Australian Higher Education Loan Programme Blowout

The Australian Parliamentary Budget Office (PBO) has released "Higher Education Loan Programme: Impact on the Budget"
(Report no. 02/2016, 6 April 2016). The PBO estimates student loans will rise from $1.7 billion in 2015–16 to $11.1 billion in 2025–26. The cost from the government charging a low interest rate on the loans and the proportion of students who do not have to repay loans.

The interest rate could be increased to cover the government's costs of borrowing, while still offering a rate lower than a student could borrow money themselves. However, the doubtful debt (loans not repaid) is more problematic. The BPO expects doubtful debts to increase from the current 19.0% of loans, to 21.8% in 2025–26.

Students previously did not have to repay the loan if they moved overseas (this loophole was closed in 2015). Students do not have to begin replaying the loan Ubuntu their income reaches a threshold.

The BPO notes that the VET FEE-HELP loans expanded rapidly after being introduced in 2009. This is for diplomas and other sub-degree programs. There were dubious practice by some training providers to sign up students who were unlikely to complete. A freeze was introduce from 1 January 2016, but there are jet to be effective measures put in place for the sector.

Simon Birmingham, Minister for Education and Training, issued a statement, not unreasonably, blaming the cost blowout on the former government and asking for "ideas from the sector, experts and students on how to make student funding sustainable" ("The increasing costs of higher education",6 April 2016).

I am no expert, but as someone who designs and delivers higher education and is a graduate student, I suggest the government could expand the VET FEE-HELP loans to cover shorter sub-diploma programs. Both the VET and university schemes should require education providers to offer a sequence of qualifications, such as certificate - sub-diploma - diploma - degree. This would encourage students to undertake as much study as they need to get a job (or a promotion) rather than the maximum loan allowed for. This would also increase the chances of success, as a student who has completed a certificate is more likely to be able to go on to a diploma.

The government could also provide incentives for programs in areas of vocational need (as state governments do already).