6 ultimate ways to fight down student debt in Australia

#The why? - Reasons for the increase

Now, here come the reasons, which are making the education cost soar higher, thereby increasing the student debt. Obviously, not individually, but a collective effect of all the below mentioned points are posing a threat to the peace of mind of every average and low-income student, studying in Australia. Also, as per the facts, on average, the tuition fees of higher colleges in Australia increase by 8% every year, which reflects that the college fees doubles every nine years. The basic reason for the same is rapid growth in inflation every year along with the following supplementary reasons that add to the chaos and misbalancing of finances.

Sources: NPSAS reports

The above graph depicts that there will be a 100 % increase in the tuition fees of Australian colleges in a gap of 20 years. This means that the new born of today would pay double the amount of fees, the present college generation is paying.

• Escalation in the admission graph

  Higher education undoubtedly is one of the prime needs to help a person qualify for a good job opportunity as almost every big company these days look for employees who have a good educational background. Therefore, it would not be wrong to say that money spent on education is a type of investment. This demand and need together, has resulted in more students applying for post-graduate degrees. Not only students from the country itself, but Australia in totality gets to witness a huge number of students from across the world. In accordance to the DoE’s international student data webpage, 398,563 students got enrolled in the Higher education of Australian Colleges in 2018.

  Thus, it can be said that the demand for education is increasing, which is forcing colleges to increase their fees.

  

  For example, the tuition fees for Bachelor of Advanced computing for an international student from the University of Sydney for 1 year (2020) is $ 48, 500. With the number of admissions growing, the fee of the course is expected to shoot up to around $ 67,900 in 2025. This can be explained by the phenomenon of demand curve, where the price of a product is likely to grow, with the increase in its demand.

• Bloom of private colleges

  In accordance with a report released by Grattan Institute in 2018, a total of 105 out of 127 higher education institutes are run by private entities. (Institute)

  These institutes are not administered under the public sector; therefore, they have their own set of profit-making terms. Moreover, the courses offered by these colleges are only entry-level, after which the student has to seek admission in some other public university. In fact, the teaching practices of some of these colleges are not even aligned with that of the university academic structure.

  This is reflected in huge differences in the fees structure of public and private universities in Australia. For example, the annual fees for an international student for a Bachelors degree course in Business from Queensland University of Technology (Public University) is $29,900, whereas for the same course in Bond University, which is a private University, the fee structure is $38,160 annually. The phenomenal variation in the two, is enough to entail the profit margins earned by the private institutions.

• A sheer requirement of the degree

  Now, another factor that cannot be ignored is the stamp of a degree from a respective college or university. It is true that a student must at least acquire a graduation or post-graduation degree to shape his career in the right direction. However, the fact that not everyone is capable of spending such a huge amount that is required to attain these degrees, is also irrefutable. Additionally, the sheep herd of completing courses from respective expensive colleges is again putting a lot of pressure not only on the students but also on their parents.

  

  Source: US Bureau of Labor Statistics, Current Population survey

  The above data clearly states that with every step upward in the level of degree, the value of money paid per week increases magnificently. This for sure is a great explanation, why more and more people are applying for degree and higher education degree courses at Universities across the globe.

• Upsurge in the trend of Federal Student Aid

  According to the paper- Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs (Federal Reserve Bank of New York), a direct link has been found out between the federal loans provided by the government to students and the hike in tuition fees of colleges. It says because of the increase in the limit of subsidized loans given to students, more students get lured towards applying for higher education courses in colleges, which further increases the demand for professional courses at universities. This also includes the numbers who are not willing to do the course, but because of the availability of government grants, they tend to apply for it. The resulting surge in the demand for higher education further pushes colleges to raise their tuition fees.

  The same study analyzed the fact that if the government makes a $1 increase in unsubsidized loans, then the sticker price increase in tuition fees is by 40 cents, whereas if the same increase of $1 is done in subsidized loans then the sticker price increases by 60 cents. This explains that the 20 cents increase in the price is leverage that the colleges take on subsidized loans. So, to cut down the profits of the college, the government should make only necessary changes in Federal loans given to the students. (Federal Reserve Bank of New York)

• On-campus student assistance

  Along with providing education in the form of lectures and notes, there are many other services, that a college is bound to cater to. These include libraries, support staff, laboratories, educational trips, guest lectures, and many other on-campus educational services. Further, with the growth in the number of students applying for courses at Australian colleges, the need for a multiplicity of all these services increases automatically. The funding required to allocate all these resources is produced from the students only, by shooting up their tuition fees.

