JO LAVERTY: The Greens want indexation abolished and their bill is currently being scrutinised by the Senate committee. One of the people contributing to the committee is Catriona Jackson, the CEO of Universities Australia. Good morning, Ms Jackson. Firstly, can you explain how the HECS system works?
CATRIONA JACKSON: It’s really important to understand that we know everyone is facing cost-of-living pressures right now, from me to students, and we’re really concerned about additional cost of living pressures on students. Changing the way HECS is indexed will make no difference to that pressure because a HECS loan is not like a car loan or a house loan. All those horrible letters you keep getting to say your mortgage is bigger every month, you don’t get those for HECS.
It is absolutely true that because of CPI, because it’s going up, your debt will get bigger over time, but you won’t pay more now. You won’t pay more in two weeks. You won’t pay more in a month. Your repayment period will just get longer. It’s certainly not great for students – they can see the amount getting bigger, and that’s genuinely concerning – but you’re not being hit like you’re being hit with a car loan or a house loan. It’s really important to understand that.
JO LAVERTY: And how does indexation work?
CATRIONA JACKSON: Indexation works like it works for everything else. Your loan gets bigger, but it gets bigger over time and that means that you’ll be repaying it for longer. You’re not repaying more now. You’re paying the same amount now, but you’re paying for longer. The way HECS was designed was to be, and we all know it’s an Australian invention, and it’s been responsible for the fact that we can afford to educate now around 40 per cent of young people through university education when back when it was devised, we were talking not quite single figures, but a much smaller number of people in the community. It’s a way of sharing the burden between the taxpayer and the student and the reason the student, it’s assumed that the student should pay some, is there is a private benefit to education. You get a private benefit out of it by earning more money. You get a private benefit from it by understanding more and being able to have a much bigger array of jobs to choose from.
At the same time, education is a public good, so the taxpayer should pay something as well. We’ve got that combination scheme and if you look around the world, the HECS scheme is an extraordinary scheme. It means we’ve been able to sustainably fund university education in a way that so many other countries have really struggled with. I know students don’t like the idea of it. I didn’t like the idea of it when I was starting to pay it when I was younger either, but it is a system that means we share the burden between the taxpayer and the student. It’s just really important to understand that cost of living pressures are a serious issue. We want to address them through the University Accord – a big discussion that’s going on now and a review of all the policy settings – but changing CPI, changing the way HECS loans are indexed will make no difference to cost of living pressures on students right now. It’s a silly thing to do.
JO LAVERTY: I hear the argument that there’s a private benefit to having a university education, the potential gains that you make in your income. But obviously, the more you earn, the more tax you pay, so, isn’t that a good thing for the overall taxation system in the end?
CATRIONA JACKSON: The way HECS has been structured is to make sure there are no barriers to people entering in the first place and to increase the repayments as people can cope with them. The problem with the HECS scheme, actually it isn’t a problem with the HECS scheme, it’s a problem with the fact that it’s been fiddled and fiddled with by successive governments over the years. What you want to do is work out what the original policy intent was. The policy intent was to have a sustainable funding mechanism that did not present barriers to people who had significant barriers already – single mums, people with a disability, indigenous Australians, It’s incredibly important that we have a system that doesn’t have a whole bunch of barriers stopping those people who really should have as much access as your average middle-class person to education as the rest of the country.
Jiggering with it and fiddling with thresholds is not a constructive way to go about it. Having a good, calm look at exactly how it’s been changed over time and whether it’s still serving that original policy intent, that’s the way to go. Luckily, we have a process through the big Accord negotiation to do that right now, and that’s how we’ll be doing it.
JO LAVERTY: This is ABC Radio, Darwin, Catriona Jackson is the CEO of Universities Australia. So, this year, indexation is going to increase quite a bit due to inflation. How much is that going to hurt students and graduates?
CATRIONA JACKSON: Just to make this point incredibly clear, it doesn’t make any difference to your HECS repayments immediately. Cost of living is going up, everything else is going up. Your bananas in the supermarket, your Weet-Bix, your petrol, everything else is going up. Your mortgage is going up. Your car loan is going up. Your HECS loan repayments do not change now. It just means your debt gets bigger, so you’re paying for longer. It’s no additional pressure now.
JO LAVERTY: And is it better than paying interest, would you say?
CATRIONA JACKSON: Definitely. A HECS loan is much better designed than a commercial loan. It’s a much better deal than a commercial loan. That’s how it was designed. It was designed to make sure that students didn’t start repaying until they earned enough. One of the problems at the moment is the repayment threshold, you start paying pretty early. It used to be set at average annual earnings, which are now around I think $90,000. That sounds quite big to me, but I’m just being old-fashioned.
JO LAVERTY: I agree, it does sound pretty large. I find it really difficult to agree.
CATRIONA JACKSON: Absolutely. One of the problems with this constant fiddling is that the threshold has been reduced. We absolutely have significant sympathy for students, with Bailey from NUS who we heard on the radio this morning, and with The Greens. They want to make sure that the threshold is in the right place, that you start repaying at a reasonable salary, and that you start repaying at a reasonable rate. At its worst, the repayments have been four per cent to start with. That’s unpleasant if it’s really low.
If you’re starting to repay too early and repaying too much, that’s a barrier. That’s why we need to have a really good look at the system and how it’s been tweaked and fiddled with over time and just make sure we put it back into balance so that it’s not putting too much pressure on students too early. I stress again, the increases in CPI that are making everything more expensive now – from bananas to Weet-Bix to car loans and mortgages – are not making any difference to how much you pay every fortnight or every month on your HECS bill because it’s designed so that doesn’t happen.
JO LAVERTY: I’m getting text messages in on this. Sean says: “The most reliable way to increase a country’s GDP is to have an educated populace. All education, including higher education, should be free. Funny how we never have enough money to fund our schools, universities and hospitals, but we managed to find nearly $400 billion behind the couch cushion for military spending,” says Sean.
And Smithy says: “The productivity of the ’80s and early ’90s was a direct result of tertiary education in the ’70s”.
Catriona, do you worry that the vast sums of, or the cost of education and probably this new news that you’re going to be paying off your HECS debt longer than you would without indexation? Does it turn people off studying?
CATRIONA JACKSON: It’s incredibly important that the settings for HECS are right so that it doesn’t turn people off studying. It’s also really important that commentators in public get this absolutely right because it’s not putting extra pressure on now. We don’t want students to be worried about something they don’t need to worry about. There’s plenty of things to worry about right now, but your HECS debt getting bigger in the next fortnight is not one of those things. It’s not going to happen.
I completely hear the discussion about whether education should be free. Let’s be clear though – free means paid for by the taxpayer. It doesn’t come out of nowhere. It’s got to get funded from somewhere. If you think about that really clearly, paid for by the taxpayer means that everyone in the community is subsidising a system. When we had it subsidised by the taxpayer, we were able to fund it at a much lower rate, which means way fewer people got the chance of having a university education. I think arguing the toss about how much governments decide to spend on various things, I’m going to leave that to government. At the same time, we have a sustainable way of funding a system which has been, in a sense, democratised and opened up through this mechanism, which means you have a combination of student contribution and taxpayer contribution.
JO LAVERTY: Catriona Jackson, thank you so much for your time this morning.
CATRIONA JACKSON: Real pleasure to have a good, solid discussion about a really important Australian-made scheme, which actually has delivered for the country and for hundreds and hundreds of thousands of Australian students.