Rejection looms for Australian student loan borrowing cap

The Australian government’s proposal to impose lifetime limits on student loans appears set to fail, after the opposition vowed to block the measure – and even senators from the ruling Coalition wanted it changed.

The plan, outlined in December’s mid-year budget update, would cap borrowing at A$104,440 (£57,720) for students in most disciplines, and A$150,000 for those studying medicine, dentistry or veterinary science.

Under the proposal, once students reach the limit they would have to pay any further tuition fees upfront. The move was triggered by fears that an escalating proportion of student debt has little prospect of repayment.

By July last year, just A$35.9 billion of the A$55.4 billion in outstanding student debt was expected to be recouped. The concerns were exacerbated by the VET-FEE-HELP loans scheme for diploma students, with all hope already abandoned of recovering at least one-quarter of the A$8 billion allocated through the scheme.

The lifetime loan limit was introduced in legislation that would also lower the repayment threshold – the income level at which former students start repaying their debts – from about A$55,000 to A$45,000. While the Labor party opposed the lower threshold, it had not revealed its position on the lifetime limit.

The office of shadow education minister Tanya Plibersek has now confirmed that Labor will oppose this measure too, after a senate committee reported on its inquiry into the legislation.

The committee’s Labor members said they supported a “price signal” to rein in “reckless fee setting”, but not a system that would force students to take out commercial loans to pay excessive fees.

Greens senator Sarah Hanson-Young went further, saying the idea should be rejected outright. She said some courses offered by six universities would push students over the cap before they had even graduated.

Meanwhile, the majority report from the Coalition-dominated committee urged the government to introduce a cap on outstanding debts instead of a lifetime loan limit.

This would free up students to continue pursuing higher education so long as they had demonstrated their capacity to pay their debts, the Coalition senators reasoned.

The Council of Australian Postgraduate Associations said this would not solve the fundamental problem, because it would force top students to interrupt their studies. “You would have to start working to get a headstart on your education,” said national president Natasha Abrahams.

“The change they propose makes sense but it [still] reduces the accessibility of higher education to people with less money. It shows there are deep problems with what’s being proposed, if even the Liberal [Coalition] senators can’t entirely agree with it.”

The Innovative Research Universities network urged the government to adopt the Coalition senators’ recommendation. IRU executive director Conor King said a lifetime limit would “inhibit access to postgraduate training, re-skilling and lifelong learning”.

Education minister Simon Birmingham did not say whether he had been swayed by the argument. A statement issued by his office said he would “continue the positive and constructive conversations he was having with his parliamentary colleagues about the bill”.

It is not clear whether his ultimate position will make any difference. With Labor and the Greens controlling 35 of the 76 Senate seats, the government would need the support of nine of the 11 cross-bench senators to pass the bill.

john.ross@timeshighereducation.com