Leading education economist Bruce Chapman, who has conducted the most detailed modelling of the government's proposal, says the ''unfair'' policy undermines a fundamental tenet of Australia's internationally-lauded HECS repayment system.The government announced in the May budget that it would peg student debts to the government bond rate, capped at six per cent, rather than inflation.He is urging the government to consider alternatives outlined in a new research paper, which would reduce inequity and save low-income graduates tens of thousands of dollars.
Professor Chapman's paper, which he wrote with Australian National University colleague Timothy Higgins, has been presented to the government for consideration.
The modelling shows that a low-income graduate on a salary of $33,000 to $40,000 would pay $105,000 in total repayments over a lifetime on a starting debt of $60,000. By contrast, a high income earner (with a salary of $60,000 to $87,000) would pay only $75,000 in total repayments on the same starting debt – that is $30,000 less than low income earners.
Graduates on a median salary would pay about $82,000 in repayments on the same starting debt.
Low-income earners would be hardest hit by the interest rate changes because they spend more time out of the workforce and have lower salaries. This means a real interest rate, applied from the time they begin accumulating debt, would see their debts compound dramatically, Professor Chapman said.
Students who do not complete a degree, but accumulate a university debt, would be among the worst affected, he said.
"Using the long-term bond rate will be regressive – and it is very hard to argue this is fair," Professor Chapman.
"HECS was designed to protect people who go to university but, because of bad luck or bad circumstances, don't get to enjoy the benefits.
"HECS should act as an insurance mechanism and that aspect of the scheme is being undermined."
Read more about Chapman's alternative scheme which hopefully Pyne will accept in today's Age.
Read more: http://www.smh.com.au/federal-politics/political-news/unfair-poor-graduates-to-pay-about-30-per-cent-more-than-rich-under-abbott-governments-university-interest-rate-fee-changes-20140731-3cvi6.html#ixzz392BZsX9F
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