Coalition may privatise HECS debt

[Professor Polonsky]

That said, this proposal is unneeded. :/

Agreed.

Edit: To expand on that, there's no reason to use such extraordinary means to raise money. We shouldn't even be doing anything special to raise money in the short-term.

[simpak]

Sure? They'd be guaranteed to get that money back - the taxation system will ensure we pay up, and also not THAT many people I imagine would be leaving the country.

Really?  I'm currently racking up the largest HECS debt possible (terminated degrees, OS-HELP) then aiming to evacuate the country!

[appianway]

What incentive is there for someone to purchase the debt without charging an interest rate (unless the government pays interest to whoever holds the debt)? If they only get the money back that they've lent, they've essentially lost money due to inflation, and then there's also the risk (albeit small) of lending.

[mark_alec]

Really?  I'm currently racking up the largest HECS debt possible (terminated degrees, OS-HELP) then aiming to evacuate the country!

Planning to join me in sunny Cali? (You really should, it is awesome here).

[simpak]

Planning to join me in sunny Cali? (You really should, it is awesome here).

I'll apply to Stanford and then we can be bffs forever.
I'm not sure yet!  East coast is preferable but we all know how bad I am at life decisions.  Although, I did finally decide not to do Honours at wehi >.>

[hobbitle]

Why not WEHI, simpak?

[simpak]

Just decided to go w/ my gut and go with my department...more interested in a project so it's basically based around that but also the environment in terms of the people to be working with and PDI is opening so there are no more 'poorer facilities' issues.  Having experienced WEHI, I've liked it, but at the same time it can be...a little cold sometimes!

[mystikal]

What incentive is there for someone to purchase the debt without charging an interest rate (unless the government pays interest to whoever holds the debt)? If they only get the money back that they've lent, they've essentially lost money due to inflation, and then there's also the risk (albeit small) of lending.

^ this is probably what is going to affect whether investors will take up the offer or not. its a good idea for getting funds actually for the government however, i hope it does not end up like the GFC in the US where they securitised mortgages and many people defaulted. Basically for this to happen to AUS if we go into a deep recession and unemployment goes sky high then these HECS bonds would be useless.

Probably a good way to do it would be to securitise and I know this may seem like discrimination or whatever but if you categorise them into types of degrees, such as health degrees (medicine, optom ,dent etc....) tend to have higher employment rates than most degrees and therefore the interest rate provided for these bonds would be lower, compared to say an arts or commerce degree bond. Just throwing ideas out there. or you can securitise the health degree ones only. 

[appianway]

I feel like HECS debt is a lot less risky than subprime mortgages though because the payment structure is such that people have it deducted automatically and gradually...  even higher risk HECS debt would be a lot safer. But still...

[JellyDonut]

Multi-quoting is a bitch on the iPad so bear with me.

Firstly, the Australian government is still the issuer of debt. Unless, it is an actual LNP policy, securitization of hecs debt, in of itself doesn't mean it will stop being interest free.

Secondly, the nature of hecs debt is that it is indexed to inflation so the real value never changes. By securitizing the loan, it's effectively making it a really shitty CPI bond. The value that comes from investing in this comes from the discounted NPV. So for example, I've heard that some bankers would only be paying $6-8b for the $23b debt. On that note, any risk that arise from recovery or whatever would most likely be factored into price anyway

Finally, it's by definition impossible for a GFC to occur on hecs debt because default can never happen. The principal is repaid according to a percentage of income >$51k. Below that you don't pay anything.

The government is basically liquidating some of its assets so it's not a doomsday tactic most think. The polo popo did raise a good point that collection through the ATO would make it weird as fuck. Also considering the fickleness of payments, due to it being a proportion of income, raises the issue of how debt securities is marketed and what obligation, if any, does the ATO have in disseminating payment information of students. It's nothing like the American system

[slothpomba]

I think by this point in the thread we've established (at least i hope we have) that HECs will stay the same to the student, it won't look any different. The question is whether it's a good idea to do this. They're taking a massive write down for short term gain to make their balance books look better. If you're cynical, you could argue its part of liberal policy to simply fluff their economic credentials on paper ala the budget emergency.

They'll be taking in less by selling it than they would if they kept it, there's no upside to that besides a temporary adjustment to the balance book by shooting yourself in the foot.

Now, if that money was spent on something immensely useful with a much high fiscial or social return than HECs, it might be alright but otherwise, i cant see how shooting yourself in the foot like this is a good idea in any galaxy.

[JellyDonut]

I wouldn't necessarily call it a write down per se.

[100gorgeous]

Really?  I'm currently racking up the largest HECS debt possible (terminated degrees, OS-HELP) then aiming to evacuate the country!
[/quote

Jeez, and you don't feel bad about this at all? This country has given so many people so many chances at life, not something I could ever effectively steal from.