Failure to repay student loans will become the norm rather than the exception for Australian arts graduates, an expert has predicted, as humanities course costs approach a daunting milestone.
Tuition fees for three-year arts degrees will rise above A$50,000 (?25,465) next year, with annual charges set to rise by 4 per cent to A$16,992.
High indexation rates fuelled by soaring inflation have added another A$2,500 to yearly humanities fees since they were?more than doubled?to A$14,500 in 2021.
Australian National University policy expert Andrew Norton said the latest fee hike meant that bachelor’s of arts graduates on median wages would not completely repay their student loans during their working lives.
Professor Norton said his analysis probably underestimated the scale of the problem because it drew on census data from 2021. Since then, repayment thresholds had increased more quickly than earnings, which meant many graduates would now be paying back their loans at lower rates.
He said he expected 2022-23 to be a “peak” repayment year?that “probably won’t be matched anytime soon”.
While the annual indexation hike has inflated humanities fees, the main contributor was the increase under the 2021?Job-ready Graduates?(JRG) reforms, which were designed to shepherd students away from arts courses towards disciplines considered more valuable to the labour market.
The government has handed the task of unwinding the JRG reforms to the?Australian Tertiary Education Commission?(Atec). Professor Norton said Atec would not be established until at least mid-2025 and would have a considerable initial workload.
This meant arts students would attract “really high” fees for at least another three years. “I think it needs a more urgent intervention to stop these people accumulating debt that will just hang over them for their entire lives.”
He said humanities fees should be lowered as an “interim measure” pending Atec’s overhaul of fees and funding rates. Teaching subsidies should be raised by the same margin to ensure that universities were not short-changed.
Such a measure would cost the government less than it might imagine “because a lot of those people will never repay anyway”, he said. The fiscal impacts would also be tempered by?. “The cost of policy change is lower than it might have looked a couple of years ago.”
More than 6 million of the 7.5 million-plus Australian student debtors have fully or partially repaid their loans since domestic tuition fees were reintroduced in 1989. This contrasts with the UK, where as little as??of full-time undergraduates were expected to fully discharge their debts before?repayment terms were changed?late last year.
Professor Norton said non-repayment was more prevalent in the UK because fees had been elevated for much longer, loans attracted real interest and incomes were lower than in Australia. But he said he was increasingly concerned about the sustainability of Australia’s loan scheme amid a dearth of data on the impacts of reforms like JRG.
“We really don’t have a good understanding of the dynamics of who’s repaying, who’s not [and] what the risk factors are. All we have is [figures] that people like me have extrapolated from the census and other data sources…not real data of the actual debtors.”
