HECS architect slams Greens ‘scaremongering’ over student debt rise

The architect of the higher education loan scheme has accused the Greens of ‘scaremongering’ over the indexation of student debt, calling on Labor to reform the cost of university degrees.

Bruce Chapman is emeritus professor of economics at the ANU who helped co-design HECS. Picture: Martin Ollman/NewsWire

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The architect of the higher education loan scheme, Bruce Chapman, has accused the Greens of “scaremongering” over the indexation of student debt, calling on Labor to reform the cost of university degrees rather than forgive $16bn in owed course fees. 

The Australian National University emeritus professor of economics said he could understand the justification for the Albanese government’s election promise to cut 20 per cent off student debt, but reversing a Coalition policy that doubled the cost of arts and humanities degrees would be a more effective way to make university affordable.

Anthony Albanese’s marquee election policy has come under scrutiny for being a bid to win votes after The Australian revealed that almost two thirds of the debt erased would likely go to people in seats held by Labor, the Greens, and teal independents.

Professor Chapman, who designed the HECS loan system for the Hawke government in 1989, said he could “see the justification for cutting the debts” as the cost of degrees has soared. He added it would be fairer to unpick changes in student contributions introduced in 2021 under a policy, called Job-ready Graduates.

“The government has chosen – and I can’t comment on the reasons that they did this – they chose to decrease the overall level of debt,” he said. “I think that fits comfortably with the view that the overall debts are now too high.

“When we first designed HECS, it wasn’t too bad, and over time the prices have gone up about double since we started … that should be the No.1 priority, to decrease debts, but to do it in a ­targeted way.

“The targeted way is to focus on prices, so the humanities prices are too high. Medical specialists, who earn the most of all graduates, are not even in the top tier.

“This is pretty bad economics, and it’s a pretty unfair way to operate the HECS system.”

Professor Chapman said despite the issue of rising degree costs, the HELP system had been designed so that it wouldn’t “ruin people’s lives”, with graduates only paying off their debt once their income had reached a certain threshold.

Labor announced the repayment threshold would be increased to $67,000 in 2025-26, as part of a suite of measures targeted cost-of-living for Australia’s three million student debt holders. After rising inflation caused debts to be indexed at 7.1 per cent in 2023, the government changed the system so that the debt would be tied to the Wage Price index if that figure was lower.

Professor Chapman said there had been a “lot of scaremongering being done by some politicians” during this time.

“The Greens political party were talking about it as if it was a huge crisis and a terrible thing that would ruin students – none of that is true,” he said. “It doesn’t actually affect how much you pay at any point in time, but it changes how long you pay it.”

Teal independents have been strong supporters of the HECS reform despite the measure being branded an attempt to win votes in their metropolitan electorates, including Warringah MP Zali Steggall.

“In recent years, university fees have risen significantly and high CPI has supercharged HECS debts,” she said. “That’s why I supported the one-off 20 per cent reduction in student debt in parliament last year.”

Kooyong MP Monique Ryan said there needed to be “significant reform which should include independent analysis of reasonable pricing for degrees and better supports for tertiary students”.

Goldstein MP Zoe Daniel said reforms needed to “address the systemic issues like the unfair timing of HECS indexation, banks factoring student debt into mortgage decisions, and the unfair impost on students doing humanities degrees”.