‘Arguments for so-called free higher education need to stop’, says HECS architect Bruce Chapman

Making university and TAFE free for all and wiping student debt bills, as the Greens have pitched, is as ‘inequitable’ and ‘regressive as policy can get’, the architect of the HECS student loan system has said.

Bruce Chapman, emeritus professor of economics at the ANU who helped co-design the Higher Education Contribution Scheme, addresses the National Press Club in Canberra. Picture: Martin Ollman / NewsWire

Making university and TAFE free for all and wiping student debt bills, as the Greens have pitched ahead of the next election, is as “inequitable” and “regressive as policy can get”, the architect of the HECS student loan system has said.

Bruce Chapman also argued in his address to the National Press Club that “HECS isn’t broken, but it needs urgent attention”.

He said the Higher Education Contribution Scheme had finally returned to its 1989 “conceptual” basis with Labor’s announced changes to the repayment system late last month, in what he described as the most important improvement to the loan scheme in the last 30 years.

“Free to students and graduates means greater tax payments from or less services to the less-advantaged – this is about as inequitable as policy could be,” the emeritus professor of Economics at the Australian National University said.

“Also, and a more extraordinary recent development, is that it has also been suggested to cancel the $80bn of unpaid HECS debt. This is the same as giving the average graduate debtor about $27,600. This is about as regressive as policy can get.

“I hope this discussion about so-called free higher education stops or becomes more sensible soon, and that the word free is not used as if it is meaningful and ­substantive.”

He praised the “correction” of the system’s “most important blemish” with the first threshold for repayment to $54,435 to $67,000 for 2024-25, announced by the government in early November, as well as changes to the way repayments are calculated based on marginal income like ­income taxes rather than total ­income.

The changes will come into effect after the next federal election.

“I hope it now becomes a permanent and reliable feature of the system,” he said.

“HECS is supposed to protect graduates from repayment hardship. And this increasingly has not been happening,” he said.

“I say without reservation that these are the most important improvements to HECS in the last 30 years. In collection, this puts the system back to 1989 and in collection terms … I think that’s where it belongs.”

Last week, parliament passed legislation to wipe out about $3bn from more than three million Help loans, with the average balance of $27,000 incurring a refund of about $1200.

But Professor Chapman said “there is still much to be fixed”.

Professor Chapman called the Job-Ready Graduate Package, which commenced in January 2021, the “number one problem” with the HECS system.

“What has Job-Ready Graduate Package resulted in? Unfair, unreasonable relative prices, large debts for the lowest income graduates and a profound sense of social injustice about the system that was not there before.

“The economics of the Job-Ready Graduate Package is seriously in error.”

He said he believed the best way to set HECS prices was “through reference to the expected lifetime incomes by course of study” which was a “basis for ­equity”.

Professor Chapman also criticised the postgraduate pricing system, and argued that TAFE should also use the HECS system.

“I think TAFE has been damaged significantly over the past 25 years by not having a secure and fair and equitable loan system that could have met a lot more people into this arrangement.”