HECS/HELP debts incurred before 2014 to suffer interest after 2020 - fair?

[Smiling Buddha]

There are too many changes for just one thread; it is worth having a few different threads dedicated to individual aspects of last night's 2014 budget imo. And this one definitely deserves some attention.

The Government is also increasing student loan interest rates to reflect the cost of Government borrowing. The rates will be allowed to rise to up to 6 per cent, instead of being set at the the rate of inflation - currently sitting at 2.9 per cent.

http://www.abc.net.au/news/2014-05-...e-university-students-pay-more-budget/5450878

If I am reading this right, then people who are in uni now will not cop the higher rates until 2020 (at which point they will apply to preexisting debt), whereas people beginning uni from this point on (or beginning 2016, it's not clear) will be hit with the higher rates from the get-go.

Now there are two issues here:

1) Should uni debt provided by government attract an interest rate above inflation?

2) Should those who accrued debt under the inflation-only model be expected to now cop interest as well?

If you believe in the fraudulent economic orthodoxy which dominates discourse today ('governments have to borrow money from other people and can't create their own') then I can see why you might say 'yes' to question 1. Given the smothering we cop from MSM and our 'education' system which tell us that this is the case, I'm not even going to bother arguing on this one.

But what I cannot understand is how it is even legal, let alone fair, to add interest on to debt which people took out under the pretense that it was adjusted for inflation only. That is completely ****ed up. You might argue, 'well you've got six years, you can pay the debt off in that time', but that fails to see the principle behind the point being made.

People have entered into a deal to pay back an amount at one rate and will now have to pay it back at a much higher rate. But this isn't simply a matter of increased interest payments, this is a matter of adding interest payments where none existed before. Some of us detest the idea of usury and entered into these loans in the knowledge that the payment mechanism was not usurious. Now all of a sudden we have tens of thousands of dollars of debt that is going to attract interest?

That s**t is ****ed up on a fundamental level.

 

[checkraiseulite]

interesting theory; and an interesting legal question regarding retrospectively altering an agreement.

http://www.macrobusiness.com.au/2013/10/is-abbott-about-to-securitise-hecs-debts/

could this be the first step in readying the scheme for sale

 

[tandino]

* it.

Homer: Uh, Milhouse saw the elephant twice and rode him once, right?
Mrs. Van Houten: Yes, but we paid you $4.
Homer: Well, that was under our old price structure. Under our new price structure, your bill comes to a total of..... $700. Now, you've already paid me $4, so that's just $696 more that you owe me.
Mr. Van Houten: ....Get off our property.​

 

[Suspense]

1) yep.

2) i haven't seen much specifics on it (and the article linked isn't clear), but I wonder if they might split the help loans in such cases with pre-2014 debt indexed to inflation and post-2014 debt having the interest charged. regarding the legal argument, have a look over the Higher Education Support Act 2003; it wouldn't surprise me if there was something in there that potentially allowed for it.

 

[tandino]

People have entered into a deal to pay back an amount at one rate and will now have to pay it back at a much higher rate. But this isn't simply a matter of increased interest payments, this is a matter of adding interest payments where none existed before. Some of us detest the idea of usury and entered into these loans in the knowledge that the payment mechanism was not usurious. Now all of a sudden we have tens of thousands of dollars of debt that is going to attract interest?.

As was indicated on the actual application form itself.

Repayment of a HECS-HELP loan:
I understand that I will repay to the ATO the amount that the Commonwealth has loaned to me. These repayments will be made in accordance with Chapter 4 of the Act, when my income reaches a certain level, even if I have not completed my studies. I understand my HELP debt will be indexed annually in line with the Act.​

 

[RUNVS]

Education is only for the rich. The Liberals have always believed that.

 

[Smiling Buddha]

Education is only for the rich. The Liberals have always believed that.

Yeah this is way worse than that. Your regurgitated talking points do valid criticism a disservice.

We are on the path to education-driven serfdom. Bondage by another name.

Like what they have in the US, where even bankruptcy does not clear one of their student loans.

But it is even more insidious again because, if I have read the situation right (and I pray, as I often do, that I am wrong, which I might be) then this is retrospective bondage.

Under the Liberals I can assure you that we will see more people getting 'education'. And more of these people will have to take out bigger loans to gain this education. And these loans will attract interest.

The end-game isn't taking the peons out of uni. No no, the powers that be want the peons in uni. As many as possible. And they want them paying lots for it. And taking out loans to afford it. And paying back these loans for years and years and years.

It is blatantly obvious where we are headed and, as Carlin said, nobody seems to notice, nobody seems to care. People who think they are informed just spit out the talking points given to them by their preferred political/news leaders like cheersquads at a football game.

While their nation and its future is being sold out from under them to the puppetmasters' glee.

 

[nylexbandit]

The sale of HELP loans will generate a lot more if they're charging higher interest rates. Much like allowing higher fees and pushing apprentices into the HELP scheme. Completely disgraceful.

