Student Debt: Facts and Predictions

Last night I tweeted this image.

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It’s from the Greens’ website, What Will My Degree Cost? You type in some variables and it spits out a figure that’s supposed to be your predicted net debt if you want to go to uni under the radically different higher education model proposed in this year’s federal budget. The above graphic was generated when I put in that I wanted to study medicine and hadn’t yet begun my degree.

As many people have pointed out: no, it’s not precisely accurate. That’s not because it’s ‘Labor-Green propaganda’ or because ‘Lefties are dumb’ or even because we don’t have mathematics degrees. It’s because there are no certainties upon which projections can be based. However, the makers of the website have discussed the underlying assumptions in their model here.

Fee deregulation literally means that universities can charge whatever they want for their courses. The VC of UTAS has recently said that, with the drop in federal funding, there will be a $30 million gap in the budget that will somehow need to be filled. The VC of the University of Melbourne recently said that course fees are likely to rise up to 61% – and that was only for ‘average’ courses like Arts and Science. Many others have said that course fees will almost certainly rise significantly, including The Conversation, Gay Alcorn, Greg Jericho, and Ross Gittins.

Of course, until deregulation actually happens, we won’t know exactly what the course fees will be. It’s likely that some universities will charge higher fees than other universities. Higher fees may or may not reflect a more prestigious or higher quality course offering. We simply don’t know yet.

What we do know is what has happened in other countries. In the USA, an undergraduate degree at Harvard, an Ivy League school, will cost you $44,000 per year. A post-graduate law course (remember they will only let you study law if you already have a bachelor’s degree) will set you back $54,000 per year. The post-graduate MD course at Harvard will cost a similar $52,000 per year. This is likely what we’re heading for as we proceed towards deregulation and ‘free market’ ideologies that prioritise competition over fairness.

The tweet containing the image above has, at last count, been re-tweeted 355 times and been ‘favourited’ 94 times.

This has gotten me in a lot of trouble today as I became a punching bag for LNP die-hards and rabid tories. People accused me of being stupid, naive, of falling for ‘anything plonked in front of [me]’ and generally being gullible and unthinking. They said that it was ‘impossible’ that the figures in the above graphic could possibly be true, and that it was simply scare-mongering by the Greens and Labor. Basically: I’ve spent today being abused on the internet.

I don’t mind that. But it did get me thinking about what the actual mathematics involved are. It’s all speculation, as I mentioned above, but it would be useful to have some working shown rather than just an automatically-generated figure at the end of a web page.

So I decided to do some maths. Here’s what I came up with.

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This is what the first 36 years of your working life would look like if you completed a medical degree that cost you $40,000 per year and accrued interest at 6% per annum. It also assumes the new pay-back thresholds (between 4% and 8% of your yearly income). Based off this modelling, it would take you 61 years of work to pay back the debt, and by the time you’re debt-free, you will have paid a total of $1,584,000, most of which is simply the effect of compound interest.

The results are almost as dire if we use a model where the cost of a medical degree is $30,000 per year. It takes 36 years of work to pay back the debt and the total you will have paid by the end is $581,932.78.

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Again, while the degree cost is only $150,000 for five years, it’s the compound interest that really gets you.

The point of all this is to say: I’m not relying on shonky mathematics or Labor-Green propaganda to make my point. In fact, the original image I tweeted is a pretty conservative estimate.

I admit that you’d have to be pretty stupid to only be paying the minimum threshold repayments on a debt like this, especially on salaries of upwards of $150,000 per year. On the other hand, even if, upon getting a steady job, you begin paying off $10,000 or $15,000 per year (a pretty signifiant portion of your income at this stage), your debt level will still peak at at least $200,000. Even if you continue paying off significantly more than the 8% of yearly income required by the legislative scheme – say $20,000 to $30,000 per year – it still takes at least ten years, and probably more like twenty, to clear the debt. Remember that the ‘salary’ column is your pre-tax income; the actual amount you have to live on will be significantly less when you account for income tax on top of your HECS contribution. It’s also significantly harder to make extra contributions to pay off the debt when, for example, you’re financially supporting someone else (e.g. a partner; a parent; a family member who is sick or disabled), if you have children, or if you’ve been lucky enough to buy a house and need to also pay off your mortgage.

I have a post in the works about the merits (or otherwise) of various models of university funding and costs which will be much more in-depth. For now, I just wanted to stick it to all the people who been saying that the claims on the How Much Will My Degree Cost website are outrageous or absurd.

