Future engineering students will take up to 25 years to pay off debts of up to $113,170 due to the Abbott government's planned higher education changes, new modelling by the university sector suggests.



Releasing the dramatic forecasts, the peak body representing Australian universities called on the government to rethink its proposed changes to student loan interest terms and the 20% average cut to commonwealth contributions.

Universities Australia modelling suggests future engineering students may have to repay as much as $113,170 – which assumes additional fees of $23,923 on top of the existing fee level of $37,319, plus $51,928 in interest charges at a rate of 4%.

This scenario is based on a "medium fee" level under deregulation – halfway between the average international student fee ("high fee") and the minimum fees universities would have to charge to recoup the expected cut to the commonwealth contribution for domestic students ("low fee").

The new evidence will embolden opponents of the reform package, which already appears unlikely to pass the Senate.

But the education minister, Christopher Pyne, sought to fight back in the political battle by predicting university graduates would repay only an extra $3 to $5.

And the Group of Eight – whose prestigious universities are likely to be able to increase their fees the most in a deregulated environment – warned people against demonising the reforms.

The group's executive director, Michael Gallagher, said the status quo was not a viable option and predicted the detractors of higher education reform would "find themselves on the wrong side of history in resisting efficiency improvement and innovation".

Universities Australia, which has to bridge the different views within the sector about fee deregulation, focused on aspects of the plans that have attracted more widespread condemnation from vice-chancellors: changes to the Higher Education Loan Program (Help) and cuts to commonwealth course contributions.

The engineering scenario considers a future graduate with a starting income of $56,000 who reaches an income of about $90,000 after 13 years of working full-time.

Under the existing system, with indexation at the consumer price index, it would take the graduate 18 years to repay a Help debt of $49,284, Universities Australia said.

Under one of the modelled scenarios the graduate could take 25 years to repay a total debt of $113,170.

The chief executive of Universities Australia, Belinda Robinson, said the combination of higher Help debt levels and the cut to the government contribution to course fees "could be expected to result in students facing higher debts and longer repayment times than needs to be the case in a more competitive, fee-deregulated environment".

“This modelling shows that parents taking time out to work part-time to raise children would be particularly hard-hit by the new arrangement," Robinson said.

One of the difficulties in predicting the impact of the reforms is that it is not known by how much fees will change. The starting fees have flow-on effects to the ultimate additional interest graduates face over the life of the loan.

The University of New South Wales disowned the modelling, taking issue with the treatment of the cuts to various disciplines. While the government plans to cut commonwealth contributions by an average of 20%, the amounts vary from discipline to discipline.

The UNSW vice-chancellor, Fred Hilmer, said universities could decide whether the cuts were reflected directly or spread across all students.

"As the UA paper indicates, on average the amount of funding per student is reduced by $2,251," Hilmer said.

"Therefore an average increase of $2,251 would be required to compensate. It is up to the university concerned whether a disproportionate amount comes from some faculties or whether it applies the increase of $2,251 to each course on a uniform basis."

Robinson countered the criticism, saying Universities Australia had modelled "some possible, and reasonably conservative, fee scenarios" and had made no judgment about the capacity for cross-subsidies.

Pyne said his office had calculated that if students left university with a debt of $30,000- $40,000, they would have to pay back between $3 to $5 extra each week.

"Students who are complaining about being asked to pay $3 or $5 a week are expecting the Australian taxpayer to pay that on their behalf," Pyne said.

The University of Canberra vice-chancellor, Stephen Parker, launched a blistering attack on the government’s higher education changes, saying the combination made it “the worst piece of policy I’ve seen in Australia in my 26 years here”.

“In summary these changes are unfair, unethical, reckless, poor economic policy, contrary to the international evidence and being woefully explained, raising suspicions about how much thought has actually gone into them,” Parker said during a debate at the Australian National University.

