The Australian | 17 October 2013
With the appointment of a commission of audit to scrutinise the Commonwealth budget and make recommendations about priorities, savings and efficiencies in the offing, there’s been all sorts of speculation as to where it might end up.
In higher education, having announced a review of the demand-driven system and mused about whether rapid growth in participation had compromised quality, education minister Christopher Pyne, prodded undoubtedly by the prime minister, promptly ruled out the reintroduction of caps, increased fees and introduction of a minimum ATAR for university entry. Let’s wait and see on all of that.
Treasurer Joe Hockey has now hosed down speculation that the government plans to “privatise” student debt, following claims that the right to recoup loans worth about $23 billion may be “sold off” to the private sector. He says, through a spokesperson, the proposal is “not current Coalition policy”, which leaves a bit of wriggle room.
HECS architect Bruce Chapman said “securitising” the HECS debt would make no difference to students. However, Chapman said it would be important not to change the key features of the loans scheme, with debts collected through the tax office after graduates’ incomes reached a certain threshold.
Fellow ANU economist Glenn Withers, who proposed securitisation of the HECS debt when he was head of peak body Universities Australia in 2008, said it was a sensible idea and is preferable to full privatisation of the HECS debt, which would force the government to cede control of the collection methods and terms of repayment.
Swinburne University policy analyst Andrew Dempster says the proposal will “generate plenty of heat”, but the government has other options to rein in unpaid HECS debt, such as establishing bilateral agreements to recoup loans from the 1 million graduates living overseas.
Securitisation is the financial practice of pooling various types of contractual debt, and selling the consolidated debt as pass-through securities, or “collateralised mortgage obligation” (CMOs) to various investors. The cash collected from the financial instruments underlying the security is paid to the various investors who had advance money for that right.