The government has abandoned its plans to increase the interest rates on student loans but is still struggling to muster the required crossbench support to deregulate fees and cut course subsidies.



The government wants to reach a compromise before parliament rises at the end of this week, to avoid the damaging debate and uncertainty dragging on until the next scheduled sitting in February.

But four crossbenchers told Guardian Australia they had ruled out voting for the bill this week, enough to combine with Labor and the Greens to block the legislation.

Tony Abbott said he hoped senators were “listening long and hard to the vice chancellors of Australia”, who overwhelmingly argued that fee deregulation would strengthen the university sector.

“We are continuing to talk with all members of the crossbench,” the prime minister said on Monday.

“I don’t presume to know what the final outcome will be but we are determined to deal with this matter one way or another in this final sitting week of the year.”

The education minister, Christopher Pyne, confirmed on Monday the government had agreed to an amendment proposed by the Family First senator Bob Day to scrap one of the most controversial elements of its package – the move to increase the indexation rate of Higher Education Loan Program (Help) debts.

The shift from inflation to the 10-year bond rate had been criticised on the basis that the compound interest would have a disproportionate effect on women who took breaks from the workforce and low-income earners. Abandoning this measure would sacrifice between $2bn and $3bn in budgeted savings over the next four years.

Pyne, who has long been hinting that the Help indexation was an area for compromise, said the government had also agreed to the proposed amendment of the independent senator John Madigan to introduce a five-year interest pause on Help debts for new parents.

Madigan suggested this measure as one of five non-negotiable changes required to secure his support for the broader package.

Pyne said the government was “now carefully considering other proposals from crossbenchers” including a targeted university transition fund, fee price monitoring by the Australian Consumer and Competition Commission (ACCC), and targeting scholarships towards rural and regional students.

The minister confirmed the government was considering launching an “information campaign for students and potential students on how the system works and the value they get from going to university”, as revealed by Guardian Australia last week. The Department of Education has spent $150,000 on market research to gauge the public’s “understanding of the higher education system” after concerns that prospective students incorrectly thought the income-contingent loan scheme had been scrapped.

Pyne said the government had “demonstrated a willingness to negotiate on these vital higher education reforms”, but Labor wanted to “play the wrecker” without spelling out a viable alternative plan.

“Without these changes our universities will be condemned to a slow decline – losing their competitive edge in our region and internationally,” he said.

“With the support of an historic consensus of the Australian higher education sector and there being no viable alternative that will secure the future of our universities, the Senate should pass these historic reforms this week so universities and students can get on with their futures.”

But the Greens senator Lee Rhiannon said Pyne’s “desperate attempts to force through his damaging plans to deregulate student fees and cut university funding should be scrapped in its entirety because it will hurt students, staff and the community”.

“Christopher Pyne’s amendments don’t provide the protection they seem to offer – giving the ACCC ‘price monitoring powers’ will result in a higher education equivalent of the much derided FuelWatch scheme,” Rhiannon said.

Labor’s higher education spokesman, Kim Carr, said “half-baked” amendments were not enough to fix the “fundamentally flawed” bill and the government still lacked the numbers to pass it.

The Palmer United party (PUP) Senate leader, Glenn Lazarus, accused the federal government of desperation in trying to salvage a deal, insisting there was “no point trying to bargain or sweeten the legislation”.

The PUP – which has two crossbench votes in the Senate – and its former member,Jacqui Lambie, indicated they would not be persuaded to support the higher education bill.

Their three votes would be enough to defeat the bill, because Labor and the Greens are firmly opposed. A fourth crossbench senator, Nick Xenophon, ruled out voting for the bill in the next four days, saying a decision should be deferred to February to allow further talks on suitable amendments.

The government’s university changes are not due to take effect until 2016, but the Senate stalemate means prospective students considering enrolling in university in 2015 do not know how much their fees will be in their second and subsequent years.

Universities Australia called on the Senate to “end the uncertainty and anxiety felt by students and their families who have no idea what will happen in 2016”.

The group’s chief executive, Belinda Robinson, welcomed the government’s concessions as proof that crossbench senators could “shape a new and fairer higher education package”.

“Delaying taking action, or rejecting the package outright, is not the answer and risks condemning Australia’s higher education system to inevitable decline,” she said.

“It is not possible for universities to continue to deliver the quality that students and parents expect under a system that remains both financially unsustainable and uncertain.”

