The University of Canberra’s National Centre for Social and Economic Modelling (NATSEM) has modelled the impact of the changes to the HELP debt repayments the government announced this week.
The government proposes increases in the student contribution to course fees totalling 7.5%, and is lowering the first income threshold for HELP repayment – at present just under A$55,000 – to $42,000. There are also changes for other thresholds and repayment rates. Thresholds will also be indexed by CPI, not average weekly earnings.
The impact will vary according to the choice of course and the duration of the study. The model contrasts the current system with a fully implemented new system, using 2017 values for both.
University courses fall into one of three “bands”.
Band 1 includes behavioural science, clinical psychology, education, foreign languages, the humanities, social studies, and visual and performing arts.
Band 2 embraces agriculture, allied health, the built environment, computing, engineering, mathematics, science, surveying, and statistics.
Band 3 includes accounting, administration, commerce, dentistry, economics, law medicine, nursing, veterinary science, and visual and performing arts.
Current student contributions and thus total graduation debts depend on the band category: band 1 $6349; band 2, $9050; band 3, $10,596.
The modelling assumes the graduate immediately finds a job with a starting salary of 50%, 75% or 100% of the average wage. It also assumes the annual wage will increase by 5% a year until the increase reaches 25% of the average wage, leading to a final salary of 75%, 100% or 125% of the average wage.
Students studying Band 1 courses would accrue $1,905 additional debt during a four-year degree and would pay off their debt earlier than the original scheme, or about the same time, depending on their exact starting salary.
The graduate would pay back the debt 18 months earlier, assuming he or she earns a starting salary of 50% of the average wage. The average annual repayment for this graduate would be $1,816 (a $586 decrease). Their repayment-free period would be reduced to zero compared with six years under present arrangements.
Students from a Band 2 four-year course would face an increase in their total debt of $2,715. The person would pay back the debt in about the same time as now, assuming they earn a starting salary of 75% of the average wage. The average annual repayment would be $4395 (a $298 increase).
Those in the most expensive courses such as law and medicine would face the highest debt increases – about $3,974 for a five-year course, and their average repayment amount would rise by 6 to 11% depending on their starting salary. Assuming a starting salary of 100% of the average wage, the graduate would pay back the debt in about the same time as presently. The average annual repayment would be $7,706 (a $754 increase).
Authors: Michelle Grattan, Professorial Fellow, University of Canberra