The Abbott government is considering privatising or ‘securitising’ the Higher Education Contribution Scheme/Loan Program (HECS/HELP). This student debt currently stands at $26.3 billion. The proposal will only be detrimental to students and working people in the long term, as investors will seek higher profits by increasing repayment and interest rates. It also will be a step towards an US-style private-loan system. It must be fully opposed.
The Coalition favours this proposal primarily because it would generate profits for their backers in the financial sector. It would also effectively shift this student debt off the budget. The income generated, however, would not be put back into funding education.
The government estimates that selling the rights to the income generated by this student debt would bring in around $11-16 billion. This 50% discount is to make it ‘commercially viable’, by supposedly compensating for the debt’s loss of value over time and the estimated $6.3 billion in non-recoverable debt.
The HECS system brought an end to free tertiary education which had been introduced by the Whitlam Labor government in 1974. It was one of many counter-reforms to the university sector introduced by the Hawke Labor government in January 1989.
HECS (recently changed into HELP) forces student to pay a part of the cost of their courses. This fee had been steadily ratcheted up by successive governments. Most students have to access a government ‘loan’ to fund this, which is paid directly to the universities. Currently, once students earn above $51,309, they are taxed by 4-8% more than everyone else to repay this ‘loan’.
Both the major parties have facilitated moves towards ‘user-pays’ education. In 1995, then Labor Prime Minister Paul Keating celebrated this neo-liberal policy. He claimed that it was “nothing short of a revolution”, and that “other countries around the world are coming to Australia and looking to extend this type of scheme in their own higher education systems.” Since 1989, this so called ‘revolution’ has seen fees increase by 40%, and has burdened students with large debts, which many will be paying until their retirement.
According to the 2013-14 budget papers, this student debt is expected to rise to $40 billion by 2017. With cuts to public spending and austerity measures looming, education funding is expected to be a victim of Abbott’s razor gang.
The Education Minister, Christopher Pyne, believes it “wouldn’t be insensible” for the government to consider the privatisation of HECS/HELP. This is despite the fact that the Australian Financial Review has pointed out that “the government may be worse off”, by “effectively paying off a low interest loan by borrowing at a higher rate”.
While shifting debt off government books might “look good”, it would still effectively be a liability if any part of the debt is guaranteed. Some banks, for example, underwrote income from securitised sub-prime mortgages, which forced these ‘toxic assets’ back onto their books in 2007-8 and led then to the massive bailouts.
In an interview with Q&A in late October, Pyne cited the UK as an example of this process. Since the reintroduction of student fees in 1998, student debt has skyrocketed to £40 billion ($67.5 billion AUD). In 2012, the Cameron government began the privatisation of student debt worth £2 billion ($3.3 billion AUD), with the whole sale expected by 2015. Already student fees have trebled, and previously agreed terms and conditions have been altered.
The proposal to privatise HECS/HELP is already highly unpopular. According to an Essential poll in early November 59% of people oppose the plan. As the UK example has shown us, this plan will open the doors for increased interest rates and the immediate cancellation of previously agreed terms.
It is nothing more than profiteering off the back of already struggling students. According to a 2012 report by Universities Australia, 45% of students earn less than $20,000 per year, while 21% of students try to live on incomes less than $10,000. This is below the poverty line. The Abbott government’s plan will affect anyone who has finished a degree or intends to study at tertiary level in the future. It needs to be opposed.
The very fact that Abbott is considering this underlines the urgent need for students and supporters of public education to mobilise against this attack. The National Union of Students needs to call and organise student strikes and mass demonstrations against the plans. Far from just limiting demands to opposition to the privatisation of HECS/HELP, we need to incorporate demands to write off student debt completely and for a return to free education.
For students to win back free education and to beat back the education cuts that are on the agenda, we will have to fight for an alternative to the neo-liberal funding models pushed by both the major parties. These policies are driven by the needs of private profit. In contrast we need to fight for free, high-quality education as a basic right and adequate welfare for all those who choose to study – policies that are driven by the needs of ordinary people.
By Conor Flynn