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Joe Hockey’s New Mantra: Earn or Learn

Joe Hockey was ‘grilled’ on the ABC TV program Q & A last night, much to the glee of the audience members who lined up to take shots at Mr Hockey over last week’s budget. The clip above shows a young Tasmanian asking where young people are supposed to find jobs when the numbers of unemployed Tasmanians are so much higher than the available job vacancies. Mr Hockey refuses to answer the question, instead repeating the words, ‘if you’re under 30, we need you to earn or learn.’

Well, Mr Hockey, I’m 23 and I am both earning and learning, and I still can’t afford a $7 co-payment every time I go to the GP. Many Tasmanians, and in fact people all across the country, are engaging in higher education or looking tirelessly for work. Many people who have already completed the ‘learning’ part of their apparent obligation to the government are now struggling to find meaningful employment. In five years time, young people with professional qualifications will likely still have the same difficulties finding a job, except that they will also have three times the student debt that today’s graduates are saddled with.

Jobs do not magically appear out of the air just because people wish it. The government does not directly create jobs – although, counter to Mr Hockey’s assertion, the government (at all levels) does in fact employ many people – but it helps to shape the economic climate of the nation. The government’s own budget papers predict that rates of unemployment will actually increase over the next 12 to 18 months, before stabilising.

While we’re at it, it remains unclear to me why the government feels the need to establish young people as a separate class of persons, somehow less deserving of the government’s assistance. The six-month waiting period (and subsequent on/off eligibility) on Newstart and the ‘tightening’ of eligibility of the Disability Support Pension apply exclusively to under-30s and under-35s respectively. Joe Hockey himself makes it very explicit: ‘if you are under 30, we need you to earn or learn.’ Why is it so much more important that today’s young people are economically productive members of society? Why does this draconian requirement not apply to other generations? As a number of people (I think principally Greg Jericho) have pointed out, the proportion of unemployed young people is actually smaller when compared with unemployment in the general population. Yes, there are a small number of young people who do not wish to study or work. These people are a drain on the economy and it’s a problem that needs to be addressed. However, most young people who are not (or soon will not be) in study or work are victims of circumstance. The jobs market, particularly for young people (who generally lack required experience), is in pretty bad shape right now, although there are geographic variances. Compounding the problem is the government’s proposed changes to HECS and student fees, which will discourage young people, particularly those from lower socio-economic backgrounds, from going to university. This is particularly the case when those young people believe that a university degree – that takes three or four years out of their life and can cost up to $100,000 – will make their chances of securing a decent job only marginally higher.

Forcing young people into poverty and desperation when they are supposed to be in the prime of their lives is morally reprehensible. If it truly is necessary to change how Newstart is paid to young people – an assertion I would dispute, but let’s assume for a moment – why not do it another way? How about paying unemployed under-30s Newstart unconditionally for the first six months of their unemployment. This would allow them to concentrate their full energy on finding a job, without having to worry about whether they’ll be able to afford food that week or whether they might get evicted from their rental property. People are much more likely to get a job when they’re showing up to interviews well-rested, well-fed, well-dressed and on time. These things are only possible, however, when you’ve got a regular income to rely on. If people haven’t found a job after six months, then by all means, restrict or reduce their payment. I still don’t think it will have been their fault that they haven’t found paid employment, but if the government is so desperate to reduce welfare spending, this is a much fairer way to do it. It would also mean encouraging young people to get jobs instead of punishing them for a situation over which they have no control. Although, put in context, perhaps the government is deliberately trying to be punitive.

In short: Mr Hockey, answer the damn question. Tell us where to find these magical jobs, because there are a lot of people out there who’d really appreciate the heads up.

The Letter I Wanted To Write To My Senators

My boyfriend came home crying on Budget Night. The nation of a Fair Go had just disappeared before his eyes. Joe Hockey’s speech took the Australia of opportunity, equality and shared prosperity and replaced it with an Australia that reserves the bounties of our nation for a privileged few. An Australia where your access to essential services like health and education is predicated on your ability to pay. An Australia that punishes people for their own disadvantage. A mean, selfish, ignorant Australia.

My boyfriend is 19 years old. He’s a second-year medical student, which means that he’s in class for up to 40 hours per week. He’s expected to put in another 20 hours of personal study each week to keep on top of the workload. In the minimal spare time he does have, he works for a taxi company, answering phones. They’ve recently cut staff and he now only works four hours per week, earning about $80. He gets Youth Allowance because he’s a full-time student and his parents aren’t in a position to financially support him. After rent is taken care of, the Youth Allowance amounts to just over $50 per week. He has tried to find another job and has been repeatedly knocked back – or flat-out ignored – by small businesses and by large employers, like Woolworths and Coles Group, alike.

