Tuesday, December 09, 2003

Student Financial Supplement Scheme Update

In mid-Sep, I blogged about the upcoming possible abolition of this cynical and usurious loan scheme. It now looks like it will happen, but “administratively” – i.e. not through legislation.

Being on the side of abolition, I don’t care too much about such a curious process on this occasion – although I note that it would seem to set an unfortunate precedent. Perhaps a couple of the attack dog pack against judicial activism – like Janet Albrechtsen and PP McGuinness – could take up the cudgels on this account: a case of parliament subordinating its authority to mere administrative edict.

In any event, with last week’s passing of the Nelson shake-up of the higher education system, a new, turbo-charged usurious loans scheme is about to commence operation.

No one yet seems to be predicting the likely bad debt ramifications of this one. Based on the total bad debt (i.e. debtor dies before full repayment) write-off for the current HECS scheme being anticipated at 20%*, my guess is that the much-higher loan amounts under Nelson will result in a loan-lifetime write-off rate well above 50%.

* Chelsey Martin “HECS doubtful debts balloon to $2bn”
AFR 3 Nov 2003 (no URL)

Update 10 December 2003

It occurred to me that “usurious” is not a technically accurate term for the Nelson ramping-up of student fees (although copious bad debt write-offs do often go hand-in-hand with high interest rates, of course).

“Two-tier arbitrage” would be a more accurate term for many of the 35% quota, fee-paying undergrad course places that will now start sprouting like mushrooms. With the debt-package involved likely to sound like – to the average 18 y.o. enrolling student – the “supersize combo” option at their local fast-food outlet, this will not be a difficult selling proposition for any smooth-talking university rep.

One wonders whether another species of the Great Australian Middleman will soon emerge here, to play a role similar to the offshore commission agents who bundle planeloads of fee-paying overseas students to our shores each year. After all, there’s a million-plus Gen Y’s out there, who all now have a virtual credit card, with a $50k limit. All they need is for someone to convince them to break it out, and to never mind about reading the fine print, viz that they’re paying double or triple the going rate.

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