HECS-HELP “Loan Forgiveness” Thoughts - Good or Bad

CommuterPolluter on 18/11/2024 - 20:47

Curious what OzBargainers think of the various HECS-HELP loan forgiveness programs the Labor Government is buying votes with has announced over the past few months. My wife saw an article on facebook and people were pretty mad about it, but that was back when it was only a de-rating of the 7% interest down to 4% or whatever. I’m a bit mixed on it. Hard to say I have strong feelings other than annoyance at how the Aussie system is always changing rules post-hoc.

There are two major changes:
1. Changing of interest rate from CPI to the lower of WPI or CPI. This will be backdated a couple years back to when we had that 7% interest event.
2. Reducing repayment thresholds and forgiving 25% of all outstanding balances. The 25% forgiveness offsets the fact that lower repayment schedule = more interest paid over loan lifetime.

Personally I will have a small benefit from both policies, although it’s slightly annoying in that I have made voluntary repayments prior to the 7% interest slug.

IMO the 25% discount is literally just buying votes. If the repayment schedule is to be reduced to match the original intention of the scheme, then what’s wrong with the total expected interest payments that were also part of the original intention of the loan? Nothing except it’s a point of weakness before an election.

Poll Options

  • 94
    Good
  • 117
    Bad
  • 17
    Don’t really care
Financial HECS-HELP

Comments

    • CommuterPolluter on 19/11/2024 - 11:32
      -1

      I think it’s reasonable logic when the policy in question is essentially a wealth transfer to an arbitrary section of the population.

      Bracket creep has moved debtors onto a more onerous repayment schedule compared to the original intention of the scheme. However, while this imposes a hardship on debtors it also benefits them by forcing them to pay off their debt quicker reducing their total interest costs. The Labor Government is proposing to fix the onerous repayment schedule without taking away the associated benefit of a quicker debt repayment timeline (by means of a 25% debt forgiveness). It’s essentially saying “here’s your cake and you can eat it too”.

      You could graduate tomorrow, have never been charged a dollar in indexation fees, and get a nice 25% discount on your HECS-HELP debt. It’s unjust.

  • plmko on 19/11/2024 - 09:28
    +4

    There absolutely needs to be forgiveness for the last 10 years of interest. People who oppose this have zero clue what is going on.

    The immediate issue is the immense inflation of indexation that occured in the last 3 years that went out of control. On top of this everyones salary inflated well past repayment thresholds. But neither wage growth nor tax brackets were scaled to debt increases. This was a stealth tax increase on the youngest and most cash poor of the population.

    Secondly HECS was originally on CPI increase but unjustly switched over to Indexation by the Coalition. And of course it was the Coalition that induced inflation via delayed vaccines effects on the economy, immense weapons acquisition and poor management of foreign trade.

    Thirdly HECS isn't a bond tied to the Reserve. It's an investment that has low expectation of repayment. Wiping it out has next zero effect on the budget.

    The debt increases were basically a wealth transfer from HECS holders to the Government for their reckless spending.

    • SlickMick on 19/11/2024 - 09:41
      +1

      Wait until you get a home loan if you're struggling with HECS.

      • plmko on 19/11/2024 - 10:25
        +4

        The young won't even get a home loan at this rate. Especially since the inflation induced ballooning HECS debt counts towards the application.

        People who oppose this are voting to create a lost generation.

        I have no debt and won't benefit but even I see the train wreck comming.

        • gromit on 19/11/2024 - 11:53
          +1

          So what is so special about this round of inflation ballooning HECS debt that is so different to what many of us dealt with during our HECS debt in the early 90's. hell my first 2 years were at 8% and 6.4%. I don't recall anyone calling us a lost generation in the 90's.

  • netjock on 19/11/2024 - 09:37

    If people vote for this then they really got rocks in their heads.

    People with debts get a discount. But what about their kids. Lets live in hope they get a lucky cut too?

    I found out the other day Open University is charging the same as top tier universities (Melbourne / UNSW) and it is online only. Why are they charging the same $16k when there is no campus etc. Should be less than $10k.

    The whole university charging scheme here is a rort.

    There used to be a discount for paying up front and discount for voluntary repayments. It is a common thing in the private sector to motivate people to pay on time. But you know the government don't motivate they just punish you with more fees / penalty interest.

    • SpainKing on 19/11/2024 - 15:25
      -1

      People with debts get a discount. But what about their kids. Lets live in hope they get a lucky cut too?

      Why bother doing anything to help or improve the situation if it doesn't fully solve the problem? People benefitting today doesn't eliminate the possibility of a better system being implemented down the road

  • Duckie2hh on 19/11/2024 - 09:52
    -3

    Let's continue to reward the baristas with bachelors degrees. Good job government.

  • Duckie2hh on 19/11/2024 - 09:53
    +1

    Could have at least reduced HECS debts on critical roles (i.e., nurses, paramedics, STEM, etc)

  • apple2016 on 19/11/2024 - 10:14

    Higher education must be free for citizens imho. We are paying life long taxes on earnings anyway!

