Student debts out of control

This is an Australian story (for those who followed the link, believing otherwise).

Graduates from private colleges and universities are costing taxpayers more than those from public universities, and new ministers of religion present one of the greatest burdens.

The architect of HECS, Bruce Chapman, has calculated that the taxpayer subsidy to privately educated graduates who deferred payment on their courses is 18 to 28 per cent on average. It is less than 5 per cent for public university graduates paying off HECS debts.

I had a conversation along these lines a while ago, with a colleague here. His argument was that HECS was fine for Australia, because we have so few people/students. And because our education costs are low (similarly with regard to health care). In the US the system would just cost way too much money, and provide way too much of an incentive for too many students to take degrees with too little payoff (private and social) at the end.

Seems that Dave’s argument is being proved by the very country I had used to support mine.

HECS allows students to wait until they have reached an annual income of nearly $40,000 before paying off their degrees. Past and present university students owe $14 billion in HECS debt, which is underwritten by the Commonwealth government.

Professor Chapman gauged that because education loans were interest-free, the taxpayer was effectively subsidising the students, and those privately educated students who paid a premium for their courses were costing more in foregone interest than their public peers.

“There was never going to be a worry with the HECS system because the debts weren’t big enough and the prices weren’t high enough,” Professor Chapman said. “But once HECS went into the private sector, some of those debts are $80,000 and the interest rates start to matter very much.”

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