Pyne’s privatisation of HECS

Last month, the Perth newspaper West Australian revealed that the federal government’s commission of audit will consider converting $23 billion of HECS debt into securities. Education minister Christopher Pyne said that while there is no government policy to privatise HECS, he is “keeping an open mind” about it.

When pushed to comment on the ABC’s Q & A program, Pyne said, “Why would you rule anything like that out? Britain have sold their HECS debt as an asset, and we should investigate whether that is a sensible move for us to do so.”

Selling HECS debt is about shifting still more of the burden of education costs onto students and their families. It would give the Liberals’ buddies in banking and finance another subsidy.

At the moment, HECS operates as an interest-free loan, adjusted only to match inflation. Former students are required to repay loans when their income reaches a threshold, currently set at $51,309. So while the HECS debt is worth $23 billion to the Australian government, the architect of the HECS scheme in the 1980s, Bruce Chapman, has speculated that its sale would attract a maximum tender of about $15 billion.

The finance heads reckon this is a “fair” price because some of the HECS debt is never repaid. But make no mistake, the sale of HECS would enable the finance bosses to make huge profits from education.

The Pyne plan has already received vociferous backing from the vice-chancellors. Glenn Withers, the founder and former head of Universities Australia (the vice-chancellors association) heralds it as a wise move that would inject more “private” revenue into the education system.

There is absolutely no guarantee that the government would invest the revenue raised from the sale of HECS debt back into tertiary education. The Liberals have already announced that they will not reverse Labor’s more than $2 billion in cuts to university funding. And the legacy of the last federal Coalition government was a 40 percent increase in HECS fees.

Decreasing government funding

The trend over the last 30 years of neoliberal education attacks has been decreased government spending on universities and the rise of a user-pays system. Withers’ talk about the HECS sell-off securing “stable” private investment for education into the future just lets the government off the hook for the existing shortfall in tertiary education funding.

Both major government reviews into tertiary education in the past five years – the Bradley Review of 2008 and the Lomax-Smith Base Funding Review of 2011 – have shown a decrease of at least 10 percent in commonwealth funding per student in the past decade.

Declining government funding is confirmed by the available data. In the 1980s, government funding accounted for about 90 percent of university revenue. It now stands at a measly 42 percent. The main source of private funding for universities has not been the corporate sector but individual students, through the introduction of full-fee places for domestic students and through the huge fees universities have collected from international students.

For years now, the Australian government has been pacing towards a more “American-style” university system, in which private expenditure makes up the vast majority of funding. You don’t require a degree from an Ivy League college to guess the impact on students of the US system, in which 64 percent of higher education funding is drawn from the private sector.

OECD statistics show that half of private investment in the US tertiary sector comes from students through a loan scheme that places millions at the mercy of private loan companies. The result is a student debt crisis, as neoliberal attacks have cut the availability of government loans and financial aid.

This year, a US Federal Reserve report revealed that student loan debt stands at a whopping US$870 billion. In total, 37 million people have student debts. They each owe, on average, $23,500; 27 percent of borrowers are past due on their repayments.

And there is a huge disparity in the quality of education that working class students receive because state loans or assistance are provided only for community or public colleges. Students at the private colleges or specialised universities rely primarily on private loans.

Pyne has tried to allay fears of a slide towards the US student loans system, saying that repayments on privatised HECS loans would remain conditional on graduate salaries. But once the HECS debt is privatised, what will stop the finance companies from placing all sorts of conditions on repayments?

British example

Pyne speaks glowingly of Britain’s recent privatisation of student loans. In the UK, the investment bank Rothschild pushed hard for interest rates to be raised as a condition of purchase, and it asked the British government to underwrite investors’ risk in taking on the loans – demanding the government use public money to guarantee returns for the banks.

The British government caved to the demand that a cap be lifted on interest paid by past students. It would be extremely naive to presume such demands wouldn’t be made by the corporate sector here.

The other way to secure revenue from student loans is of course to increase fees. Again, the Liberal government would not be pushing against the current trend in higher education if it moved to do this.

A comprehensive report into Australian higher education carried out by the Grattan Institute in 2013 states that, since 1989, the total amount of HECS debt has increased by 100 times. This has been the result of both the expansion of student numbers at university and a higher rate of fees per place.

In 1989 HECS consisted of a flat fee of $5,400 for a three-year degree. In 2013, a degree costs anywhere from $17,604 for humanities or education to $39,168 for four years of law.

The neoliberal offensive has limited workers’ access to tertiary education. The prospect of a high HECS debt acts as a deterrent to students from low socioeconomic backgrounds. And working class students are poorly represented at the “sandstone” universities and in the disciplines of law and arts.

Any step towards privatising HECS can only be a further step in the direction of an education system for the rich. It must be resisted with all the force we can muster.