Students slugged with $2.7bn interest on debt

Students will spend thousands more repaying loans and graduates will be slugged with a $2.7bn ­interest bill this year, after a increase in borrowing rates.

Australian Taxation Office data reveals that student loan debt has more than doubled over the past seven years.

University students will spend thousands more repaying their student loans and graduates will be slugged with a $2.7bn ­interest bill this year, after a huge increase in borrowing rates.

Tertiary debt will swell this year after the indexation rate on Higher Education Loan Program debts rose from 0.6 per cent last year to 3.9 per cent this year.

The higher interest rate will add $923 to the average HELP debt of $23,685 this year, but the cost would double for many arts, law and business students due to graduate in the next three years after the former Morrison government slashed taxpayer subsidies for their courses from 2021.

Australian Taxation Office data reveals that student loan debt has more than doubled over the past seven years, with nearly three million students and graduates owing taxpayers a total of $69bn, which they must pay back through the tax system once they start earning more than the minimum wage.

The indexation increase is a double whammy for millennial students, who will be lumbered with higher debts as they try to enter an inflated housing market with rising rents and mortgage rates.

Student debts slice into a borrower’s spending power, as banks take HELP debts into account when deciding how much to lend for housing loans.

National Union of Students president Georgie Beatty warned that rising education costs are trapping students into poverty.

“Aspiring to a home, or even a car loan, seems like an unreachable dream to full-time uni students who are forced to work casualised jobs with low pay, often having to increase work hours to supplement low rates,’’ she told The Australian.

“Students are left battling compounding debt on fees that are at an unprecedented high.’’

Under its Job-ready Graduates reform, taxpayer subsidies were increased for degrees in industries with skills shortages, but students were forced to borrow more to study in many other popular courses.

The price increases for degrees were grandfathered to exempt students who had enrolled before 2021.

But for students who graduate at the end of next year, debts will be as high as $43,000 for a degree in arts, law, business or finance, history, sport or gender studies.

Students in the fields of teaching, mathematics, nursing and agriculture face debts of $12,000, while those studying health, computer science, architecture, building and psychology will pay $24,062 for a three-year degree.

Ms Beatty, who is an arts student, said the university regulator, the Tertiary Education Quality and Standards Agency, had “failed miserably” in its duty to students to ensure the quality of education.

“Students who dreamed of the opportunities that university brings are bitterly disappointed by unmanageable class sizes, course cuts and staff who are so overworked they are incapable of providing us with quality feedback,’’ she said.

“All the while they are seeing astronomical university revenue surpluses that feel like a slap in the face.

“Education is supposed to be the great equaliser.

“Yet the raised (HELP) index, in conjunction with the Job-ready Graduates Package, is increasing the gap between the cost and quality of education.’’

A TEQSA spokesman said that the regulator was reviewing its student expert advisory group, which has not met since April last year.

“TEQSA recognises that in the post-pandemic environment there are major changes to the student experience,’’ he said.

“That’s why we are reviewing our student engagement approach to ensure we are best able to gain a diversity of perspectives from all cohorts of higher education students.’’

Graduates must start repaying their HELP loans once they earn $48,361 – almost half the average wage of $91,000 and barely more than the minium wage of $42,000.

Graduates start repaying 1 per cent of their income towards the debt, but the rate rises to 6 per cent once they earn an average wage, and to 10 per cent if they earn $142,000.

The HELP scheme lets students postpone their tuition costs by borrowing up to $108,000 from the federal government, although students of medicine, dentistry, veterinary and aviation courses can borrow as much as $155,448.

The Australian Government Actuary estimates 15 per cent of debt incurred in 2020/21 will never be repaid.

The federal government wrote off HECS debts totalling $167 million in 2020/21 – a 75 per cent increase since 2016/17.

Loan repayments grew by only 56 per cent over the same period, up to $38.8 billion last financial year.