  • Cluster on 19/11/2024 - 11:09
    +2

    Looking over finance videos on Youtube, it seems like many young and middle aged Americans are banking on large debt forgiveness over there as a bailout, and it seems like we're developing that trend here too.

    Why work to pay off the debt you voluntarily took on when someone in the future will just wipe it out? The people who paid off their HECS debt must feel like suckers.

    • ForkSnorter on 19/11/2024 - 11:15

      It gets taken out of your pay automatically. This was how I paid off mine. If I hadn't worked and paid it off, the debt would now be twice or three times as big.

  • furyou on 19/11/2024 - 11:09
    -1

    It's really bad for people who just paid off their loans before whatever cutoff date they decide.

    And it also teaches you not to pay off your debts - you get punished for saving and paying off your loans, you get rewarded for delaying as much as possible.

    Instead they could just make it cheap to begin with and it would encourage more people to take up education

  • haemolysis on 19/11/2024 - 11:42
    +2

    I support loan reductions, however, they must be accompanied by some market rationalization. Just because the bills change hands from students, to the government, doesn't mean there shouldn't be strong downward pressure on the tuition. Similarly, we don't want to see this lead to large scale enrolments "because it's free." Students should face a significant and non-trivial barrier to entry to prevent frivolous enrollment. These barriers should strongly favor degrees with stronger market demand. I don't know what the right balance is. But simply passing the debt from student to government doesn't address the root cause.

    The qualification bar is in such a weird place nowadays, and the pay for skilled persons has simply been eroded. We have a combination of intermediate degrees (Cert 1-4) disappearing (as a result of TAFE being gutted), businesses hiring "degree only" where it isn't required, and those degrees, attracting minimum wage. We need to make that stop.

    • CommuterPolluter on 19/11/2024 - 12:04
      -1

      Similarly, we don't want to see this lead to large scale enrolments "because it's free." Students should face a significant and non-trivial barrier to entry to prevent frivolous enrollment. These barriers should strongly favor degrees with stronger market demand.

      I agree. I think Rudd specifically deserves a lot of blame for this, his ego has put us in a bad position.

      • SpainKing on 19/11/2024 - 15:29

        What did Rudd's ego do?

  • gromit on 19/11/2024 - 11:46

    its mixed. I support change to the way it is indexed and threseholds, but not the loan forgiveness, it is completely unnecessary government pork barreling.

  • tsunamisurfer on 19/11/2024 - 12:00

    Bad. Very bad.

    These people wanted the degree and were happy to let others front the money.

    And now repaying it is a problem?

    Everyone knows what interest vs indexing is. Again they happily took the deal, for decades never complained about sub 3% indexing. Now that it doesn't go their way they bitch.

    Shameful.

    • jaimex2 on 19/11/2024 - 12:52
      +2

      You think every year 12 student knows what interest vs indexing is?

      They're just herded to uni/TAFE and told to take on debt.

      • tsunamisurfer on 19/11/2024 - 13:18

        Every Year 12 that is going to HIGHER learning, yes.

  • Heiks9000 on 19/11/2024 - 12:26

    I still remember going to uni and talking to people about their semester break. They all went on holiday and I had to work 40+ hours a week just to pay my fees upfront. Why should I feel bad for them? They had a great time at university and now they need to pay up for it. I think most people rely too much on government support and just expect other people to pay for everything.

  • nedski on 19/11/2024 - 12:42
    +1

    I will beneft from this but im also supportive of this as any little bit helps. There are plenty of other taxpayer funded benefits that others get that I dont begrudge them for. I must admit I got in at the right time as my whole course only cost $24k or $1000 per unit. Now its like $17k or something a year, the younger generation are getting screwed and whatever can be done to help is appreciated.

  • samfisher5986 on 19/11/2024 - 13:14
    -1

    Its definitely a bad idea.

    • Tax Payers shouldn't be paying off degrees.
    • Doing this just encourages people to not pay their HECS debt in case a future government helps them with HECS.
    • Many of those degrees are not in the public interest
    • Half of those degrees are probably not even particularly useful for the person who owns it.
    • This pulling the ladder up on all future students who have to pay full price.
    • Going to university is a choice, and only you get the benefits from that so why shouldn't you pay for it?
    • We need more Teachers for example, but this only helps people who have already studied, it doesn't encourage more people to become Teachers

    I would support loan forgiveness for degrees like teaching and nursing, something Australia needs, but isn't paid very well. Everyone else has a lot of high paid potential in their future.

  • pformag on 19/11/2024 - 15:28
    +1

    The government should offer HECS subsidies for critical roles. Nurses, Paramedics, STEM etc. If someone wants to do a bachelor of brewing, then HECS should not apply.

    • madseason on 19/11/2024 - 15:42

      I disagree, I find it an essential service to have brewers making university level beer for me

  • R4 on 19/11/2024 - 16:12

    A ridiculous policy. If you signed up for a degree knowing the cost and repayment conditions, then honour that contract and pay up. University should not be free (actually, it isn't really free but we all know that) anyway.

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