I am 23 years old. I’m in the final year of my Arts-Law degree. I study hard to keep my academic results up, and I’ve been working hard in paid employment since I was 18, keeping a roof over my head, putting food on my table, and paying my taxes. My boyfriend and I live in a rented house near our Uni. Because I’m classed as independent, I get a greater rate of Youth Allowance than him. I also have the capacity to work more shifts, and thus also earn more that way. Without relying on my income, my boyfriend often has to dip into his modest savings into order to pay for day-to-day expenses. Our combined pre-tax income for this financial year will be just over $40,000, putting us in the lowest 20% of earnings in the country.

At the end of this year I will graduate from my degree and start looking for paid employment. Unfortunately the jobs market isn’t what it used to be. Two friends of mine, one with a PhD and one with an Honours degree, recently returned to study because they were unable to find work. Another friend, also with an Honours degree, works two days per week in a department store, because nobody will employ her to use the skills that she spent four years at University developing. Under Joe Hockey’s plan, if I am unable to find a job after graduation, both me and my partner will fall into poverty. With no government support I will not have an income, and there will be no money for food, no money for rent, no money for petrol, and certainly no money to pay for health care when GP visits cost $7 a pop.

Joe Hockey believes that this is my fault. He believes that if people who have spent their entire lives to date studying to gain qualifications can’t find a job, they just aren’t looking hard enough. The Government thinks that job-seekers’ standards are too high. The reality is that Minister Hockey’s standards are too high.

The reason that youth unemployment is as high as 25% in some parts of the country isn’t because young people are lazy, entitled, or afraid of getting their hands dirty. It’s because there are no jobs for them. People are actively looking for full-time work and they cannot find it. The Budget recognises that older Australians face age discrimination in the workplace and is offering a $10,000 incentive to employers to hire workers over the age of 55. Instead of recognising that young people face that exact same age discrimination, the government plans to blame young people for a job market and an economic system that actively disadvantages them.

Under this Budget, my partner will graduate from a medical degree with up to $100,000 of debt. Enormous reductions in hospital funding mean that he is less likely to be offered an internship placement. Without an internship position, he will never be a fully qualified doctor. If he is lucky enough to find a position and complete his training, he will be working in a hospital system that not only has less funding and fewer resources (including human resources like nurses) but that has to deal with increasingly sick patients. Look at any of the available evidence and you will see that out-of-pocket co-payments for GP visits, prescription medicines and medical services such as blood tests and X-rays actively discourage people from seeking medical treatment. The longer an illness is left untreated, the more expensive it is to deal with when help finally is sought.

I want the same things as other Australians. I want a secure place to live, I want a job that makes use of my skills and training, and I want a loving and healthy family. I do not mind paying taxes to support schools, to build hospitals, to maintain roads and to help those less fortunate than myself, but in order to pay taxes, I must first have a job. University used to be a ticket to a good job. Indeed, the HECS system is predicated on the idea that university graduates have a significantly higher lifetime earning potential. Initiatives such as Youth Allowance effectively ‘loan’ money to people in education and training on the understanding that this money will later be paid back to the government through income taxes. At the moment, however, the number of graduates is increasing while the number of jobs available to them is decreasing. Couple this with university fee deregulation and young people would be forgiven for wondering what the point of going to uni is, if at the end of your three, four or five years living in student poverty, you’ll have tens of thousands of dollars of debt and may still end up working an unskilled job in hospitality or manufacturing for not much more than minimum wage.

I have no doubt that this Budget, coupled with the very real possibility that I will not be able to find full-time work despite having tertiary qualifications, will not only negatively impact on my life but may actually directly lead to poverty. Australia has spent four decades implementing social safety net policies to protect and assist people who find themselves in unfair and unconscionable circumstances. The proposed changes to Newstart eligibility, the stricter conditions for Disability Support Pension recipients who are under 35, and the deregulation and uncapping of University fees are a direct assault on the young people of this country. We are supposed to be nurturing these people and encouraging them to fulfil their potential; instead the Government is trying to reserve power and privilege to a small number of citizens, people who already enjoy significant material wealth.