  As per the Department of education, Australian Government, in 2019 the colleges can charge Student Services and Amenities fee up to $303 per student annually. The regulations for the same are set under the Higher Education Support Act 2003. Further, the SAF charges for the University of Sydney in 2019 and 2020, semester-wise for full-time students is $151 and $154, respectively. (Current students, n.d.) This means that the SAF charges are also bound to increase every year, which puts more burden on students.

  

  Sources: Department of Education and Training

  The above graph bifurcates the number of people on the basis of staff requirements at various working areas of the University

• The decline in financial support from state governments

  Sad but true, this is one of the biggest reasons that has landed Australian colleges in situations leading to an increase in fees hike of students. The funds provided by the government have gone far low in recent years. As per the Federal Government Announcements in December 2017, a huge cut of $2.2 billion was made to university funding to bring down the overspending of the government in the sector. This was a concerning move for every single person related to the education sector as it directly resulted in putting more burden on the shoulders of colleges, students, and parents.

  However, in 2018, the government decided to shell out $134.8 million to produce 1955 more scholarships, which increased the count to 3155 scholarships for regional students applying for higher education.

  On the other hand, there are only 1000 scholarships available for international students whereas the money earned from education export in Australia was $ 30.3 billion in 2017 and it is on an ever growing scale.

• Luxurious amenities offered

  Along with providing basic amenities, the top Australian colleges also make sure to facilitate its students with high- end amenities which are the main reasons that attract large number of students to these colleges. The amenities include services like on campus housing facilities, luxurious swimming pools, roof top gardens, valet parking, ‘worry free zones’ and many other. Such facilities not only lure students to these colleges but also make them addictive to these benefits.

  For example, The University of Western Australia has an Aquatic Centre and to access the same, students, community members or the non- University students and pension holders have to pay around $4-$4.5 per visit. Also, there are separate charges for multiple visits and membership cards can also be made accordingly. (About the UWA Aquatic Centre, n.d.)

  Moreover, The University of Kentucky introduced a worry-free zone inside the campus in 2016, wherein special diets menu was introduced. In these diets, ingredients such as gluten, peanut, shellfish, and tree- nut are not used, as many students are prone to allergies from the use of these food items. Also, many other flavors in dishes were introduced to attract more students to the campus canteen. (the University of Kentucky News, n.d.)

  These are few of the ways, with which the college fetches extra money from the students.

#The impressions thus created

With such soaring costs of education in Australia, many students are not able to apply for higher education courses. This is truly sad and needs to be taken as an alarming situation for the future growth of the country. If the number of students applying for the courses will steep down, it will not only affect the economy's growth but will put a question mark on the personal growth of the students. Further, it can contribute towards an increase in the unemployment ratio of the country.

Moreover, all the factors discussed in the above section put pressure on the Australian colleges to increase their education fees, which further ends up in the following effects.

• A life worth hundreds of dollars every week

  A foreign student living in Australia is not only supposed to bear the educational expenses but the cost of living is also a matter of concern for him. This enlists the burden of money to be spent on transportation, books, food, and accommodation. Obviously, it is just not easy to live in a foreign land! From sacrificing the comfort of home to adjusting to an alienated environment, a student has to go through a lot of hardships. On top of that, the inflation in college fees is a sheer disappointment for students.

• As per the Study in Australia Guidelines, a person coming to Australia needs to shell out $224- $ 331, on average, per week. This huge variation depends largely upon the accommodation he gets to choose. Further, below is the bifurcation of the cost of living

  • Grocery for the week and food- $80 to $280 per week
  • Expenditure on Public transport - $15 to $55
  • Gas and electricity usage - $35 to $140
  • If you purchase a car, the weekly budget, after purchase - $150 to $260
  • Bills for Phone and Internet - $20 to $55
  • Entertainment activities - $80 to $150

• To mention the earning capacity of a student, in accordance to the official Australian Government website, Study in Australia, an international student can work for 40 hours every two weeks, when his course of study is in progress. Whereas, in the case of summer breaks or other course breaks, an international student can work for unlimited hours.

