Student debt forgiveness plan unlikely to succeed

Students from rich families tend to be over-represented in medical programs because of the established link between wealth and academic performance, particularly on the Australian Tertiary Academic Rank.

“So these people might be getting what amounts to a massively subsidised and discounted education,” Professor Holden said.

“It amounts to bus drivers subsidising wealthy kids to get medical degrees. And it’s inefficient to boot.”

Andrew Norton, a higher education policy expert from Australian National University, said the repayment of debt would turn into a bureaucratic nightmare as the Australian Taxation Office and education departments try to sort out the debts of about 850 graduates if the target is reached.

Mr Norton also questioned whether incentives for doctors and nurses to work outside capital cities might be more effective if they were also applied to overseas-born qualified staff.

“Why restrict it to this narrow pool,” Mr Norton asked.

“It’s just a little hard to get excited about because the number of people and number of dollars is not that great.

“But cumulatively it is creating an extraordinarily complex and bureaucratic system. Let’s just have a small number of simple, rules-driven programs, which do the things that universities need to do.”

Professor Holden also questioned the timing of the legislative change.

A new accord process is due to start this month, and will include a review of student contributions as part of a wider inquiry into the higher education sector.

“It strikes me as odd to do something piecemeal now when it will presumably intersect with a whole bunch of other reforms and changes that are going to be made,” Professor Holden said.

The US-based think tank, The Brookings Institute, recently described student loan forgiveness as “regressive whether measured by income, education or wealth”.

“Medical school graduates typically owe six-figure student loans, but that doesn’t mean they are poorer than other high-school graduates who did not go to college,” wrote Adam Looney, a non-residential senior fellow at Brookings.

“Student debt is concentrated among high-wealth households and loan forgiveness is regressive whether measured by income, educational attainment or wealth.”

That position was backed up by a recent Productivity Commission report. The October report was disdainful of free places in TAFEs and universities, saying such policies come at a huge cost to taxpayers, which is largely borne by people who don’t directly benefit from them.

Professor Holden said there were much more efficient ways to encourage to work in remote areas.

“If you want doctors and nurse practitioners go and work in underserved areas then given them cash now, rather than forgiving a loan with zero interest.”

Under the Higher Education Loans Program, commonly known as HECS, the government covers the cost of students’ contributions until such a time as they earn a minimum salary of $48,361 and repayments of 1 per cent a year kick in. Repayments are staggered to $141,848, at which point graduates repay at a rate of 10 per cent through the Australian Tax Office.

While the loans are indexed to CPI, no interest is paid on them.

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