There is no budget emergency; our debt as a percentage of GDP is small on an international scale and this Budget will make literally no change to the amount of Government expenditure as a percentage of GDP over the next four years. I urge you to vote against the Budget in the Senate. Not only does it not save any money, it actively punishes people who are already disadvantaged. People who are chronically ill should not have to choose between buying essential medicines or buying food. Families of young people should not have to bear the burden of unemployment when that unemployment is the fault of the economy and not of the individual. Pursuing a medical degree should not be only possible if your parents are willing and able to support you through five years of full-time, intensive study. Opportunity should belong to everyone; the wealth of your family should not determine your access to healthcare or education, but that is the direction in which this Budget takes us. No child’s prospects in life should be determined by the identity or the financial means of their parents.

The reason I call this The Letter I ‘Wanted’ To Write is because this is far too long to put on one A4 page. Rest assured that I am, in fact, writing to all twelve Tasmanian senators to urge them to vote down the Budget Bill. You can find the contact details of Tasmanian senators here. If you’re from another state or territory, usually a Google search will provide you with sufficient details of how to reach your elected representatives. 

If you want more information about the actual facts and figures of the budget, there are good summaries here, here, here, and here, and also all over Twitter if you care to take a look.  

Joe Hockey’s Culture of Entitlement

The media has been doing a lot of scaremongering this week about the impending federal budget. Considering the noises being made by federal ministers, particularly treasurer Joe Hockey, about ‘deep cuts’ and the like, it’s probably fair enough. It certainly has been causing a lot of outrage on Twitter, not least because the money being cut from things like pensions and healthcare is, as it turns out, going to be used to buy a bunch of planes that don’t actually work. Before all of this started, we heard a lot from Minister Hockey about a ‘culture of entitlement’ that needed to end. In fact, Hockey’s been complaining about an ‘age of entitlement’ for a full two years now.

The victims of Abbott and Hockey’s rampage against the culture of entitlement will, as ever, be those already doing it tough. Hockey has all but admitted the government’s plan to raise the pension age to 70. Then there’s the new $6 GP co-payment which will affect those who are currently eligible to be bulk-billed. (Never mind the fact that most GPs will only bulk-bill you currently if you demonstrate financial need, for example by holding a Healthcare or Concession card from Centrelink.) No details on any particular areas of budget cuts have yet been released, but we are all waiting with bated breath for the budget announcement on May 13th. The government is allegedly using the Commission of Audit Report, to be released in full to the public next week, to direct their fiscal policy into the future.

Did anyone ever think that perhaps the ‘age of entitlement’ that Joe Hockey seems so concerned about is not so much about working-class Australians, but is in fact about those in our community doing well for themselves? Could it be that, rather than people who rely on Newstart or the Disability Pension to keep a roof over their heads and food on their tables, it’s people like Joe Hockey himself who feel this overwhelming sense of entitlement?

Take this guy, for example. Despite being in the top 1% of wage earners in the country, he seems to feel entitled to label himself as ‘average’, perhaps even struggling. Never mind the fact that his meagre $21,000 left over after paying for all of life’s essentials is the same amount as my total taxable income for a year. You ‘only’ have $21k each year for holidays and/or savings? Boo hoo. Try living your life on that amount and then come back and talk to me about how hard it is to pay off a mortgage while putting two kids through private school.

How about Gina Rinehart? I think I could make a pretty good argument that she’s one of the most entitled people in the country. Who else could argue that welfare recipients are dragging this country into disastrous debt while being worth 29.17 billion dollars? And who could forget that time she said that workers should work harder for less money in order to compete with third-world producers? This is a woman who feels so entitled to her (mostly inherited) wealth that she has been embroiled in a court battle with her children over a trust for the measly sum of $4 billion. But still she continues to argue that it’s people receiving piecemeal government benefits who are the ‘entitled’ of this country.

Let’s talk about Joe Hockey himself. He’s repeatedly said that current pensioners need not fear any changes to their entitlements, as it is his generation who will bear the brunt of the proposed changes to pensions. Mr Hockey isn’t your average everyday Joe, though. As a Member of Parliament, his base salary is $195,130 per year. This is before we factor in the extra money that comes from holding a senior ministry position. Since 2004, federal Members have enjoyed superannuation contributions of 15.4% per annum – a little more than the compulsory 9.25% per annum that everyone else gets. In fact I doubt that Joe Hockey will ever need to rely on the aged pension, which in turn essentially means that he can retire whenever he likes. But by all means, talk about ‘your generation’ as if you share their future fate, Mr Treasurer.

