Advertisement

Is the application of interest to historical HELP debt a breach of contract?

By 27 May 2014 26

There is a fair amount of debate going on around changes to University fee structures at the moment, including the application of an interest rate to the debt racked up through the Higher Education Loan Program (HELP). During Senate Question Time last week, the Greens Higher Education spokeswoman Lee Rhiannon posed an interesting question to Minister for Human Services Marise Payne, asking whether the plan to charge interest up to 6 per cent on existing debts as well as new ones constituted a broken contract.

The ABC put it through their fact checker and came out with a result of ‘debatable’.

It made me wonder though – would I have so easily taken on HELP debt if I was aware at the time of an interest charge? In asking that I am not necessarily against it (although 6 per cent is steep and I worry that this may put those in lower socio economic backgrounds off higher education), but am concerned that they can make this change ‘just like that’.

What do you think? Is it a breach of contract, or just of faith? Or, indeed simply a sign of the times where all must pay their way?

Please login to post your comments
26 Responses to Is the application of interest to historical HELP debt a breach of contract?
#1
bd842:27 pm, 27 May 14

Unlikely to a breach of contract, I believe the forms signed when entering the arrangements would refer to the relevant section of the act that deals with the calculation of the amount of indexation/interest charged. This amount already changes on an annual basis anyway. A change to the legislation to substitute the new method would all that it would take. As noted in the article, this legislation and rates have been changed multiple times already over time, this time shouldn’t be any different.

#2
pierce3:20 pm, 27 May 14

It’s up to a maximum of 6% – currently I believe the working figure is 3.8% (10 year government bonds)

It would be interesting to see exactly what the agreement signed actually said though.

#3
VYBerlinaV8_is_back3:33 pm, 27 May 14

Is changing my private health insurance rebate from 30% to zero a breach of contract? I clearly remember the ads with the umbrella about keeping your rebate for life if you joined by age 30.

It’s a moot point anyway. Fortunately for uni students the rate isn’t currently 6%, but closer to 3.5%, so similar to cpi anyway. Not that I agree with the changes.

#4
pink little birdie4:42 pm, 27 May 14

A guy on facebook worked out that even at 3.0% it would take 220 years for a hecs debt of $20,000 per year of university if you were paying 4% of your income on $50,000

It’s sort of scary That’s why people are objecting.

#5
pink little birdie4:47 pm, 27 May 14

VYBerlinaV8_is_back said :

Is changing my private health insurance rebate from 30% to zero a breach of contract? I clearly remember the ads with the umbrella about keeping your rebate for life if you joined by age 30.

It’s a moot point anyway. Fortunately for uni students the rate isn’t currently 6%, but closer to 3.5%, so similar to cpi anyway. Not that I agree with the changes.

It’s not a 30% rebate for life it’s an extra 2% for each year over 30 that you aren’t in private health care that you aren’t paying.

#6
milkman6:23 pm, 27 May 14

pink little birdie said :

A guy on facebook worked out that even at 3.0% it would take 220 years for a hecs debt of $20,000 per year of university if you were paying 4% of your income on $50,000

It’s sort of scary That’s why people are objecting.

Better do a degree that doesn’t lead to below average wage then.

#7
milkman6:25 pm, 27 May 14

pink little birdie said :

VYBerlinaV8_is_back said :

Is changing my private health insurance rebate from 30% to zero a breach of contract? I clearly remember the ads with the umbrella about keeping your rebate for life if you joined by age 30.

It’s a moot point anyway. Fortunately for uni students the rate isn’t currently 6%, but closer to 3.5%, so similar to cpi anyway. Not that I agree with the changes.

It’s not a 30% rebate for life it’s an extra 2% for each year over 30 that you aren’t in private health care that you aren’t paying.

Huh? It’s a tax rebate. Once you no longer qualify there’s no rebate. It doesn’t matter about the 2% increments. When it was brought in it was non means tested, now it is.

#8
banco6:49 pm, 27 May 14

pink little birdie said :

A guy on facebook worked out that even at 3.0% it would take 220 years for a hecs debt of $20,000 per year of university if you were paying 4% of your income on $50,000

It’s sort of scary That’s why people are objecting.

Surely that’s indicative of what a great deal HECs is someone on that income will never pay back the money (assuming the calculations are correct).

#9
chewy147:41 pm, 27 May 14

pink little birdie said :

A guy on facebook worked out that even at 3.0% it would take 220 years for a hecs debt of $20,000 per year of university if you were paying 4% of your income on $50,000

It’s sort of scary That’s why people are objecting.

OMG, and did you know that a person earning $40k per year will take an infinite numbers of years to pay it back?
Arrrrghhhhg, its the end of university I tells ya.

