Currently there is no real interest charged for HECS‑HELP loans. Rather, student debts are indexed each year to reflect changes in the Consumer Price Index (inflation) and maintain their real value.
But in a dramatic break from the 25-year history of HECS, the Abbott Government will peg the interest rate for student debt to the 10-year Treasury bond rate, tying it to real interest rates up to six per cent.
Modelling by the National Tertiary Education Union and reported in The Sydney Morning Herald reveals that under the proposed changes the cost of a three-year accountancy degree will climb from $30,255 to around $75,000.
Graduates who take time off to have children and then work part-time will end up repaying $120,000 in today’s dollars, including $45,000 in interest. The degree would take 36 years to pay off, compared with just 10 years for a typical graduate under the current scheme.
Accountancy graduates who stay in the workforce would take 23 years to pay off their degree, with repayments totalling $99,000, including $24,000 of interest.
“The new arrangements have a built-in bias against graduates with carer responsibilities, which will mainly be women,” says the report from the National Tertiary Education Union.
The modelling also shows that the cost of a nursing degree would climb from $18,000 to $22,000-$40,000, an education degree from $24,000 to $29,000- $40,000 and a medical degree from $60,000 to $83,000-$180,000.
The changes are likely to affect low-income students as well as women, as students may borrow more than they can “reasonably afford to pay back as an employed graduate” says University of Melbourne vice-chancellor Glyn Davis.
Writing in The Australian Financial Review, Mr Davis said the higher interest rates will be a challenge for those who cannot repay their loan quickly, “such as students who remain out of the labour force for a lengthy period”.
