With the 25th anniversary of the Dawkins higher education reforms being commemorated, maybe the funding structure – notably the HECS scheme – introduced by those reforms is about to undergo fundamental change. Education minister Christopher Pyne has put “securitisation” of HECS firmly on the agenda of the government’s commission of audit. Some commentators think the idea of securitisation is “bananas“. Others are somewhat more sanguine: Bruce Chapman – the architect of HECS – says it doesn’t really matter who owns the debt, so long as the essential characteristics are maintained (particularly recovery through the tax system). In these two articles, usefully published in tandem on The Conversation, we get alternative (though not diametrically opposed) views. Andrew Norton (Grattan Institute) argues that the current HECS system should be retained but with significant reforms to make the scheme more economical – such as a real interest rate. Rodney Maddock (Monash University) is of the “it doesn’t matter who owns the debt” school but enthuses that securitisation would be a great new investment vehicle for the super industry. The word “student” doesn’t make an appearance. Securitisation is just one of the issues before the commission of audit: headed as it is is by the current chair of the Business Council of Australia (BCA), with the commission’s secretariat headed by the BCA’s chief policy wallah, it’s worth looking at the BCA’s own agenda to divine the possible future. Who knows where this might all end up?
There are also many potential changes other than securitisation that are worth considering. These include lowering the threshold at which HELP repayment starts, collecting from HELP debtors working overseas, charging real interest, and removing the death write-off of remaining HELP debt. Other countries with similar loan schemes already do the first three things on this list, and we could too if the public believed the savings would be well spent. A Grattan Institute project is looking into these options in more detail. Selling HELP debt to private investors could give the government billions of dollars in the short term, but reforming HELP could lead to billions more in repayments over the long run.
The key attraction for the government is it could convert a stream of payments in the future into cash today. This may or may not be a good idea, it simply depends on whether the government can make better use of the money today rather than by waiting. The new government clearly feels constrained from making investments today (for example in infrastructure) by the amount of debt it currently has. Selling off some assets to reduce those constraints may let it invest more in other areas…It would be unfortunate if the debate about the extent of subsidisation of students was conflated with the issue of privatising the repayment flows…The HECS repayment flows could be a valuable new asset for Australian superannuation fund, adding to the suite of alternative assets they have available for investment.