The Abbott government's first budget has cut more than $5 billion in funding out of higher education. In addition to cutting direct funding for universities and research, the government has announced massive changes to the way students pay for their degrees.
Currently students pay part of the cost of their degree, with the government footing the rest of the bill. Students can choose to pay for their degree up front or defer the cost by taking out a student loan known as HECS-HELP (more commonly referred to as a HECS debt). The cost of a degree is currently capped by the government.
Up until now HECS debts have increased annually in line with inflation. This is to ensure the “real" value of the debt isn't decreasing every year.
The 2014 budget changes all of this
The government will reduce its contributions to a student's degree by an average of 20 per cent. It has also announced it will “deregulate" student fees. This means universities can charge students whatever they like. Many universities have already confirmed they will need to increase fees by at least 20 per cent to make up for the government's funding cuts. Other experts have predicted fees at some universities could double as a result of these changes.
On top of all this, the government will charge up to 6 per cent interest a year on student debt. This is a massive change from the current loan system. The charging of higher interest rates will result in students paying more for their degrees and taking longer to pay their debt off.
You can find out more details about the impact of the federal budget on higher education here:
The government's changes have created a lot of uncertainty amongst universities and students. Many universities have acknowledged they will need to increase student fees just to break even due to the government's funding cuts. It has been predicted that universities that face high demand from students, in particular the Group of 8 universities like the University of Sydney, University of Melbourne, and Australia National University, will charge much more for degrees than they currently do.
Our calculations are based on the estimated average cost of a degree under the new deregulated system of uncapped fees. These figures are based on analysis by Andrew Norton, a higher education policy analyst at the Grattan Institute. Andrew Norton was a co-author of the Kemp-Norton review into Demand Driven Funding – a Coalition government review into higher education funding.
A table of estimated degree costs compared to current costs is below:
|Course||Estimated Total Degree Cost (Deregulated system)||Total Degree Cost (Current System)|
We believe these figures are actually a conservative estimate of what a degree could cost under the new system. Similar analysis by the National Tertiary Education Union (NTEU) has found that degrees could cost even more than what Andrew Norton has predicted. You can find the NTEU's analysis here:
These calculations assume the Coalition’s changes to university funding, proposed to come into affect in 2016, have already been implemented.
Youth Allowance recipients used to receive a "Start-Up Scholarship" valued at $1,025 each semester. This scholarship was paid as a grant - with no requirement to repay the government. From now on, these scholarships will now be loans - and your student debt will grow by $1,025 for each semester you receive Youth Allowance.
For our calculations, if you say you are intending to receive Youth Allowance we've factored in you receiving a Start-Up Loan for each semester of your studies. If you're partway through you're degree we've only factored in Start-Up Loans for half of your studies.
The salary a graduate earns will have a significant impact on the time it takes them to repay their debt. Graduates who earn more will pay off their debt quicker than those on lower incomes. This is because HECS debt repayment rates are linked to an individual's incomes. You can find more information on repayment rates here:
Our calculations are based on graduates entering the workforce with the average starting salary for their respective profession. These figures have been taken from:
We have calculated annual pay increases of 2 per cent above inflation. Since these figures are just an average estimation we have provided users of the site with the ability to enter their own starting salaries and measure the impact that has on their student debt.
Currently student debt only increases in line with inflation – to ensure the real value of the debt doesn't decrease every year. The government has announced student debt will now increase at a figure in-line with the Australia Government 10 year bond rate up to a cap of 6 per cent. The current bond rate is currently 3.8 per cent however the long term average going back to 1997 is 5.5 per cent. Our calculations assume a bond rate of 4.9 per cent.
You can find a table of annual bond rates going back to 1997 here:
In summary, while it's not possible to exactly predict the cost a degree at every university under the new, deregulated system, our calculations are a conservative and realistic projection for what a university degree could cost for the average student.
The demographic data you enter into the calculator such as postcode, gender and age is to help analyse the estimated impact of these cuts for different sections of the community.
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