Senate Turns Down Greens’ Bill to Freeze Student Debts

Students walk around Sydney University in Sydney, Australia, on April 6, 2016. (Brendon Thorne/Getty Images)

A parliamentary committee has rejected a proposal by the Greens party to freeze debts for Australian students, saying it was not an effective way to deal with the cost of living pressures.

In late November 2022, Greens Senator Mehreen Faruqi tabled a bill to the parliament seeking to scrap indexing on Higher Education Loan Program (HELP) debt and raise minimum repayment income thresholds to $62,400 (US$42,000).

At the time, Faruqi said that student debts would continue to balloon rapidly without urgent intervention and that freezing the debts would provide much-needed money for people struggling with living costs.

In Australia, student loans are tied to inflation and increase in line with the consumer price index each year.

However, graduates are only required to repay their loans when they earn above a certain amount.

The minimum repayment income threshold for the 2022-2023 financial year is $48,361, which is around $6,000 above the minimum wage.

Following the bill’s submission, the Senate Standing Committees on Education and Employment opened an inquiry into the matter in December 2022.

Result of the Inquiry

After hearing evidence from student unions, graduate associations, university representatives and people with student debts, the committee submitted a final report on April 17, recommending the Senate not pass the bill.

“While the committee agrees that measures should be taken to ease the cost-of-living burden on Australians, it is unclear whether the measures proposed in the bill will achieve this effectively,” committee chair and Labor senator Tony Sheldon said.

The report cited a submission by the Independent Tertiary Education Council of Australia which expressed concerns that changes to indexation arrangements might result in significantly higher costs for the federal government, leading to a substantial reduction in the scope and size of loans available to students.

RMIT graduates march through the Melbourne CBD in Melbourne, Australia, on Dec. 17, 2008. (Photo by Luis Enrique Ascui/Getty Images)

It also took into account the views of the education and employment departments, which said changes to the minimum repayment threshold could impose substantial costs on the budget and taxpayers in the long term.

The departments further explained that indexation did not affect the rate at which a person repays their loan, as repayment rates were calculated based on an individual’s income rather than the amount of their loans.

Echoing the sentiment, Catriona Jackson, the CEO of Universities Australia–a peak industry body–said freezing or abolishing indexation would make no difference to the cost-of-living pressures being faced by people with a study loan.

She then advised the government not to scrap the indexation of student loans.

The report also noted that the federal government announced a new review of the higher education system in November 2022, which would look into many issues, including funding, accessibility, affordability, and transparency.

The Greens’ Response

Following the inquiry’s conclusion, Senator Faruqi said that the committee’s report overstated concerns about the bill and that it would take a long time for the government’s university review to be complete.

“The committee’s recommendation is an insult to everyone who provided evidence in support of the bill, especially those individuals who gave brave and harrowing testimony of how student debt was affecting their lives,” she said in a statement.

“The growing burden of student debt is making news every day, and it’s beyond clear that urgent intervention is warranted.

But Labor has elected to sit back and watch as millions of Australians are hit with a student debt avalanche on June 1.”

Furthermore, the Greens senator argued that Australia’s student loan system was significantly unfair and caused young people to suffer financial and emotional stress.

“The current system is crushing dreams of study and making people regret their decision to pursue higher education,” Faruqi said in a dissenting report to the parliament.

“That is a devastating indictment for a system apparently designed to promote access to higher education.”

The State of Student Debts in Australia

According to the report, over three million Australians currently have student debt, with half of them owing more than $20,000.

The total amount of student debts reached $74.3 billion in the 2021-2022 financial year, a 191 percent increase compared to the debt levels in 2011-2012.

The number of people with over $100,000 in student debts also soared from 22,514 to 70,962 people in the last three years.

Meanwhile, data from the Australian Taxation Office showed that the average time for a student to repay their debt rose from 7.3 years in 2005-2006 to 9.5 years in 2021-2022.