On 1 June last year, indexation was applied on my then HELP debt of $87,722 at 7.10 per cent. This resulted in a $6,228 debit being applied to my HELP account. This year, student debts are due to rise by 4.8 per cent, the second highest indexation rate in a decade. HELP indeed!
I am a 41-year-old professional woman. I have been in and out of the workforce for the last 18 years, as I raise my children, and engage in part-time work. As such, it was only 3 years ago that I finally began earning enough to start making repayments to my HECS-HELP debt through my income.
At age 17, I began my higher education with a bachelor’s degree. At age 20, I went on to do a law degree and then, at age 29, I completed a Master of Laws. Even before completing my Masters I had never made a single repayment on my existing, constantly accumulating education debt. Probably the most problematic part of my exorbitant education borrowing was my lack of financial literacy.
Had I been more financially literate (or better informed?) at the time, I perhaps would have made a better, more educated assessment as to whether my postgraduate study was economically valuable to my career. The reality was that the Masters was not going to make a big impact on my earning ability. But, even today, is there enough being done to equip students, especially young women, with the requisite information to make informed decisions regarding their education debts?
Tracey West, Financial Education Manager at Ecstra Foundation, explains that women consistently show lower levels of financial literacy than men. This is concerning as we currently have more women than men enrolling in higher education.
“The lack of clear information and financial literacy workshop support during study is concerning in terms of developing key life skills, but also in terms of the financial burden of studying and the consequences of high HELP debt on women when they are more likely to spend time out of the workforce, work part-time, or be paid less than male counterparts for the same work,” West says.
West goes on to explain that women are more likely to hold HECS-HELP debts for longer and be subject to larger amounts of inflation adjustment, compounding the time it takes to repay the loans.
“This is especially important when women undertake postgraduate study as mature students, potentially before child-rearing or to up-skill after child-rearing,” she says.
This has certainly been my personal experience of the system and it was my postgraduate study that really blew out my debt. The financial ramification of that extra debt is now quite significant. The Australian Universities Accord Final Report, published by the Department of Education on 25 February, recognises that financial stress is a significant barrier to tertiary study. Student poverty is increasing, especially for First Nations, low SES and regional and remote cohorts and intersectionality is very significant.
West points out that there are recommendations made within the report where embedding financial literacy programs would be highly beneficial to students. These include:
- Jobs broker
- Careers advice
- Dedicated outreach programs to low SES populations
- Free preparation programs
Marissa Schulze, Managing Director of Rise High Financial Solutions, agrees that empowering women with financial literacy is essential when it comes to the HECS-HELP income-contingent loan system.
For many student debtors, there is a real lack of understanding as to what the debt means, how exactly it works and what the implications of that debt are later in life. For many years I actively tried to just completely ignore my debt. I have numerous friends who also take the same approach.
It’s not until I realised that the debt significantly impacts my borrowing capacity for a home loan, or when the indexation rates blow totally out of control, that I was forced to acknowledge that this is a very real financial problem for me.
Schulze explains that mortgage brokers are obligated to assess and verify a debtor’s capacity to repay a loan and meet their obligations under the loan and that brokers and lenders are subject to responsible lending principles. Are these same responsible lending principles being applied when it comes to the income-contingent loans of the HECS system?
“When we do a home loan for a customer, we have to go to the nth degree to make sure they understand every little detail about that loan but then we’ve got all of these students at the start of their careers that are entering these debt obligations that they really don’t understand and there’s not really a lot of effort being made to help them understand and, as a result, they can’t make educated and informed decisions based on that information.”
Schulze explains the harsh reality that most university students have a fairly low level of financial literacy, citing that many of them don’t understand many aspects that are important. For example, many debtors have been shocked over the last few years to learn that their education debts are not in fact ‘interest-free’.
However, West grapples with the idea that we need to raise awareness of the long-term implications of HECS-HELP debt on income and budgets, with a caveat that without the qualification we may experience a lifetime of lower earnings. She explains that that may or may not be true depending on the individual and the field of study, and we cannot predict the future.
“The tertiary study experience is also about networking, developing higher-order thinking, being exposed to different disciplines and ways of doing, and learning for the joy of learning and tackling big ideas or big problems. These activities contribute to building rounded individuals with attributes not otherwise developed. It is an issue for society that the high cost of tertiary study means that students might opt out.”
Universities, and the government, need to do more to help students better understand their HECS-HELP debt obligations and ramifications. Perhaps we should be looking at making financial literacy a compulsory part of higher education.