We live in a Western social democracy. Part of our social contract with one another is that we sometimes have to help people who cannot help themselves. Sometimes, as in the case of the NDIS, we help people who, through no fault of their own, do not have the capacity to work for a living. Sometimes, as in the case of Newstart, we help people who are temporarily out of work. Sometimes, as in the case of the aged pension, we help people who have worked all their lives and who now need a bit of help keeping their heads above water in their final years of life. Sometimes, as in the case of Youth Allowance, we help people get food on the table while they are studying, so that in five or ten years time we have skilled workers in the community, paying taxes and contributing to the economy. And sometimes, as in the case of negative gearing for investment properties, we help people who already have lots of money make more money.

Which of those seems like the odd one out to you?

We have built a culture of social welfare. That much is undeniable. Subsidised medical care; safety nets for unemployed people, the disabled, the elderly and students; universal state-funded education: all of this is welfare. And we do it because it makes society better for everyone. It also upholds the human rights of everyone in the community – to be healthy, to have food and shelter, to have equal opportunity. People feeling entitled to their rights aren’t the problem. The problems come when people feel entitled to rip up this country in search of mineral wealth and expect not to have to share that wealth. When the government and the populace feel entitled to lock up innocent people, including children, for having the audacity to flee peril and attempt to come to this country on boats instead of on planes. When people feel that their tax dollars shouldn’t be used to pay for anything they don’t like or don’t use, despite us having some of the lowest taxes of the OECD nations. Yes, entitlement culture exists, but there shouldn’t be a knee-jerk reaction punishing those already struggling. Instead, we should be questioning those doing well in our society, who seem to feel entitled to their position even when their success comes at a detriment to the rest of us.

She’s not perfect, but I’m still proud of our Prime Minister

After her incredible Question Time speech in Parliament on October 9th – the news and YouTube video of which have apparently gone viral – Prime Minister Gillard is receiving, well, even more attention than usual. Many people, men and women alike, are praising the Prime Minister’s courage, as well as her oratory skills, in calling out Tony Abbott and others on ridiculous statements they have made in the past.

It’s true that those whose watched the entirety of the day unfold, and not just the Prime Minister’s speech, have a somewhat different (and more cynical) view of the whole affair. But nothing even comes close to the bile that Peter Hartcher today expressed in his column in the Sydney Morning Herald. I beg you, please read the whole article, but just in case you’re lazy (like me) I’m going to extract a few key quotes.

“If there was one thing that should have been different about Gillard’s prime ministership, it should have been that Australia’s first female prime minister should have been a flag bearer for women.”

In the next paragraph he goes on to say: “She started on her long trajectory of electoral disillusionment when, bit by bit, she revealed herself to be just another politician.”

And then: “If Gillard will not defend respect for women, what will she defend? Just another politician indeed.”

I have three points to make here.
1. Hartcher seems to be implying that Julia Gillard should have been a certain kind – a different kind – of prime minister simply by virtue of her gender. I would argue that every politician is ‘just another politician’. Prime Minister Gillard doesn’t have an obligation to act any certain way simply because she is a woman. Yes, it is inspiring to know that we as a country and a society have advanced enough that we can elect  a woman to our highest office. But Julia Gillard is a human being just like any other, and she is constrained by the workings of her party and the wider political arena just like any other prime minister would be. Much like those who label women ‘shrill’, ‘hysterical’ and ‘aggressive’ when they act just like men, Hartcher seems to be implying that by virtue of her gender Ms Gillard ought to somehow be better, more principled, less jaded than the men who have preceded her. I was alive for less than two months of Margaret Thatcher’s time as Prime Minister of Britain, but I’m sure if anyone told her she should have ruled the country differently because she was a woman she would have had a cow.

2. Julia Gillard is a flag-bearer for women. Did you somehow miss her entire speech? Fifteen solid minutes of calling out the sexist, misogynist pigs that Ms Gillard and every other woman in the country has to deal with on a daily basis. Trying to tell me that my prime minister is somehow not sticking up for my rights the day after this speech really just makes me think you’re an imbecile.

3. Ms Gillard wasn’t defending Peter Slipper. In fact, she quite explicitly called out Tony Abbott for his continuing close friendship with Mr Slipper, which all went down the drain – probably for political point-scoring – when this whole text messaging scandal emerged. The Prime Minister, in no uncertain terms, condemned Mr Slipper’s actions in sending those text messages.

I’ll leave you with this delighful snapshot of another wonderful human being – a commenter on Hartcher’s article – who seems to think that femaleness is a reason to be a whole different kind of Prime Minister.

The only other thing I have to say right now is go and read this article because it is utterly fantastic, more comprehensive and eloquent than anything I could ever manage.

  • Things about me:

    My name is Mel, I'm a final year law student from Australia. I'm interested in politics, feminism, sociology and science, among other things. You can find my Twitter account below; I am more active there than here.

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