May 19, 2014

How the uni student debt trap will hobble tomorrow’s workforce

The budget hits students with a one-two punch, with fees increasing and debt set to skyrocket. La Trobe Business School accounting lecturers Lachlan McDonald-Kerr and Venkat Narayanan examine what's in store for future students.

As part of its “everyone needs to contribute” approach to reducing the national debt, the government has announced major changes to higher education funding, such as deregulation of the sector beginning in 2016; the removal of caps on chargeable fees; and an increase in HELP repayments by way of lower repayment thresholds and higher repayment indexations. And higher fees and higher repayment indexations will mean students leaving university in the future will be saddled with a huge amount of debt, just as they enter the workforce. Unless paid upfront, higher fees will manifest in a debt that students will have to repay after they find employment and earn more than $51,309 (2013-14), $53,345 (2014-15) or $50,638 (2016-17) per year. Current legislation means universities can’t charge more than a certain amount per course per year:

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27 thoughts on “How the uni student debt trap will hobble tomorrow’s workforce

  1. Richo T

    “employability will likely be the primary driver of students’ course selections, whereas matters such as aptitude, desire, or academic intrigue may be seen as less important.”

    Err… how would be that different from now? There ain’t much point spending several years doing a degree that isn’t going to improve your job prospects in the real world. We can’t all live in an academic sheltered workshop.

  2. Mark Duffett

    many courses go beyond this three-year minimum

    I’d substitute ‘most’ for ‘many’, certainly in engineering and most science streams. In the latter case, a 4th i.e. Honours year is the de facto minimum for employment in related fields.

  3. Pamela

    More Stupidity from government- the educated young will leave Australia rather than be saddled with debt. Already my young contacts are saying – why come home to an unimaginative ecologically and morally bankrupt government which has no appreciation of innovation, development and the future.
    Look at the stats – how many are leaving, what age education bracket, how long do they stay away?
    My daughter is paid to do post-graduate study in Europe.
    Abbott Govt is crippling the young while claiming to be saving them from future debt- what a bloody lie.
    Already the deregulation of education has seen shysters arise from the muck- delivering courses with “guaranteed” jobs at the end! More lies. My son has just completed one such and yes what a surprise not one in his course was given a job! More lies

  4. Migraine

    A thought: the Commission of Audit recommended against privatising HECS/HELP debt, noting that the effective interest rate was too low to make it attractive to the private sector without a major price discount that would undermine the intent (assuming the only intent in selling off student debt was to reduce government debt).
    A UK treasury review came to a similar conclusion. It didn’t stop the UK government from selling off some student debt.
    The conservative government here seems to be getting an awful lot of its policy ideas from the Conservatives in the UK, especially in relation to education. And they have just raised the interest rate on student debt. Does this address the issue raised by the Commission of Audit? Could part of the intent behind the move be to make HECS/HELP debt a more attractive prospect? Will the next move be for Australia’s Tories to follow the lead of their UK cousins, and turn to the market?

  5. Liberstand

    Good article and good comments.

    In short, straddling young people with a huge debt as they enter the work-force should be a criminal offense. But then handing them over to the private sector for collection is like opening the door to the wolves.

    User pays gone mad and the witches have cast the spell, sorry, I mean “Hex”..

  6. Dogs breakfast

    “And what better way to entrap young people into a system than to start them off in their working lives with the burdens of debt?”

    That is what worries me most.

    the opportunity for these young people to travel, to broaden themselves, to live full lives and maybe come back and enrich our country with their broad and international perspective may be lost.

    And then we will all just be insular, sheepish, burdened. Australia does not need to go back to the insular days of the 50’s and beforehand where very few people had travelled, and parochial policies and attitudes abounded.

    We are only just escaping the legacy of those years now.

    Don’t send us back there. Nobody in their right mind wants to live in that place any more.

  7. Liberstand

    “And what better way to entrap young people into a system than to start them off in their working lives with the burdens of debt?”

    You would be forgiven for thinking it’s part of a wider programme. Also, the govt of the day gets a huge windfall by onselling it’s loan-book and resolves itself of any social responsibility. Which bureaucrat and or politician dreamed this one up?

  8. Susan Caley

    @poster No:5 – Dog’s Breakfast

    ” and beforehand where very few people had travelled, and parochial policies and attitudes abounded ”

    Such as?…..

  9. Boston the Dog


    “……..should be a criminal offense”. So should the use of “s” instead of “c”.

    Your sentiments however, are spot on!!

  10. Ben Gray

    It’s hard to argue that students are getting value for money now, much less with increased fees. Simply put – in ‘ye olden days’ a university education was a shortcut to a professional job, but this is demonstrably false now. These days a university qualification is so watered down that it is the modern equivalent of the high school leavers certificate, required for any job. And there is a strong argument to be made that uni’s have done an awful job at actually teaching and training young minds.

    Instead of making uni free, encouraging unlimited places, or raising the cost, Government should focus on reducing credentialism in our society and offering alternative pathways for people to enter the professions – exams and testing to demonstrate skills and knowledge and supporting/encouraging employers to provide this training.

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