Yahoo Finance $3 billion HECS change 'not enough to fix unfair' system - so should uni be free?
The system has been branded as 'outdated' and 'unfair'. Maybe it's time to re-examine it completely?
The Federal Government has announced changes to the way HECS-HELP debt is indexed, wiping an estimated $3 billion off student loans, but is it a long-term fix? Students and experts have said the changes don't go far enough, with fundamental issues in the system needing to be addressed.
Student debt has increased with the consumer price index (CPI), but under a new proposal, it will be indexed to whichever is lower between that or the wage price index (WPI). Despite the apparent good news, a closer look shows it may do little to impact indexation in the future, as the inflationary measures have historically moved up and down very closely.
Mark Warburton, an honorary senior fellow with the Melbourne Centre for the Study of Higher Education, branded the current system 'unfair' and said it is 'contributing to the structural inequities in Australia’s taxation system'.
In February 2024, an independent review of Australia's higher education system also found that the HELP system is “outdated” and has “significantly and unfairly increased what students repay”.
Should university be free in Australia?
University was free in Australia until the introduction of the Higher Education Contributions Scheme - what we now call HECS - in 1989.
In 1996, the Liberal National Coalition introduced a tier based system for university fees.
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This was based on the idea that the more your earning potential, the more you should pay for your degree. This saw yearly fees costing between $3,300 and $5,500 depending on your degree.
But as fees and tuition continue to rise around the country, the average HECS debt now sits at roughly $26,000 per year. This ballooning issue has been well documented, impacting millions amidst rising cost of living pressures and inflation.
In light of this, Yahoo Finance has examined how paid university tuition works in other countries and whether there are any possible solutions to consider in Australia.
How does higher education debt work in the United States?
With HECS debt rapidly rising for many Aussies, looking to the United States may offer a warning of how out of hand student debt can get. According to research, the average federal student loan debt balance is $56,000.
Heidi Keller-Lapp, Ph.D. Lecturer in the Department of History at San Diego State University explained that students in the US can pay for their tuition by applying for a federal loan, private loan, grant, scholarship or subsidised loans in under-resourced or protected categories.
She told Yahoo Finance it's difficult to find the balance between access to education and long-term student debt.
“I love US colleges/universities for the focus they put on access to education," she said.
"There are so many options for students to get technical training and a higher education and to advance their family's generational wealth and security.
"The system I have described is like no other I know of for this kind of access. But it's broken.”
“The burden of college funding has been placed increasingly on students and families (you can see the stats). Moreover, predatory lending has become increasingly unregulated by state and federal agencies.
“These are precarious times when it comes to state assistance for funding public education. It's a debate between those who see the benefit of access to higher education for the US economy (and politics and culture, I might add), and those who feel that individuals should foot the full cost themselves (rugged US individualism).”
How does higher education debt work in Europe?
In France, like many European countries, higher education is split between public and private institutions. Studying a bachelor's degree at a public university in France will cost students roughly $277, compared to anywhere from $5,000 - $20,000 for Australians.
Mickaël Mariho, Coach and Teacher at SKEMA Business School in Paris told Yahoo Finance about the free access to education and the difference between public and private universities.
“Private universities or institutions offer client centred education: small classes, easier access to development mechanisms such as exchange programs (conditioned by grades in public universities).
However he also shared the different perception of education due to its accessibility. “As university is almost free, many students think of it as a right instead of an opportunity.”
Possible solutions
European policy on higher education sparks discussion around access and equity in Australia and prompts the question: Should university education be free?
Valerie Braithwaite, scholar and professor at The Australian National University has lobbied for cheaper tuition for many years, including in a 2006 research paper that predicted some of the HECS related issues that are being analysed currently.
“My preferred option for first degrees is that they are free – or only a very modest fixed contribution is required to receive a tertiary education.”
While free university is one solution that may be a long way away Warburton outlined the unfairness that exists in the current system and some potential solutions in his 2023 report.
“There is growing evidence that student loan schemes may be contributing to structural inequities in Australia’s taxation system, intergenerational unfairness and reinforcing women’s economic disadvantage,” he said.
“A single rate of repayment applied to income above a threshold would be simpler and more rational than the current HELP repayment arrangements. It would allow the threshold to be varied according to a person’s family circumstances, ensuring that former students only make repayments when they have the capacity to do so.”
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