Some bad ideas simply won’t die – okay bad pun – simply won’t go away. Andrew Norton has long argued against Australia’s income contingent loan scheme that part finances Australian university students. In particular, he doesn’t like the fact that outstanding HECS debts are written off at death. Last year he managed, briefly, to get former education minister Christopher Pyne to consider the idea of not writing off HECS debt upon death. Now he’s got Simon Birmingham looking at the idea.
In an address to the AFR’s Higher Education Summit, Mr Birmingham indicated he would be looking at old measures, including ending the write-off for HECS loans at death, which former education minister Christopher Pyne ruled out last year.
Grattan higher education program director Andrew Norton recommended the change last year, after analysis found debt being written off was often held by secondary income earners of wealthy households.
Many of those benefiting were women who did not work, or did not return to work fulltime after having children, because their partner was able to support them financially.
Okay so here is the story: Young lady goes to university and meets and marries a high-flyer who earns oodles of money. She raises the children and never works (or works very little) and never pays off her HECS debt. It is really hard to get excited about this issue: people who don’t work or never earn over the repayment threshold are not liable to pay back the HECS – that is a design feature of the policy not a bug. Perhaps some other features should have been included in the HECS design at the time. But as things stand the policy is working as designed and as intended.
But then we get into the “if you want to change a policy pick a big number” problem.
The Grattan Institute floated the idea last year and estimated it could bring in $800 million for the government.
I seem to recall that was $800 million per annum, but even if it wasn’t that is still a very big number.
So HECS has been around for about 25 years. Let’s assume the average outstanding HECS debt is about $20,000. Let’s also assume that people tend to go to uni between ages 18 – 21. So the oldest women with an outstanding HECS debt are going to be about 46. So $800 million by $20,000 is 40,000. Are we to believe that 40,000 university graduate stay-at-home mums die each year with an outstanding HECS loan of $20,000? Even The Lancet might blush at a death rate like that.
Perhaps 40,000 university graduates have died over the past 25 years with an outstanding HECS debt, that if recovered, would have raised $800 million. That works out to $32 million per annum – not nothing, but not much to get excited about either. But that is a very different story to recovering HECS from rich widowers and orphans.