$663,000 HECS debts and the Government’s new strategy

$663,000 HECS debts and the Government’s new strategy

Growing up as a student in Australia, it has been somewhat of an expectation that our university fees are taken care of for us. The sheer thought of having to pay for our tertiary education upfront is frightening and almost unfathomable. Remarkably, we may not be able to take this for granted anymore due to the Government’s growing frustration of HECS wasters. Since the mid 20th century, our Government has made it part of its agenda to make higher education more accessible to working and middle class Australians. These progressive virtues famously peaked under Whitlam’s Labor Government when university was made free from 1974 to 1989.[1] Since the conclusion of these glory days, we’ve become very familiar with our beloved HECS (Higher Education Contribution Scheme). For those who are unaware, as a Commonwealth supported student, you’re entitled to a HECS-HELP loan which is a study assistance tool that essentially covers your higher education fees. If you’re interested in how much study you can undertake with no immediate costs, the answer is $106,319 worth or $152,700 for certain courses like medicine.[2]

Albeit imperfectly, Australia has strived to structure itself in way where education is a right and not a privilege. Generally, if you can work hard enough and surpass the admission requirements, you’re entitled to a tertiary education. However, as of the 13th of August a proposal has been made by the Morrison Government to abolish ‘serial failures’.[3] The individuals that the Government intend to filter out are those who accumulate excessive HECS debts yet have no gained qualification to show for it. The exemplary case for this is a student who first enrolled in 1991 and has since started 44 courses at 26 different institutions, totalling a sum of $663,000 in HECS debt. Undertaking tertiary studies is a significant decision and the hope is for this seriousness to be more widely considered before enrolling. At the end of the day, is anyone here to waste time?

Understandably, this proposal has rattled students as many believe it “incentivises success through fear and punishment”.[4] Some of the major barriers to academic success include financial instability, disability, domestic issues, and mental health conditions. The new policy proposal has outlined that such exceptional circumstances will be exempted. However, the main concern is that many of these issues will go unreported by students and that they may be punished as a result. In any case, it is clear that the new policy needs to identify students that have genuinely endured such disadvantaging circumstances and exempt them from such costly punishment. If it fails to do so, this policy will be a mere nuisance in the lives of already struggling students. Moreover, it highlights the inequality as to whether these serial failures have parents that can now fund their education. In such a case, this would certainly discriminate as financially abundant students may not be impacted. And if one thing is to be criticised, it’s the frustrating timing as students are already having to adapt to eLearning. Aren’t there more urgent issues to attend to than catching a few HECS wasting offenders? 

The Government has to be making this change for a reason, right? Consider the hypothetical scenario where a student is failing at least half of their units on a consistent basis. There are three potential explanations: 1) the student isn’t applying themselves 2) the student doesn’t have the capability to complete the course 3) the student has been disadvantaged by exceptional circumstances. Cases relating to the third explanation need to be separated from the first two through the policy’s mechanisms. If this 50%+ fail rate is explained by a lack of work ethic and/or a lack of competency, should the student still be entitled to a publicly funded tertiary education? A fair suggestion is for the student to find a course/career they are better suited toward, or to simply work harder. It would be naive to think that such measures for failing students are new as similar barriers have always existed. A student failing at this rate will face intervention from the University themselves with an example being Monash University’s 3 Level academic progress system.[5]

The Mincer model suggests that individuals should make the decision to further their education based on the present discounted value of their lifetime earnings.[6] University is costly, you likely have to pay for your degree at some stage, and you forgo potential earnings by undertaking study. However, with a degree in your possession, you signal to firms that you are productive through both work ethic and competency.[7] Firms seek to hire productive individuals, which will raise your wage. For certain individuals, this increased wage greatly exceeds the costs of education. For other individuals, the earnings that they forwent were more valuable than the investment in their education. If HECS is unavailable for failing students, these costs are enhanced, meaning that a degree will carry more weight in signalling to employers that an individual is productive. This is the unapologetic economic explanation, whether this is fair is up for interpretation.

Opinion will be divided on whether this policy is simply unequitable or whether it is a necessary measure to incentivise academic performance and minimise wastage of public funds. One thing is for certain: students unfairly represented as HECS wasters need to be filtered out!

[1] Knott, M. (2014). Gough Whitlam’s free university education reforms led to legacy of no upfront fees, https://www.smh.com.au/politics/federal/gough-whitlams-free-university-education-reforms-led-to-legacy-of-no-upfront-fees-20141021-119bws.html

[2] Government, A. (2020). HECS-HELP. https://www.studyassist.gov.au/help-loans/hecs-help

[3] Napier-Raman, K. (2020). Tehan’s crackdown on failing students needs fact-checking. Here is a start. https://www.crikey.com.au/2020/08/13/fact-checking-dan-tehan/

[4] Macmillan, J. (2020). Students who fail classes could risk losing their HECS loans. https://www.abc.net.au/news/2020-08-13/university-hecs-limits-for-failing-students-explained/12553548#:~:text=Under%20the%20latest%20changes%2C%20students,if%20they%20wish%20to%20continue.

[5] Receiving a notice of unsatisfactory progress. (2020). Retrieved 11 September 2020, from https://www.monash.edu/students/academic-progress/receiving-notice

[6] Patrinos, H. (2016). Estimating the return to schooling using the Mincer equation. IZA World of Labor. doi: 10.15185/izawol.278

[7] Borjas, G. (2009). Labour Economics (8th ed., pp. 259-262). London: McGraw-Hill.