Higher Learning

I'm amazed by the cutting of the HECS-HELP 10% discount announced by the Gillard Government. Talk about short sighted.

If you take away the discount, which according to the Gratton Institute report on Higher Education is only worth $40 million a year, you take away any incentive for people to pay university fees upfront. That means people will take on HELP debt and so add to the rapidly increasing stock pile of outstanding money (currently at $26.3 Billion).

The problem with this is that some of this debt is never re payed (approx $6.2 billion is estimated as doubtful debt) So that is a doubtful debt ratio of 23.6%.

Let's do a little exercise. If we assume $40 million represents the 10% discount, then 100% = $400 million. Thus $360 million would be the amount of money received by the government for upfront payments.

Lets assume that with the reduction of the discount, only 20% of people who currently pay up front, do so now. Therefore the amount that goes onto the Government coffers is $80 million, leaving $320 million going into the HECS debt pile. As only 77.4% of this is recovered, that gives up $224.48 million eventually going into the coffers, a loss of $75 million. And that doesn't even count the time value of money (the fact that $1 today is worth more than a dollar tomorrow).

Even if you use 17% as the doubtful debt ratio (Government's own figures), you end up with a loss of $54 million, still greater than the $40 million discount.

Only this government can claim this is a saving!