The Australian government¡¯s ¡°populist¡± student loan forgiveness proposal does not address the root cause of the ¡°burgeoning¡± debt that is magnifying the country¡¯s intergenerational divide, an independent politician has warned.

Canberra senator David Pocock said the governing Labor Party¡¯s pledge to wipe 20 per cent of accrued student debt would not fix the ¡°main issue¡± ¨C massive fee hikes for some courses, and the ¡°new debt¡± generated as a result.

by the Parliamentary Budget Office (PBO), commissioned by Pocock, shows that outstanding student debt has swollen by more than A$10 billion (?4.8 billion) since fees were restructured under the 2021 Job-ready Graduates (JRG) reforms.

Pocock said last year¡¯s Universities Accord report had recommended ¡°urgent remediation¡± of JRG. But this work has been delegated to the Australian Tertiary Education Commission, which does not yet exist and never will if the Liberal-National party coalition wins the 3 May election.

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¡°Handballing that task to a new body that hasn¡¯t even been established is not going to cut it in the face of such steeply rising student debt burdens,¡± Pocock said. ¡°We have to get on with fixing this.¡±

The debt forgiveness proposal is a key point of difference in the election policies of the major parties. ¡°This will help everyone with a student debt right now, whilst we work hard to deliver a better deal for every student in the years ahead,¡± prime minister Anthony Albanese said.

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The coalition has confirmed that it will ditch the proposal if it wins the election. ¡°[It] is elitist and unfair, delivering large financial windfalls to people with multiple degrees,¡± shadow treasurer Angus Taylor .

The Greens have vowed to wipe all A$81-plus billion of outstanding student debt and to eliminate fees for university and public vocational colleges, at a cost of another A$47 billion by mid-2028. These imposts would be covered by ¡°taxing the big corporations¡± to the tune of half a trillion dollars over the next decade.

¡°The prime minister benefited from free university education but he refuses to give young people the same opportunity,¡± said Greens leader Adam Bandt. He said Labor¡¯s failure to reverse JRG was ¡°the single biggest issue facing higher education. This has led to A$50,000 arts degrees and a doubling in the number of students with student debts exceeding A$100,000.¡±

Higher Education Loan Programme show that outstanding debt has grown relatively sedately under JRG. It increased far more quickly after the 2012 uncapping of student places, rising up to A$8 billion a year in the middle of the last decade.

Monash University policy expert Andrew Norton attributed the slower recent growth partly to a massive spike in voluntary repayments, as graduates strived to avoid high debt indexation, and partly to flat or declining enrolments ¨C particularly in expensive arts and business courses ¨C which meant less borrowing overall.

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But Norton said JRG had affected student debt at the individual level because some courses had become so expensive.

The PBO analysis also shows that a timing quirk in tax processing, which leaves graduates slugged with indexation bills on months of previously discharged student loan repayments, will add about A$704 million to outstanding debt over the next four years and more than A$2.3 billion by 2035.

Pollock said it was ¡°deeply unfair¡± that people were forced to pay indexation on debt they had already repaid. ¡°Student debt should only grow in line with what people actually owe,¡± he said.

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He also warned of unintended consequences from the government¡¯s proposal to raise the repayment threshold and introduce a ¡°marginal¡± system of repayments. The PBO analysis found this would make little difference to people who earned average graduate wages straight after completing their degrees, adding less than A$1,000 to their indexation and increasing payment duration by perhaps a year.

But low-income graduates would take an additional seven years to repay their loans, incurring an extra A$21,000 in indexation costs in the process. And people whose incomes remained low would retire having paid off just one-third of their debts, despite making compulsory repayments almost every year.

Pollock said the changes would disadvantage people in fields with low initial salaries, such as pharmacy, or with a ¡°slower income trajectory¡±, such as personal services.

Norton said there were ¡°theoretical arguments¡± for a marginal tax rate. But the practical consequences were that ¡°people on moderate incomes could see quite significant increases in their repayment times and¡­total indexation paid, because they¡¯re simply not repaying enough each year to pull down the debt¡±.

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john.ross@timeshighereducation.com