While Federal Government changes to our Higher Education System will deter some from going to university, for others the greatest impact will be the significant increase in student debt.
The Government’s plans to apply real compounding interest rates to student debt through the HECS/HELP scheme will result in women paying a greater price for their higher education.
Under the Abbott Government’s proposals, many women will accumulate greater amounts of overall debt for their university degree and will be paying it off for longer than their male colleagues.
This is because women in many professions still earn a lower salary than men and often have periods out of the workforce to raise a child, which means they will take longer to pay off their student debt.
In its desire to get students to shoulder a greater burden of the cost of higher education, the Federal Government is not only cutting funding to universities and forcing them to pass on greater costs to students, but for the first time applying interest rates to HECS/HELP debt.
Under the current arrangements, outstanding student debt is indexed to the Consumer Price Index, in order to maintain the real value of debt. But under the new system, the Government intends to index student debt equivalent to the 10 year bond interest rate, capped at six per cent.
Student debt currently increases at the rate of cost of living, but under the new system, students will be paying compounding interest where their debt grows in real terms over the years.
Anyone who has a mortgage or even missed payments on their credit card will understand compounding interest can quickly lead to the accumulation of large debts. And this is especially the case the longer it takes you to pay off your loan.
The HECS/HELP scheme allows students to pay their debt through the tax system, with repayments automatically being deducted from their salary when they earn a certain amount, currently $53,345 for 2014-15.
Those who earn less or have periods away from full time employment after completing their study will take longer to pay off their debt, but under the new system they will also have to pay a greater amount in real terms as a result of the higher interest rates and compounding nature.
The National Centre for Social and Economic Modelling has compared the impact of the proposed changes on male and female student debt and the length of time it would take to pay that debt off.
It showed that the length of time for a female science student to pay off her degree would increase from 8.4 years to 13.9 years with the total repayment increasing from $44,228 to $95,720. This is compared to a male science student who would take 10.7 years to pay off a science degree with the total repayments increasing from $43,297 to $88,378. The modelling also suggests that the impact of the changes would be felt most strongly in lower paid occupations such as nursing and education which are largely female dominated.
This modelling is also a best case scenario as it assumes universities will not increase above the cost it takes to deliver. However, in an environment where there are no limits on fees, the gap between total debt and the number of years to pay off will no doubt increase significantly. And this gap will only widen between men and women.
At a time where we should be encouraging women’s participation in higher education, the Federal Government seems intent on putting barriers in their way.
It is time for our Prime Minister – who also claims to be the Minister for Women to step in. It is time for our Prime Minister to rip up his higher education reforms. If he doesn’t, he will place a greater debt burden on our next generation – especially on our next generation of women.