 

[Lach72]

Johhny, living in Cottelsoe, with his surgeon father and laywer mother, dips into daddy's wallet and shells out the 20-100k for his degree.

Old mate in kwinana with parents on 60k between them gets a nice loan at up to 6%.

Awesome

 

[clogged]

6%? Isn't the 10 year government bond rate lower than that?

 

[Smiling Buddha]

For now it is.

http://www.tradingeconomics.com/australia/government-bond-yield

 

[clogged]

Yeah I see what you mean Smiling Buddha.

However if that line starts rising towards 6% there'll be a lot more people in trouble than just people with student debt.

 

[Smiling Buddha]

That is true. However my objection to this change runs far deeper than the 'trouble' any individuals will find themselves in with 6% interest rates on debt.

 

[CLUBMEDhurst]

Yeah this is way worse than that. Your regurgitated talking points do valid criticism a disservice.

We are on the path to education-driven serfdom. Bondage by another name.

Like what they have in the US, where even bankruptcy does not clear one of their student loans.

But it is even more insidious again because, if I have read the situation right (and I pray, as I often do, that I am wrong, which I might be) then this is retrospective bondage.

Under the Liberals I can assure you that we will see more people getting 'education'. And more of these people will have to take out bigger loans to gain this education. And these loans will attract interest.

The end-game isn't taking the peons out of uni. No no, the powers that be want the peons in uni. As many as possible. And they want them paying lots for it. And taking out loans to afford it. And paying back these loans for years and years and years.

It is blatantly obvious where we are headed and, as Carlin said, nobody seems to notice, nobody seems to care. People who think they are informed just spit out the talking points given to them by their preferred political/news leaders like cheersquads at a football game.

While their nation and its future is being sold out from under them to the puppetmasters' glee.

Earn or learn Smiling Buddha, off welfare into debt

 

[medusala]

Yeah this is way worse than that. Your regurgitated talking points do valid criticism a disservice.

We are on the path to education-driven serfdom. Bondage by another name.

The problem is the government funds too many utterly pointless degrees and those same degrees are the ones where the HECS repayments are very low.

Instead of addressing the obvious cause the government is penalising all students.

Currently the system is just massive middle class welfare. Few are honest enough to admit it though.

 

[Power Raid]

charging commercial rates on HECS is reasonable

changing the rate mechanics on past HECS debt is unreasonable


the government has to honour its past agreements.

 

[Scotland]

What did they do in previous changes to HECS/HELP?

HECS debts used to be interest/indexation free with a discount of 25% for up front payments.

From memory it was 'stiff s**t, it's indexed now and the discounts for paying up front are going - deal with it'. Can't see this being any different. Ugh.

 

[DivideandMultiply]

Both are fundamentally unreasonable.

There is only one purpose to this change, to pave the way for the sale of HECS debt. Increasing interest will guarantee a handsome return for those who buy it.

 

[Power Raid]

Both are fundamentally unreasonable.

There is only one purpose to this change, to pave the way for the sale of HECS debt. Increasing interest will guarantee a handsome return for those who buy it.

why is it unreasonable that someone pays back their education costs that society paid for them (only when they find their feet)? surely contributing back, so the next generation can benefit from the same scheme is reasonable and sustainable.

 

[DivideandMultiply]

why is it unreasonable that someone pays back their education costs that society paid for them (only when they find their feet)? surely contributing back, so the next generation can benefit from the same scheme is reasonable and sustainable.

It is reasonable to pay back the debt, not reasonable at 6% interest.

Given how badly Australia struggle with private sector innovation, incentivising a larger number of students to take up the sciences and more fully funding education, even at an immediate loss, will have exponential benefit for the countries future. It is after all, publicly funded research using graduates from a publicly funded/subsidised system that account for the vast majority of new IP in Aus.

Further cutting funding and making the cost of education more expensive will have serious future consequences for this country.

There are plenty of non productive areas that should be taking cuts first, likewise, this will only make Australia less competitive v is Asian neighbors who have all been greatly increasing public education funding.

Education is one of the key areas where economic rationalism should be avoided at all costs.

 

[madmug]

why is it unreasonable that someone pays back their education costs that society paid for them (only when they find their feet)? surely contributing back, so the next generation can benefit from the same scheme is reasonable and sustainable.

In general its not unreasonable. It just depends on how much & how its structured. Do remember that society & the economy also benefit from that persons study efforts. So education is not just an economic cost, its a society benefit.
I think their should be levels of repayment anyway, a small amount say from $45k then graded up to $100k+.

 

[Mofra]

why is it unreasonable that someone pays back their education costs that society paid for them (only when they find their feet)? surely contributing back, so the next generation can benefit from the same scheme is reasonable and sustainable.

By increasing fees, it disincentivises overall enrolment rates pushing up fees and increasing unit costs for universities - it must be remembered that after coal & iron ore exports, education (especially foreign students) is our third biggest industry.

