HECS architect Bruce Chapman says with a few tweaks to its plans the federal government could cut the cost of university loans in a fairer way.
The government's plan to charge real interest on HELP debt would lead to poor graduates paying up to $30,000 more over the lifetime of a $60,000 loan than a high earner, he says.
University graduates in low-paying jobs, like teachers, and those who take time out to look after children will find themselves saddled with much higher debts under the government's plan.
Dr Chapman's modelling, done with his Australian National University colleague Timothy Higgins, shows that on a $60,000 loan, the low earner would end up paying $105,000 while the high earner pays $75,000.
They've proposed two alternative options.
One possibility would be to only start charging interest at the 10-year bond rate once income reaches the repayment threshold of about $50,000.
It's more equitable than charging the bond rate on the debt from day dot but would still end up with poor graduates paying more than high earners.
Their other suggestion was to add a 25 per cent surcharge to the debt and index the principal in line with consumer price rises.
All graduates would pay the same real amount over the loan's lifetime in this scenario.
Dr Chapman and Dr Higgins say the cost to the budget from these alternatives is relatively small but it's much fairer for students.
Education Minister Christopher Pyne has indicated previously he would be willing to change his plans for the interest on debts if it would help the higher education reforms get through parliament.
On Friday the minister said he's been talking to the Senate crossbenchers "for months and months and months" about the government's plans.
The government also wants to deregulate tuition fees, expand government funding to private providers and sub-bachelor courses and cut the level of per-student funding.
Opponents of the planned changes say increased fees coupled with higher interest on debts will put off disadvantaged youth from heading to university.
Labor's higher education spokesman Senator Kim Carr said fiddling with the interest rates wouldn't fix the essential unfairness of the changes.
"Watering down one aspect of the Pyne plan will not stop the Americanisation of our universities and the prospect of $100,000 degrees," he said.
WHAT INTEREST COULD COST UNI STUDENTS
TO REPAY A $60,000 DEBT WITH INTEREST AT 10-YEAR BOND RATE
* high earners pay $75,000
* medium earners pay $82,000
* low earners pay $105,000
IF 10-YEAR BOND RATE ONLY KICKS IN WHEN YOU EARN MORE THAN $50,000
* high earners pay just over $70,000
* medium earners pay $72,000
* low earners pay $78,000
IF 25 PER CENT SURCHARGE ADDED AND LOAN INDEXED AT CPI
* all graduates pay $75,000
(Source: Bruce Chapman and Timothy Higgins)
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