Accord

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• A review team is due to finish a draft report in June and a final report in December 2023.
• Some students have been expressing shock and dismay as their loans are interest-free and they believed they would not grow.
• This is why universities should do more to help students better understand their HECS-HELP debt and make financial decisions in general.
• On top of other generic skills learned at university, such as communication, collaboration, problem-solving and critical thinking, we need to add financial literacy.

Studying is a financial decision

• And students accrue significant amounts while studying – often in the tens of thousands of dollars.
• The 2021 ANZ Financial Wellbeing Survey found that 18–24 year olds struggle with financial planning, choosing products, understanding online risks and credit-trap awareness.

What is financial literacy?

• It requires you to be competent in many aspects of the financial decision-making process.
• It includes the person’s knowledge of financial concepts, their ability to gather and sift through information and compare products, and their confidence in making decisions involving money.
• Although the concept is broad, there is a set of five questions about interest rates, the stock market and mortgages that are regularly used to measure an individual’s level of financial literacy.
• More alarming than the overall decline and increasing gender gap is the decline in financial literacy for those aged 15 to 24.

Why should unis get involved?

• In its early iterations, the National Financial Literacy Strategy (later named the Financial Capability Strategy) focused on driving improvement through formal education in schools.
• However, the effort has not shifted the dial on school performance in terms of financial literacy and there are issues with the focus on maths in the school curriculum over building specific financial literacy skills.

The US example

• In the United States, 19 states either require or plan to require students to do a personal finance course to graduate from high school.
• A 2019 US Treasury Department report recommended universities and colleges “should require mandatory courses to teach students financial concepts and skills”.


Many US universities already have financial literacy courses. The Ohio State University, for example, runs a financial coaching program to assist thousands of students each year in setting financial goals, budgeting and banking, credit, debt repayment, saving and retirement planning.

Read more:
Many students don't know how to manage their money. Here are 6 ways to improve financial literacy education

How can we improve financial literacy?

• At the strategic level, they should add “developing financially capable students” to the list of graduate attributes.
• They could then mandate all students complete a course on managing personal finances as part of graduation requirements.

• A review team is due to finish a draft report in June and a final report in December 2023.
• The university fees (known as “student contributions”) paid by most domestic undergraduates are a difficult issue for the Universities Accord review.
• A multi-rate student contribution system – with the aim of making average student debt repayment times similar across different courses – would be more politically acceptable.

Current student contributions

• The Morrison government’s Job-ready Graduates policy set current student contributions in 2021.
• For subjects the government deemed “job ready” or “national priorities,” student contributions were lowered to attract students.
• These student contributions are added to federal government subsidies called “Commonwealth contributions”, which also vary by discipline, to create a total funding rate received by universities.

What are university groups calling for?

• Two university lobby groups, the Group of Eight (which includes the University of Melbourne and University of Sydney) and the Australian Technology Network (which includes Curtin, Deakin and RMIT universities), want a single student contribution rate regardless of subjects taken.
• Before the Job-ready Graduates scheme was introduced, student contributions were roughly linked to future expected earnings in a similar way.

My submission to the Universities Accord

• But student interests, and within those interests employment prospects and expected salaries, are the main drivers of course choices.
• My submission to the Universities Accord review focused on practical consequences for students, the government and universities.

Consequences for students

• Students in longer courses would pay more in total, but final HELP debts on completion would be more similar across courses than under Job-ready Graduates or the previous student contribution system.
• In practice, however, the same debt has different on-average consequences depending on degree taken.
• Annual HELP debt repayments are based on the debtor’s income, so students with degrees leading to better-paid occupations make more annual progress towards paying off their HELP debt.
• For example, before Job-ready Graduates law students were charged more than humanities students, but graduates from both fields on average took nine years to repay their HELP debt.

Consequences for government

• HELP debt costs the government money as well as students.
• Normally the government incurs interest subsidy costs, calculated as the difference between what it costs the government to borrow money in the bond markets and the CPI-linked indexation rate.
• Not all HELP debtors repay, with 15% of new debt estimated to be eventually written off at taxpayer expense.

Consequences for universities

• For universities, the total funding rate matters more than how it is divided between Commonwealth and student contributions.
• But student contributions matter independently in one specific set of circumstances: when universities “over-enrol”.
• Universities would lose money if they over-enrol in these courses, discouraging them from offering more student places.

The politics of single rate student contributions

• A flat student contribution that left the government and universities in the same financial position as now would be about $10,000 per year for a full-time student.
• $10,000 is more than double what teaching and nursing students pay now.
• Based on 2021 enrolment data, a flat student contribution would, on average, lead to women paying slightly more than under Job-ready Graduates.

What now?

A flat rate student contribution would be simple and improve on Job-ready Graduates for universities and students in high student contribution courses. But a three or four-tier student contribution system would do more to equalise repayment burdens between students. It would be fairer overall, and politically easier for the government to sell.