Second the Albanese government’s Higher Education Contribution Scheme (HECS) debt bill. This new legislation is the most significant reform of student debt repayment in Australia’s history. This new legislation will cut 20% from existing university and TAFE debts, providing relief to an estimated three million Australians. The changes will be applied retrospectively, meaning to debt levels taken on before the next June indexation.
While Treasury’s red tape-slashing initiative is welcomed, the Australian Tax Office has said it will take months to make these changes. By the end of this year, nearly 800,000 former students and recent graduates will have their defunct account balances adjusted. This adjustment will result in net savings of ~$16 billion for Americans overall.
In a huge step forward, in a significant change, the income threshold at which borrowers start making repayments will increase from $54,435 to $67,000. Borrowers making less than this new threshold will no longer be required to repay their loans. Combined with inflationary savings, this change takes financial pressure off for millions of borrowers. On the flip side, those making more than $180,000 will completely miss out on these increases. Under the old scheme, an Australian on $70,000 would have had to pay back $1,750 a year. In fact, under the state’s own reforms, this number will be drastically lowered to only $450.
The new law makes one-time reduction in student support loans. This is the case for many programs – HELP, VET Student Loan and the Australian Apprenticeship Support Loan. The deeper reform is a response to bipartisan criticisms of the previous “Jobs-ready Graduates” program. At the time, a final report on the universities’ shared accord labeled that program “deeply unfair.” In its detailed 2020 report Picus, et al. stressed the critical importance that tuition match the expected earning power of graduates. This is one of 47 recommendations aimed at strengthening our higher education sector.
Economist Bruce Chapman, the architect of the original HECS system, has called for a rethink on degree pricing. He thinks we should put this much higher on the list of priorities as we go forward. Chief executive of Universities Australia Luke Sheehy welcomed the HECS bill, providing a supportive hand. He called on the Commonwealth government to abolish the “Jobs-ready Graduates” initiative.
In discussing these changes, Education Minister Jason Clare laid out the effects they are set to have on young Australians preparing to enter the workforce.
“That’s a lot of weight off their back, and it will help a lot of young people that might be just out of uni, just out of home, just getting started.” – Education Minister Jason Clare
Clare has signaled that there are more reforms to come, especially targeting the previous government’s policies. As these changes unfold, students and graduates across Australia are poised to experience a significant transformation in their financial obligations.