• Also, the minimum wage as per the website for an international student ranges from $18.29 to $20 per hour and it can go up to $25 depending on the type of job and the industry chosen. This sums out that a student can earn a minimum weekly amount of $365.80 if he works 20 hours a week.

• Now, comparing the weekly earnings and the weekly expenditure, it can be noticed that they are almost the same, which leaves very less space for the student to save for his University Fees installments.

• Sharp elevation in the scale of the debt

  Yet again, a very distressing effect of education inflation is the constant increase in student debt. For gaining a degree in higher education, students tend to apply for education loans from the Australian government. These loans are of huge amounts, paying back which takes a toll on the life of students. Though taking an education loan has become a mandate for students these days but the increasing debts on them is a great cause of worry. Further, their inability to pay off these loans acts as a threat to their identity and their future goals.

• 

  Sources- DET, HELP data

• The above graph elucidates the increasing amount of debt on the people from the time range of 2009-2018. This clearly shows that the outstanding debt amount has been increasing with each passing year.

• 

  Source: DET, HELP data

• The above graph showcases the fact that the number of people with HELP debt has increased over a period of ten years. Also, the graph can be seen upsurging with every single year

• The program HELP was started by the Australian government as a measure of offering fund assistance to the students. Whereas, it turned out to be a disaster for students as the debts are soaring high and making it difficult for them to pursue their lives in peace. Also, these loans further prove to be a source of income for the government only, as they get to encash on the long loan tenure and high rate of interests paid by the students.

• Superfluous use of self-capability

  Now, the mismanagement comes into the scene, when, students start spoiling their health by joining a number of employment options, just to pay off their loans. It has been witnessed in many countries, that students tend to work on one job during the daytime and at another one in the evening, to disburden themselves from a load of debt. These multiple jobs, continuous working hours, illegal strategies, collectively take them far away from their dream of attaining higher educational degrees and actually makes them stand nowhere. With so much happening at such young age, the students start to face problems of depression and anger. Therefore, changes should be brought at the root level so that the students of the future do not face these harsh realities.

• More applications for scholarships

  Of course, scholarships seem to be the only way out, in such cases. However, the twist is that only 4155 (approx.) scholarships are currently available to both regional and international students, combined for the two vocational and higher studies. This is too low in contrary to a whooping high number of 1, 562, 520 students out of which 4, 79, 987 are international students. These numbers are self-explanatory to entail the difficulties that a student faces while going through the scholarship procedure. Also, for such huge numbers, the tests drafted by the universities are again very tough, which questions the capability of a student at every passing level.

#6 possible approaches to curtail the students' debt overload

The problems discussed above are impacting greatly on the growth of the students in higher education which is why it is the need of the hour is to look for realistic solutions. Thus, the following is a list of possible way-outs, implementation of which can prove to be highly beneficial for the students as well as for the government of Australia.

• Cease the tag of business

  The number of students applying for a higher college education is increasing with each passing year. mand in education has given further rise to the surging hike in tuition fees at Australian Colleges. This clearly exemplifies that this cycle is working on a demand and supply basis and education has become a business for the past many years. Therefore, to keep a check on the constant increase in the profit earnings of colleges, the government of Australia, should intervene and restrict the colleges to minimize their fees hike to a certain percentage. The fact that an 8% hike is witnessed every year in the higher education fee of Australian colleges, is truly alarming.

  The government intervention can prove to be a great relief for the regional as well as the international students. Also, the escalation in the dropouts from higher colleges is actually a call for the government to take some strict action against the top private universities and preach to them about the importance and essence of educational services.

  According to a report produced by Universities Australia, by the name Data Snapshot 2019, it has been found that the total operating expenditure of Australian Universities in 2016 is $28.6 Billion whereas the operating revenue for the same year is 30.1 Billion. This margin in terms of profit is huge, and this is where the government needs to intervene and limit the profit range to a minimum percentage.

