Labor’s education savings short sighted
Minister for Children and Youth Affairs, Larry Anthony, today said that Labor’s opposition to the closure of the Student Financial Supplement Scheme could cost Australian taxpayers billions of dollars in the future.
“Labor’s recently released higher education policy will be partly funded by opposing the closure of the student loan scheme. However, this is a costly and irresponsible proposal that highlights Labor’s lack of ability to develop credible policy.
“The Government announced in April our intention to end the loan scheme because it is not delivering good outcomes for students or Australian taxpayers. The announcement was welcomed by stakeholders, including the National Union of Students.
“The structure of the scheme is fundamentally flawed. In order to receive a loan, customers have to trade in a component of their income support payments. This means they can face effective interest rates as high as 16 per cent.
“The loan scheme is creating high levels of student debts. Some customers have debts as high as $28,000. On an income of $35,000 per annum this would take 40 years to repay.
“In addition, the Australian Government Actuary has estimated that more than 50 per cent of total loans may never be repaid. With more than $2 billion of debt outstanding since the scheme started in 1993, this means up to $1 billion dollars may not be repaid.
“For many customers, clearly the scheme works more like a gift than a loan. However, this is a gift that Australian taxpayers cannot afford.
The Student Financial Supplement Scheme was introduced by the Labor Government in 1993 in a climate of high youth unemployment, high interest rates and when there were few commercial loan packages available to students. Students now have far more flexible and better-targeted options to fund their studies such as Youth Allowance.
“Since the inception of Youth Allowance, take-up of the Student Financial Supplement Scheme has declined by one third. Youth Allowance provides flexible benefits such as the $500 advance, higher income free area, Student Income Bank and access to Rent Assistance.
“Labor’s proposed savings of $159 million will cost future generations dearly. I hope they will come to their senses and support the Government’s legislation to close the scheme when it is introduced in the Autumn session of Parliament,” Mr Anthony said.