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30 per cent of university graduates to be out of work after finishing degree

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Matthew Knott, Heath Gilmore

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Gittins: changes to HECS foolish

The higher the Government increases the interest rate on HECS, the more of this debt that ends up never being repaid. Ross Gittins comments.

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Up to 65,000 university students - 30 per cent of graduates - will be jobless four months after finishing their studies, and those finding employment will be earning less, the federal government has forecast.

The predicted major downturn in graduate employment will occur at the same time student debts are expected to soar with the deregulation of university fees and an increased interest rate applied to student loans.

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Preliminary estimates also indicate that the amount of student debt owed to the government, which will never be repaid, could jump to $3 billion a year under the new rules.

Tim Higgins, a senior lecturer in actuarial studies at the ANU, said fee deregulation raised concerns about future budget blowouts as students load up on debt. ''There are no incentives for universities to manage the risk of loan non-payment because the government pays the shortfall,'' Dr Higgins said.

The budget papers show only 70 per cent of higher education graduates are expected to have a full-time job within four months of finishing a degree in 2016-17 - down from the 78 per cent predicted a year ago. This means 64,800 new graduates will be out of work, 17,000 more than predicted in last year's budget.

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Graduate salaries are also expected to fall.

Starting salaries for higher education graduates, as a proportion of average male weekly earnings, are forecast to fall from 78 per cent this year to 74 per cent in 2016-17.

A spokesman for the Education Department said the figures reflect Treasury forecasts of a softer labour market in coming years, with unemployment forecast to rise to 6.25 per cent in the June quarter next year.

Graduates in full-time employment fell from 76 per cent in 2012 to 71 per cent last year, according to a Graduate Destination Survey.

Education Minister Christopher Pyne has justified fee deregulation by pointing out there are significant personal benefits to having a degree, with graduates earning about 75 per cent more than non-graduates - or about $1 million more over their lifetimes.

Greens higher education spokeswoman Lee Rhiannon said: ''It beggars belief the government would introduce these changes when their own department's figures show fewer graduates will be employed.''

On budget night the government announced that it would cut its contribution towards the cost of university courses by an average 20 per cent, saving $1.1 billion over three years. It will also reduce the annual indexation of its contribution, switching to the consumer price index.

To compensate the higher education sector, the government is allowing the universities to structure the fees they charge for different courses.

Students borrow money from the taxpayer to pay for their course. These loan payments are expected to increase from $6.6 billion this year to $12 billion in 2018, a Department of Education spokesman said, with another 80,000 participants accessing the system for the first time and the impact of fee deregulation.

Grattan Institute Higher Education program director Andrew Norton, and other academics, said the amount of unpaid debt arising from these student loans had the potential to grow dramatically.

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275 comments

  • all thanks to the Liberals - who seem determined to have class warfare in Australia where only those from the rich families can afford to go to uni

    Commenter
    John
    Location
    Wynnum
    Date and time
    June 04, 2014, 7:14AM
    • "Poor" students can still go to uni, they just have a larger HECS debt. Same with "rich" students.

      Gillard and Swan were big on class warfare, pity that only involved lecturing billionaires and not actually doing anything.

      Commenter
      adrian
      Date and time
      June 04, 2014, 7:40AM
    • Not following you, John. Everyone takes on a debt from the government to pay tertiary fees as they do today so that their future earnings will pay down the debt, as they do today. It wont stop the intelligent poor from going to Uni. Its Labor that promotes class division. Gillard even said it herself.

      Commenter
      Mike
      Date and time
      June 04, 2014, 7:42AM
    • Money is a poor motive for improving one's education. If you want to make money, all you need do is think outside the square and play the system. I suggest that many will recognize that they have been simply programmed to accept the status quo and that if you have a victim's mindset, you will become a victim. The pendulum has been pushed strongly to the right and the reaction will be interesting. My feeling is that apathy will evaporate in an instant. Tony Abbott is good for Australia - 'some things are so bad that they are good', and I hope he fights to the bitter end and takes the LNP down with him. They always were a luddite waste of space.

      Commenter
      adam
      Location
      yarrawonga
      Date and time
      June 04, 2014, 7:50AM
    • Absolutely right John. They keep spruking the no upfront payment line but how many will be deterred from taking on such enormous debt without any guarantee of decent employment opportunities at the end.
      We have been hearing for years that younger generations will have to be flexible and have many careers (some that haven't even been invented yet) and will have to retrain. If this is so, how will they EVER get out of debt?
      Whilst some copayment has long been acceptable, what is proposed is economically idiotic because these debts will put pressure on wages & EVERYBODY will feel the knock on efffects. A young couple could easily have a debt of $100-200 between them. Before they start their lives. How do they become positive contributors to an economy when they are drowning in debt?
      Education is not a sole use/end user product - it benefits all of society.
      Australians have to decide what type of society we want to live in.

      Commenter
      CR
      Date and time
      June 04, 2014, 7:56AM
    • It is silly to split hairs over so-called class warfare. The reality is and always has been that different Parites ursue the interests of different sections of society - but usually with some pretence at honouring the perpetual election night crassness of "governing for all Australians".
      This is different. This Government is clearly removing the resources for equality of opportunity from large slabs of the population as part of a softening up process for a very bleak future - if they can get away with it.
      We need a genuine new Party who can honestly claim to stand for social justice - otherwise we are headed towards having the resource wars as a civil conflict - not what we always predicted - that we would be targeted from outside.

      Commenter
      Christopher
      Location
      Abscrapistan
      Date and time
      June 04, 2014, 7:56AM
    • The poor will have double the debt......they will be paying it all their lives almost with no chance of ever buying a house.....mummy and daddy will pay off the rich kids debt and they still will be able to afford to eat and clothe themselves and buy a house. The poor kid's doomed for life if this gets through.

      Commenter
      JT
      Date and time
      June 04, 2014, 7:58AM
    • @Mike, When I went to Uni it was free and still should be, education should be a right in a country like Australia not a privilege, unfortunately for a lot of Australian children this dream won't be possible because the right wing wants to deregulate them out of the market, the LNP always puts money before everything but in this case the lack of educated graduates coming into the workforce will eventually be bad for the economy and will have a reverse effect.

      Commenter
      Bushy
      Location
      Cressy
      Date and time
      June 04, 2014, 8:02AM
    • Let's not forget that Labor was intending to make large cuts to University funding too. The discussion on education funding is a frustrating one. It appears that we either accept that people should pay more for the privilege of receiving a good education, or we accept that by having more people attend universities, without being saddled with debt, then over the medium to long term the nation will benefit through increased skills and services, and a better economic base, therefore justifying the need to properly resource the sector. I suspect the latter is the more valid argument but at present there is no consensus so politicians on either side continue to make short term decisions based on their own priorities and agenda, rather than supporting a bilateral long term approach to higher education funding.

      Commenter
      Flanders
      Date and time
      June 04, 2014, 8:03AM
    • This has nothing to do with Lib policy as it would not have taken effect by 2016-17. This is the fault of universities piling people into courses (many of them worthless) that the employment market cannot meet supply.

      Universities need to have regard to the employment outcome of graduates when setting the amount of places. These days universities just like to get the fees from extra students in accordance with marginal cost analyses.

      Universities need to better understand their role in producing employment prospects and the effect of market over-supply. They exist to train/educate people in professions and vocations that require higher learning. Perhaps the government needs to add some sort of disincentive to over-supplying the employment market so that universities won't just throw people into courses in order to get the fees. While ever there is a disconnect between university revenue generation and graduate outcome this will remain.

      Commenter
      Bender
      Date and time
      June 04, 2014, 8:05AM

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