  (Data Snapshot 2019)

  

  Source: Department of Education, Financial Report of Higher Education providers, 2016

  The above graphs elucidate the concerning difference between the operating expenditure and the operating revenue of Australian Universities in the year 2016.

• Creating a win-win situation for both the students and the Government

  Many countries have come up with various ways to help students with their college fees. A new exercise, which can be brought into action by the Australian government is dwelling into some hourly work possibilities for students and reimburse them in the form of their college fees. These activities can be communal or government help services, which would be allocated to earn profits for the government.

  This way, the government can encash the skills of the volunteering students by getting the work done on an hourly basis rather than paying a full day wage to a professional. Also, on the other hand, the student gets to pay off a part of his tuition fee by the government itself.

• Keeping the students' interest at first

  The students staying in Australia, having student Visa, currently have the permission to work for 40 hours fortnightly. This is very little in comparison to the student loan debts in Australia. Therefore, the government should take steps to increase the working hours of the students in a way, that would help them earn more money to pay back their debts on time.

  Moreover, Australia can become the trendsetter by introducing an additional increase in the working hours of international students as most of the countries have the same fashion of working 20 hours per week. However, with the commencement of this change, the country can proudly announce itself as the first one to keep the student's interest at first. This would also result in creating a shift towards increasing the share of weekly earnings to that of the expenditure done on weekly needs (cost of living) by international students in Australia.

• Capping the federal loans

  As discussed above, in the research conducted by the Federal Reserve Bank of India, a direct link has been established between the federal loans provided by the government and the rise in tuition fees of colleges. So, to break the monotony, the government should restrict its grants in the form of loans to students, so that colleges alongside would be stopped from adding more dollars to their fees structure.

  Though, this concept has already been visualized and there are various caps on undergraduate loans but the problem comes with the graduate loans. Especially, the GradPlus loans, which do not have any limit in terms of borrowing. Also, as per the Department of Education, there are more than 100 borrowers whose loan balance is over $1 Million and most of them are the processors of Grad PLUS loans.

  Putting a limit on these types of loans, would in one place put pressure on colleges to not increase their tuition fees and on the other hand, would also eliminate the unwilling admissions to higher education.

• Bringing ease in the loan interest

  Well, this is a major step, that needs to be taken by the Government of Australia, the reduction in the interest rate on students loans. The interest rates should at least be brought closer to the prime loan rates so that the student does not feel burdened when he compares his education loan to a car loan. The bottom line of giving the loan and its purpose should always be analyzed first before setting huge rates on education loans. Moreover, the paying back capacity of the students and their future earnings in terms of jobs opportunities should together be taken into notice, before deciding the high-interest rate on student loans.

  Though Australia is considered to be a generous country (4.45%- 7%) as compared to England (5.4%) but there are countries like New Zealand which does not charge any interest on the student loan. Additionally, there are countries like Finland and Germany which charge very minimal or no fees from the students.

• Increase in the pocket value of students

  To balance out the paying back capacity of students and other expenses accounting to manage their cost of living, it is an extensive need today, that countries should increase the wages scale for students. There is a large force of workers, who fall into the students’ category, therefore to pose an equilibrium in their expenditures and earnings, the daily wages or the weekly salaries of these workers should be increased.  Besides, more remote part-time jobs for students should be generated so that more and more students can work in their free time and earn decent amounts of money to support their expenses and manage debts. By pursuing part-time jobs online not only can students enhance their financial management but also learn essential professional skills. In today's era defined by ultra digitalization, there is a wide spectrum of online jobs that make it easy for students to earn money. Enhanced earnings will add to the pocket value of students and play a salient role in helping students get rid of their debts without compromising on their quality of life.

  As calculated in the high cost of the living section, there is very little difference between the weekly earnings ($365.80) and expenditure ($315) of an international student studying in Australia. Therefore, to increase the gap and put more confidence and education in the pockets of the students, the maximum weekly wages should be increased for the students.

  This would also reduce the number of college drop outs from the universities, giving more financial support to the students to afford higher education.