plan a desperate giveaway that is unfair because it only benefits about 3 million of the nation’s 21 million taxpayers.

Any reduction in student debts will help the economy. Credit:

Others have argued scarce government resources could be better used than giving debt relief to the tertiary-educated, a group that tends to go on to enjoy relatively high incomes.

But the denunciations are overblown and ignore the social and economic damage being done by rising student debt.

While Australians should contribute to the cost of their tertiary education, the current system has imposed an unreasonable burden on many young people.

Student debts of more than $50,000 have become worryingly common. Five years ago, one in 14 outstanding Higher Education Loan Program (previously HECS) loans was over this figure, but now it’s one in seven.

Reforms by the Morrison government in 2021 that lowered student contributions for some courses such as nursing and education, but raised contributions for popular degrees in social science, law, and commerce, have virtually guaranteed the number with debts above $50,000 will keep rising.

The Herald’s higher education reporter, Daniella White, reported in September the proportion of student loans exceeding $100,000 has more than doubled in five years. Total student debt has ballooned by $15 billion in the past five years to more than $81 billion.

George Williams, the Western Sydney University vice-chancellor, points out the federal government now collects far more from student debt repayments than it does through the petroleum resource rent tax.

Many policy settings in Australia disproportionately benefit older generations – from the generous tax treatment of housing investments to tax-free superannuation withdrawals in retirement. The cost to taxpayers of these policies favouring older Australians dwarfs the modest student debt relief being proposed by Labor.

An army of older Australians also benefited from fee-free university courses during the 1970s and 1980s. A report comparing education systems released by the Organisation for Economic Co-operation and Development (OECD) in September underscores how much things have changed since then – it found Australians contributed the fourth-highest tuition fees for a bachelors-level degree out of the 23 high-income nations included in the study.

The Australian community has benefited enormously from a relatively high share of citizens with good quality post-school qualifications. Well-educated workers have underpinned the rise of the knowledge-driven service industries that have transformed the Australian economy.

Amid rapid economic and technological change, there is a growing imperative for our tertiary education sector to attract more students and prepare them well.

And yet young people are becoming increasingly sensitive to the prospect of finishing tertiary studies with a crippling level of debt. There is a real danger that many capable school leavers will be discouraged from pursuing further education, especially those from disadvantaged backgrounds.

Policies that limit the debt burden on young Australians are a worthwhile investment in our future.

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