Coalition may privatise HECS debt

[ninwa]

http://au.news.yahoo.com/thewest/business/a/-/business/19408705/libs-to-clear-23b-hecs-debt/

One proposal that has backing in the financial sector is to convert the $22.6 billion in HECS debt held by 1.6 million Australians into a financial product. In a process called securitisation, the responsibility for HECS debts would be bought by the private sector and then sold to investors.

Not sure if this will affect future uni students, but it certainly affects current ones

[brenden]

...Does this mean it could stop being interest free or other good things?

[Will T]

In my heart of hearts, I always knew something like this would happen with the LNP.
Looks like it's time to start trying for a scholarship.....

[chasej]

This seems to be essentially what is proposed. http://lexicon.ft.com/Term?term=securitisation

It's just the government passing on the debt to someone else. Government may sell the debt for less than it is worth. E.g. Sell the debt for 15b when it would result in 22b of revenue. Thereby making it an attractive investment without causing repayments cost to increase.

I may be wrong though as my knowledge of bonds etc. is limited to VCE economics and there's not much info in the article.

[charmanderp]

Was coming on here to post this. Slightly irritated etc.

[Russ]

It depends on what the government actually decide to do but at best it will be neutral for students. Most likely it'll be good for banks and no change for the people with the debts. Some people are talking about it as a shift towards the American model, which would be terrifying and stupid, but it might not end up being like that.

It is, however, an excellent example of the LNPs economic capabilities.

[BigAl]

I don't think it would affect us or future student. I think the government is trying to get some cash money...kind of boost...not sure if it's a good thing though

[chasej]

Also worth mentioning that this is a proposal and not a policy. It's possible this would never see the light of day after this article.

[Professor Polonsky]

It doesn't involve any change of policy regarding HECS (that's set out in the Higher Education Support Act and regulations). My understanding of the proposal is similar to chase and Russ' - it's simply about who owns the debt, not how much you owe (or its indexation).

What interests me though is the mechanics of it - assuming payment would still be made through the income tax system, will the Fed government be passing the money they collect on? That could get a bit complicated then, especially if it can be resold.

[charmanderp]

It doesn't involve any change of policy regarding HECS (that's set out in the Higher Education Support Act and regulations). My understanding of the proposal is similar to chase and Russ' - it's simply about who owns the debt, not how much you owe (or its indexation).

What interests me though is the mechanics of it - assuming payment would still be made through the income tax system, will the Fed government be passing the money they collect on? That could get a bit complicated then, especially if it can be resold.

It's an uncomfortable precedent though. Additionally if you have private institutions funding public education I feel like it also gives those institutions more of a capacity to exert influence on the higher education system which might not be driven by pedagogical values.

[Professor Polonsky]

Not necessarily, because it seems as if they'll be sticking to selling preexisting debt rather than any future debt.

[charmanderp]

Not necessarily, because it seems as if they'll be sticking to selling preexisting debt rather than any future debt.

Yep I'm aware of that, but you still have a private institution that's owed money by universities/university students. I think to say this wouldn't give them the slightest bit of influence would be folly (though I might be on a slippery slope here). And like I said I do feel like it says an unhealthy precedent for further privatisation of what should be public sectors, like education.

[thushan]

Yep I'm aware of that, but you still have a private institution that's owed money by universities/university students. I think to say this wouldn't give them the slightest bit of influence would be folly (though I might be on a slippery slope here). And like I said I do feel like it says an unhealthy precedent for further privatisation of what should be public sectors, like education.

Nah, it won't happen if this were to go through. The company would have money owed to them; they have not "donated" money to the university nor do they plan to I think (in this scheme). They would have power to control the universities if the universities rely on the companies for funding and donations, neither of which have happened on a large scale.

Securitisation =/= donation.

That said, this proposal is unneeded. :/

[Damoz.G]

I wonder if any company or rich person will risk "buying" the debt. There is a MASSIVE risk that they may not get that money back, which is why it will be interesting to see who takes up on Abbott's proposal.

[thushan]

I wonder if any company or rich person will risk "buying" the debt. There is a MASSIVE risk that they may not get that money back, which is why it will be interesting to see who takes up on Abbott's proposal.

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.