Set to explode in absence of change
7 April 2016
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As the Turnbull government ponders a higher education policy to take to the 2016 election, it’s been given food for thought by a research report revealing explosive growth of 560% in FEE-HELP debt over the next decade – on current policy settings. Obviously this portends a change to current policy settings.
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HELP loan -annual cost on an underlying cash basis
The independent Parliamentary Budget Office (PBO) report finds that the loans scheme will cost the budget $11.1 billion by 2025-26, up from $1.7 billion currently. This amount covers the scheme’s concessional interest rates and the increasing proportion of loans that will never be repaid. It projects the total nominal value of student loans program (the cumulative value of the portfolio) will grow from around $60 billion now to $185 billion by 2026.
The amount never to be repaid on loans issued is predicted to exceed $4 billion — up from $1.9 billion expected from loans issued last financial year.
The public debt interest payments associated with financing the FEE-HELP portfolio as a proportion of the Australian Government’s total public debt interest payments is projected to rise from 15.4% in 2016 to 46.3% in 2026.
The PBO attributes the uncapping of university places over the period 2010- 2012 and the expansion of loans to vocational students as driving growth in FEE-HELP debt since 2010.
Student numbers (equivalent full-time student load)
But according to the report, implementation of the Coalition’s stalled program to cut university funding and deregulate fees would fuel explosive growth in debt over the next decade:
The size of the HELP loan portfolio is projected to grow rapidly through to 2025-26, driven mainly by projected increases in student fees from 2017 due to the announced higher education reforms. The reforms recognised that the lower direct subsidies from the government would mean that student contributions would rise. Under the reform package, higher student contributions could be expected to see an expansion in the HELP loan portfolio in the form of larger HELP loans.
Extension of FEE-HELP to sub-degree HE programs and to non-university higher education providers would further drive growth in student debt.
Education minister Simon Birmingham says more details of the Government’s higher education policy will be unveiled before the election, as he recommits to de-regulating the sector.
Birmingham confirmed the Federal Government remained committed to finding savings, particularly in light of the PBO report.
Birmingham told the ABC’s 7.30 program talks are continuing with the university sector about the 
best way to manage the issue, and promised more details before voters go to the polls.
We’ll have more to say ahead of the election about higher education policy and we’ll make sure that Australians understand what we’re doing, the reasons why we’re doing it.
Our universities do need to be able to differentiate between each other, to innovate on the world stage, and that of course does require a certain degree of latitude for them in terms of how they structure their course and how they finance their courses to some extent.
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