‘Failed’ university scheme hurting home ownership prospects
Expensive university degrees are making it harder for young Australians to buy a home, economists say, as pressure mounts on the federal government to scrap the Job-ready Graduates scheme, which has seen the cost of many arts degrees soar past $50,000.
In Canberra, 20-year-old Chith Weliamuna is halfway through his double degree in law and politics, philosophy and economics, but is already bracing for almost $90,000 in debt by the time he graduates.
Like many other students, he was passionate about what he wanted to study, so while the cost is a burden, it did not deter him.
“I just chose to eat the cost,”
he said.
Under the program that began in 2021, introduced by Scott Morrison, nursing, computing, teaching and engineering degrees were among those made cheaper, in a move to incentivise students to study in fields the government deemed a priority.
But the cost of humanities, arts and law degrees all shot up dramatically.
Chith Weliamuna says he is so passionate about his degree that he has decided to “eat the costs”. (ABC: Joel Wilson)
Five years on, the scheme has been widely found not to have worked.
Education Minister Jason Clare has agreed it “failed” and is “unfinished business”, but it is not clear when he plans to act.
He said he was awaiting advice from the Australian Tertiary Education Commission (ATEC), which is conducting a broader review into how universities get and spend their money, but that advice is at least a year away.
ATEC commissioner Barney Glover has also said the scheme failed.
In the meantime, 300,000 domestic students are estimated to be enrolled in the most expensive degrees next year, according to the 2050 Alliance — a collective of Australian universities.
Those students will pay maximum yearly contributions of $18,025.
After delivering a budget aimed at assisting young Australians into home ownership, the government is now facing widespread calls to scrap the Job-ready Graduates scheme, on top of its 20 per cent cut to student debt last year.
There are calls for the government to dump a scheme that has more than doubled the cost of some degrees. (ABC News: Lucas Hill)
Home ownership prospects harmed by big HECs debt
Experts say the debt will hamper their ability to get a home loan, given student debt repayments not only hurt someone’s ability to save for a loan, but because banks factor in existing debt when considering home loan approval.
The chief economist at AMP, Shane Oliver, said it therefore reduces how much a bank is willing to lend.
“There’s no doubt that having a high level of student debt is a constraint on being able to get into the property market,” he said.
“It means it takes longer to get into the property market, or you can’t get in at all.“
Last year, the federal government told banks they could disregard a potential lender’s debt if they were due to pay it off “in the near term,” which the banking association described as within a year.
But the chief executive of research firm The McKell Institute, Edward Cavanough, said there was a clear correlation between rising student debt and people buying homes later in life.
Edward Cavanough says it might be harder for students with large debts to borrow the money required to buy a house. (Image: Supplied)
At the same time, house prices across the country have also been skyrocketing, adding to the affordability challenge.
“If you do have a big student debt, you take home less income, [so] it’s going to be much harder for you to borrow the amount you need to buy a house,”
he said.
Mr Cavanough said the degrees made more expensive under the scheme also taught the sorts of skills employers wanted because they cannot be replicated by artificial intelligence.
“Those creative soft skills, cultural literacy, creativity, relationships, good use of language, that’s actually becoming much more attractive for employers in the long term,” he said.
“We’ve created this system now where the degrees that are most attractive to future employers are the most expensive, and that’s the literal inverse policy outcome.”
Vice-chancellor says tertiary attainment goal will not be met
According to research by Innovative Research Universities, between 2020 and 2024, the number of domestic students starting a bachelor’s degree fell by 3.5 per cent.
Enrolments by students from a low socio-economic background in the highest charging courses also fell by nearly 20 per cent, but did increase by 2.1 per cent in the cheapest courses.
Vice-chancellor of Western Sydney University, Professor George Williams, said the overall hit to commencement rates, though, meant the government would fail to reach its target of 80 per cent tertiary attainment by 2050.
Professor George Williams says there are flaws in the Job-ready Graduates scheme. (ABC News: John Gunn)
He told triple j hack the “humble arts degree” was the “gateway” for many students into higher education and the Job-ready Graduates scheme was sending them a “big price signal” to not study.
He believed the scheme had not been fixed because of the cost.
“It isn’t a cheap thing to fix, but I’d say in a country like ours, cost comes down to priorities,” he said.
Chith Weliamuna says some students are “hesitant” to study courses they might fail because courses have become so expensive. (ABC: Joel Wilson)
University student Chith Weliamuna said he was seeing the ramifications of the scheme play out among his peers who were avoiding more challenging courses.
“People are a lot more hesitant in doing courses they might fail,”
he said.
“Even though that [class] might be where you learn and expand your horizons.”
He said his brother decided to take a “gap year” because he was not sure what he wanted to study at university and did not want to waste money trying out subjects he did not ultimately pursue.
Government yet to act on two-year-old recommendation
Even Education Minister Jason Clare conceded the Job-ready Graduates scheme had “failed”. (ABC News: Ian Cutmore)
Despite agreeing the scheme had “failed”, Education Minister Jason Clare has yet to outline a plan to reform it, as he awaits independent advice.
But more than two years ago the major Universities Accord report recommended “urgently” fixing the scheme.
Mr Clare said his government had implemented 36 of the report’s 47 recommendations.
Shadow Education Minister Julian Leeser said the Coalition had always been open to reviewing the scheme, but warned reversing it could lead to teaching students paying more than they currently do.
“There is a very good reason that Labor in government has decided to keep Job Ready Graduates for at least six years — much longer than the Coalition,” he said.
He also accused the university sector of having “vested interests” that “distract from their own failings”.
Shadow Education Minister Julian Leeser does not want to see the costs of courses increase for students. (ABC News: Matt Roberts)
Former Labor minister turned vice-chancellor of the University of Canberra, Bill Shorten, said while the government needed to get a move on with reforming the scheme, he was most worried about the cost of going to university overall.
While he praised the government’s $16 billion decision last year to wipe 20 per cent from students’ debts, he said more help was needed.
“Maybe the Australian corporate sector should pay a little bit for the benefit they get from the students spending years and years studying, or adults going back to university, rather than just leaving it to Tommy and Tina taxpayer and Johnny and Jilly student,” he said.