The mining industry gets a diesel fuel rebate worth billions per year - suerly our biggest value add industry can take advantage of low government borrowing rates to keep HECS debt repayments at a lower rate to protect the industry (as is currently the case).

 

[Footy Smarts]

why is it unreasonable that someone pays back their education costs that society paid for them (only when they find their feet)? surely contributing back, so the next generation can benefit from the same scheme is reasonable and sustainable.

There's absolutely nothing wrong with paying it back. But we've got to be really careful that we don't get to the stage where paying back student debts is unreasonable and prevents people from wanting to and being able to go to university. The combination of unregulated fees, increased interest and a lower payback point could have dire results. I mean we already have people graduating with $60k+ HECS debts. With unregulated fees that's likely to be far, far higher. If we're looking at $100k debt at 5% interest then that's $100 a week just to service the interest on that. Even paying $200 a week they'd be looking at over 13 years to pay it off. That's going to make a lot of people think about whether it's worth going to uni.

The problem that I see currently is that the government seems to want HECS to be revenue neutral but there's no way that will ever be the case if nobody ever pays back more than they were lent. There are always going to be some people who, for whatever reason (health issues for example), are not going to be able to pay off their HECS debt. So unless we have people contributing more than what they put in to the system it's never going to pay for itself.

Something like a small lifelong contribution based on your earnings could make up that difference. Say for any money earned above the average male wage you pay 1% extra in tax if you were supported through HECS. This isn't counted as paying off your HECS debt it's just extra money put in that goes towards making HECS cost neutral. The average male wage is ~$80k so that means somebody earning $100k in a year would contribute $200 extra a year. Somebody earning $200k a year would contribute an extra $1200 a year and so on. Of course the exact numbers would have to be worked on.

That way we have everybody contributing to pay back their HECS. However those who benefit most from the government's investment in university (ie those who earn the most) contribute more back to account for those who have benefited the least from it. It changes a regressive system that the current government is trying to make more regressive where everybody pays back the same regardless of income to a system where those who benefit most contribute most while still ensuring everybody makes some contribution. Isn't that a lot fairer than expecting somebody to pay back a massive chunk of their wage when they're on a low income? Wouldn't that also make university a lot more appealing to young people, safe in the knowledge that if they don't get a job on good pay they'll have to still contribute but not to the level where they'll be broke? Unfortunately the proposed system is likely to make education more exclusive. It might well be what the Liberals want but it's a shocking thing to do for the nation.

 

[Smiling Buddha]

Well put, Footy Smarts, but I fear that these changes are part of a longer-term slide to something rather different, and worse, than what you are predicting.

Whereas you predict these changes will reduce tertiary education levels, I see them as being driven by forces which will profit from increased tertiary participation - so increased tertiary participation is what we will ultimately get.

A state-provided 'education' for thirteen years and then two-to-seven years of tafe/uni education paid for by loans will be the norm. Those loans will be provided by the private sector.

Credentialisation is only getting worse and will continue to, so long as the Usury Class run the show. And those forces are only growing ever stronger (here and abroad). As they must and will always do when they are allowed to exist and to profit from lending money.

We are headed towards indentured slavery, only by another name: 'education'.

 

[Footy Smarts]

Well put, Footy Smarts, but I fear that these changes are part of a longer-term slide to something rather different, and worse, than what you are predicting.

Whereas you predict these changes will reduce tertiary education levels, I see them as being driven by forces which will profit from increased tertiary participation - so increased tertiary participation is what we will ultimately get.

A state-provided 'education' for thirteen years and then two-to-seven years of tafe/uni education paid for by loans will be the norm. Those loans will be provided by the private sector.

Credentialisation is only getting worse and will continue to, so long as the Usury Class run the show. And those forces are only growing ever stronger (here and abroad). As they must and will always do when they are allowed to exist and to profit from lending money.

We are headed towards indentured slavery, only by another name: 'education'.

I fear that you're somewhat on the mark but I don't think they'll be in the traditional tertiary education sector.

If what the government planned comes to fruition I see the big winners (not surprisingly) being the banks again with them taking over the loans process. Universities will put up their prices to whatever they can while still filling spots. The best might even drop the number of places but charge a premium to promote themselves as elite institutions.

The poor will be faced with enormous loans to go to university which will put a lot off. Also if they're provided by the private sector I'd expect them to refuse loans to certain socio-economic groups. So our better universities will become places reserved for the well off. Then, with reduced regulations for getting certification for courses, a bunch of crappy institutions pop up providing low quality courses cheaper. Of course for low socio-economic groups this is more achievable so people go there.

The end result is just a massive reduction in social mobility where the rich are locked into being rich. Oh and of course those rich make a good chunk of money along the way through the loans.

If these changes are implemented it's definitely the end of Australia as a meritocracy. It really is disgusting just how desperate the rich are to get richer. They'll crush anybody to ensure their crown is retained and in this case they're trying to crush any chance of a poor person getting a reasonable start in life.