A hex according to the Cambridge dictionary is ‘to put an evil spell on someone or something in order to bring them bad luck’. Looking at the recent article on HECS debts and how they are increasing under the indexation of the debt, certainly seems like an evil spell to a curse to those who aspire to a university education.
A university education is the gateway to exciting careers. Medicine; doctors and other health professionals. Law; lawyers, barristers, judges, and so many more. Engineers; and architects designing and building the infrastructure for contemporary life. Scientists; exploring the world around us, geology, marine biology, environmental sciences. Educators, and so the list goes on, opening opportunities and commanding some pretty good renumeration packages.
The cost of a university education is expensive and has traditionally been difficult for lower and middle class people to enter without some serious financial support and was considered elitist.
Over the last 80 or so years governments have lent a helping hand, offering scholarships to graduating high school students who have passed the Leaving Certificate or later iterations of a score-based criteria for university entrance, but these were limited in number and highly competitive. Graduates from wealthy families could pay fees directly, as they still can and do. During the 1940s and 50s scholarships were offered to help students into undergraduate courses, and under the Curtin Labor government the scheme was increased to include women. A bursary scheme was introduced to for Teacher’s College fees to be paid in return for an agreement to teach in government primary schools for an agreed number of years on graduation.
The election of the Whitlam Labor government in 1972 saw university fees abolished so that lower- and working-class students could gain access to a university education and universities grew in enrolments; the new graduates finding interesting work in careers which for many had seemed unimaginable without the support offered. Included were a number of young people who entered politics.
The cost of funding university tuition became a bit of a budgetary sore point but the benefits of enabling a broad cohort to benefit from the opportunities offered were too important for aspirational students to be discouraged, and so the HECS scheme was introduced, essentially a loan offered by the government to pay university fees to be paid back when income thresholds were reached after graduation.
Interestingly several ministers in the Hawke government had benefitted from the free university education the Whitlam government had enabled, including Gareth Evans, Sue Ryan and Kim Beazley. In part, the rationale made good sense, the amount owed remained fixed, it was interest free and not subject to any increases and repayments commenced once an income threshold had been reached. In other words the benefits of earning a higher income allowed the debt to be repaid. The other rationale is that under the income tax regime, which is progressive, that is, the more you earn the higher rate of tax is paid, the graduate would in time make a greater contribution to the national tax take than without the extra earning capacity the degree enabled.
With the 1996 Liberal government under John Howard, the commitment to the well-known dedication Liberals have to responsible financial management it was decided that HECS debt needed to be indexed according to the annual inflation rate as defined through the March CPI figures and applied at the commencement of each new Financial Year. Each year the debt, or once repayments had commenced, the remaining debt was increased by the rate of inflation. I guess it’s a bit like buying a car for say $20,000 and financing that over a number of years, but instead of just paying off the $20,000 the price went up each year by the amount the new car price rose during that year due to inflation. Nothing at all wrong with that, is there?
Ministers who had benefitted from the free university education of the 1970s through to the introduction of the HECS scheme included Treasurer Peter Costello and fellow cabinet ministers Peter Reith, Dr Michael Wooldridge and Amanda Vanstone among others. For Alexander Downer, it seems the Australian universities were just not up to scratch, he attended Newcastle University in England.
Under the Morrison government, the price of a university education was increased dramatically, especially for those who chose ‘useless’ degrees such as an Arts Degree, you know, History, who needs to know about that? Geography, oh dear that just may include topics like global warming, nah, don’t need that, Sociology, English Lit, and so forth, even psychology and mental health subjects. University degrees which taught skills in engineering and such like, yep, need them, so make them affordable.
The hex bit of HECS is that now that the debt is indexed, it grows year on year, and through a period of higher inflation it grows very quickly, leaving the student with a repayment commitment which appears never ending. A debt of around $100,000 grows by $6,000 when the CPI is 6%, the next year if inflation has dropped to say 4.5% another $4,770 is added.
The incredible irony in all this is that the ministers and members of the government who have made these changes included people who had benefitted from the earlier initiative, breaking down the elitism of university education, making it available to all who aspired to the fruitful careers such an education offered and is now slamming the door on those aspiring to such careers.
Can we ask that the HECS hex can somehow be removed, that those dedicated students who work so hard to gain an education and careers which not only promise them a quality of life and worthwhile careers, and incomes that bring them to higher income tax brackets so their contributions late in life more than repay the costs they have incurred?
That’s right, the Stage 3 tax cuts have worked to minimise that benefit… worse before the Albo ‘lie’ as he adjusted the rate thresholds to make the system a smidgeon more equitable.
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