Impact of the Australian Higher Education Funding Reforms
Melbourne Institute Policy Brief No. 02/14
This brief explores the potential impact on the time students take to repay their tuition loans of changes proposed by the Australian Government in its May 2014 budget to the funding and operations of the Australian higher education sector. The key results of the analysis are:
Result 1: Total loan repayments vary substantially across the graduate income distribution, increasing by more than double the higher tuition charges for about 20% of graduates, since these graduates take a long time to repay the debt.
Result 2: The additional time taken to repay tuition loans also varies substantially across the graduate income distribution, increasing most at incomes a little above the first repayment threshold. Across the graduate income distribution, repayment periods are typically about double under the new arrangements studied compared with existing arrangements, if repayments are made at all.
Result 3: Loan default will increase. An increased proportion of individuals will never repay their tuition loans. The proportion who never repays anything will not change much, but the proportion making only partial payments will increase, especially among female graduates.
Result 4: Even in the absence of any increase in fees from university fee deregulation, the package of other measures results in an increase in the time to repay loans of over ten years for some groups of graduates. Increases in fees of the magnitudes envisaged here as part of the fee deregulation element of the package increase the additional time to repayment beyond fifteen years for some individuals.
Result 5: Variations to the base case or analysis of specific groups do not result in qualitatively different results – typically, the average years required to repay the loan approximately doubles under variations to the new arrangements.