If it wasn’t for the HECS/HELP system I definitely wouldn’t be in the position that I am today. Whilst I didn’t come from an exactly poor family we were definitely on the lower end of the middle class and the prospect of going to uni meant that I’d have to start paying my way. Thankfully I was able to defer my HECS debt until I was able to pay it back through tax allowing me to attend university without having to fork out the $25,000 or so which I simply did not have. After 4 years of an accelerated career that was directly attributable to my university experience the debt was fully repaid back to the Australian government with a little bit of inflation added on top for good measure.
In other countries this same situation probably wouldn’t have been possible. In the USA for instance I would have had to secure a student loan with a bank, something that probably would have seen me paying exorbitant interest rates on top the much higher cost of education. Even if the loan amount remained the same I would’ve been repaying the debt for at least another year just because of interest and I would have been much less inclined to take the risks that I did knowing that I’d have to make those monthly repayments regardless of my current employment situation. The couple percent interest I paid on my HELP debt to curb the deflation on the debt seems like nothing in comparison to that.
The difference between the two systems is the motive behind the loans. HECS/HELP is made by the government to encourage people to go into higher education in the hopes that, because of said education, they will get higher paying jobs and will then be able to contribute more to the economy as well as repaying their debt. Loans made by banks on the other hand, regardless of their intended purpose, are done purely for the motive of generating a profit and they will do anything to maximise the return on them as such. This is why the Liberal’s proposal to securitise (read: sell off) student debt is an inherently bad move.
Should such a deal go down the government would likely have to sell the debt for a fraction of its current value, usually on the order of 40%~60%. This would mean an instant cash windfall of approximately $11 billion or so with the annuity streams being collected by the new owners of the debt. If your government is strapped for cash (which we really aren’t at the moment) then this would seem like a good move however it would only account for 3% of our total budget and only for the year in which it happened. For comparison HECS/HELP revenue was around $1.4 billion back in 2009/2010 financial year meaning that the $11 billion windfall would become a shortfall in 8 years (probably less considering that repayment rates would have likely increased in the interim). It’s a short term cash grab that will make the budget its in look a lot better but at the cost of making every budget that follows it look a lot worse.
The real problem though is the transfer of government owned debt to a private company, one that will inevitably look to make the most out of their investment. Whilst HECS/HELP is one of the few things you can’t discharge through bankruptcy you’re under no obligation to repay it should you not have the means to, a key to encouraging people to at least attempt higher education to further their careers. Should the debt be owned by a bank however there’s no guarantees that the same structures will hold and it’s almost inevitable that the banks would look to squeeze delinquent loans for all they’re worth. Don’t believe me? Just look at the student loan situation in the USA.
Whilst the Liberals may have said that such a plan is not current policy the fact that it’s under consideration should ring alarm bells. It’s an incredibly short sighted move, one that favours short term gains over long term losses which is something that a “fiscally responsible” government should be doing everything to avoid. Selling off national assets, especially one that provides as much value as HECS/HELP does, will only hurt us in the long term no matter how warm and fuzzy running a surplus makes you feel now.
