Two of Australia’s leading experts on the Higher Education Contribution Scheme (HECS) have warned against significantly changing the system, writes Martyn Pearce.
The Australian Higher Education Contribution Scheme (HECS) isn’t broken, but the prospect of Australian universities being allowed to deregulate fees puts the HECS system in jeopardy, two leading experts have warned.
Taking part in the latest Policy Forum Pod, Professor Bruce Chapman – the architect of Australia’s HECS scheme – and Associate Professor Tim Higgins of The Australian National University’s College of Business and Economics have warned that trying to fix something that isn’t broken could end in tears. A better solution might be to rethink deregulation.
“A lot of the media headlines have been ‘HECS is unaffordable – let’s change HECS’,” said Higgins.
“The easier solution is don’t change HECS – don’t deregulate.”
Debate about the future of HECS has been sparked because of a report from the Parliamentary Budget Office warning of a big blowout in the size and cost of the scheme over the next decade. The report suggested the value of the program would rise to $185 billion by 2026, up from $60 billion now, and the cost to the budget would increase from $1.7 billion to $11.1 billion by 2026.
But Chapman said that those figures were projections based on a policy of universities being given the chance to set their own fees that may not go ahead.
“I don’t think it’s credible to believe that complete price discretion is likely in the medium or short run. Most of the projections are driven by that,” he said.
“There should be no surprise in this data, but there should also be no panic because this is not the reality. It’s basically a kind of budget fantasy.”
A possible response to the report could be a move to lower the threshold where HECS recipients have to start repaying the loan. Higgins says if this is to be considered, it should be accompanied by a lowering of the repayment rate.
“If there is going to be a reduction in the threshold then I think it’s important that the repayment rate is a lot lower than it currently is. Only then would those repayments be affordable.”
Chapman agreed, saying that people earning the suggested rate were already doing it tough.
“The critical point of HECS is that it’s there for fairness. It’s there to protect people who don’t do well. At $45,000 they’re not doing well.”