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.

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.  

  • 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.

    Feel free to share my posts anywhere you like, provided appropriate attribution and link-backs are given. Respectful comments always welcome. I like discussion.

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