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The cost of providing student loans will soar over the next decade. Picture: istock
THE annual cost of providing student loans is expected to balloon by around 550 per cent to more than $11 billion within a decade.
A report by the Parliamentary Budget Office has warned the federal government’s plan to deregulate university fees would trigger a massive spike in the Higher Education Loan Programme.
The report places mounting pressure on the federal government to reign in higher education costs in the upcoming May 3 budget.
Currently the HELP scheme costs taxpayers $1.7 billion a year, because the concessional loans charged to students are less than what the government pays in interest on its net debt, and about one in five students never repay their loan.
In ten years time the cost of the HELP scheme will topple $11.1 billion. Picture: istockSource:Supplied
But the PBO predicts that by 2025-26 that cost will soar to $11.1 billion annually with $4 billion written off in loans unlikely to be repaid.
The report says the HELP scheme has expanded rapidly because of Labor’s decision to move to a demand-driven enrolment scheme and allow vocational education and training students to access concessional loans through VET-FEE HELP.
But it also says the federal government’s plan to allow universities to set their own fees, which has been placed on the backburner by Education Minister Simon Birmingham, would trigger significant further inflation of the scheme in the future.
“The size of the HELP loan portfolio is projected to grow rapidly through to 2025-26 driven mainly by projected increases in student fees from 2017 due to the announced higher education reformsâ€.
Student fees could rise by 40 per cent if the government reduces contribution to universities. Picture: istockSource:Supplied
The report predicts average student fees could rise by 40 per cent if the government goes ahead and reduces its contribution to universities, and the nominal value of the HELP portfolio will grow from $42.3 billion last financial year to $185.2 billion by 2026.
Senator Birmingham said the PBO report highlights the fact that there “are real sustainability pressures in the higher education budgetâ€.
“Projections show that costs will continue to increase dramatically and the Turnbull Government acknowledges that we must ensure the higher education system is sustainable for all those generations of students yet to come,†Senator Birmingham said.
The Opposition’s higher education spokesman Kim Carr said the report indicated the Coalition’s plans to deregulate universities was “recklessâ€.
“Today we see more evidence that the Liberals’ plan to Americanise Australian universities is not only bad for students — it’s also bad for the Budget and bad for Australian taxpayers,†he said.