#10
chewy147:58 pm, 27 May 14

Although my last comment was flippant, I think it would be only fair to apply the interest to debt amounts incurred under the new system rather than retrospectively applying it to existing debts.

#11
m_ratt8:12 pm, 27 May 14

milkman said :

pink little birdie said :

VYBerlinaV8_is_back said :

Is changing my private health insurance rebate from 30% to zero a breach of contract? I clearly remember the ads with the umbrella about keeping your rebate for life if you joined by age 30.

It’s a moot point anyway. Fortunately for uni students the rate isn’t currently 6%, but closer to 3.5%, so similar to cpi anyway. Not that I agree with the changes.

It’s not a 30% rebate for life it’s an extra 2% for each year over 30 that you aren’t in private health care that you aren’t paying.

Huh? It’s a tax rebate. Once you no longer qualify there’s no rebate. It doesn’t matter about the 2% increments. When it was brought in it was non means tested, now it is.

The 2% increments are relevant, because that is what VYBerlina is confusing with the rebate – the advertising for the Lifetime Health Cover loading being 2% for each year over 30 without cover – the age of 30 is not relevant to the rebate. VYBerlina obviously does not remember the ads clearly enough.

#12
dungfungus8:17 pm, 27 May 14

banco said :

pink little birdie said :

A guy on facebook worked out that even at 3.0% it would take 220 years for a hecs debt of $20,000 per year of university if you were paying 4% of your income on $50,000

It’s sort of scary That’s why people are objecting.

Surely that’s indicative of what a great deal HECs is someone on that income will never pay back the money (assuming the calculations are correct).

The total of outstanding HELP/HECS loans is somewhere between $25 billion and $60 billion. That is the cost of “free” tertiary education. We read of extraordinary efforts that some people will go to to avoid payment of same especially the ones that go overseas and boast about it. Those in the UK will soon have repayments deducted from their foreign income following arrangements made between the Australian and the UK governments. It’s a bit like the mentality of some retirees who organise their finances so they can draw the full pension and all the other “battler benefits” while enjoying the assets they have accumulated that are not assessed in calculating pension entitlements.

#13
m_ratt8:21 pm, 27 May 14

pink little birdie said :

A guy on facebook worked out that even at 3.0% it would take 220 years for a hecs debt of $20,000 per year of university if you were paying 4% of your income on $50,000

It’s sort of scary That’s why people are objecting.

The guy on facebook is an idiot. That’s entirely (and surely obviously?) wrong.

3% interest (which is not actually dissimilar to the current CPI indexation) adds about $600pa to the total.
4% at $50,000 is about $2000 paid off each.

At that rate, (assuming a constant $1400 net payment each year for simplicity), the debt will be repaid in under 15 years. Quicker when you remove the simplification.

Would take a bit longer at 6% interest, but still no where near 220 years.

Think about it.
4% of $50,000 per year for 220 years is $440,000 – way off for payment of a $20k debt.

#14
milkman9:13 pm, 27 May 14

m_ratt said :

milkman said :

pink little birdie said :

VYBerlinaV8_is_back said :

Is changing my private health insurance rebate from 30% to zero a breach of contract? I clearly remember the ads with the umbrella about keeping your rebate for life if you joined by age 30.

It’s a moot point anyway. Fortunately for uni students the rate isn’t currently 6%, but closer to 3.5%, so similar to cpi anyway. Not that I agree with the changes.

It’s not a 30% rebate for life it’s an extra 2% for each year over 30 that you aren’t in private health care that you aren’t paying.

Huh? It’s a tax rebate. Once you no longer qualify there’s no rebate. It doesn’t matter about the 2% increments. When it was brought in it was non means tested, now it is.

The 2% increments are relevant, because that is what VYBerlina is confusing with the rebate – the advertising for the Lifetime Health Cover loading being 2% for each year over 30 without cover – the age of 30 is not relevant to the rebate. VYBerlina obviously does not remember the ads clearly enough.

Once you earn over a certain amount, though, there is no rebate. It is now means tested. It wasn’t before.

#15
chewy1410:10 pm, 27 May 14

m_ratt said :

pink little birdie said :

A guy on facebook worked out that even at 3.0% it would take 220 years for a hecs debt of $20,000 per year of university if you were paying 4% of your income on $50,000

It’s sort of scary That’s why people are objecting.

The guy on facebook is an idiot. That’s entirely (and surely obviously?) wrong.

3% interest (which is not actually dissimilar to the current CPI indexation) adds about $600pa to the total.
4% at $50,000 is about $2000 paid off each.

At that rate, (assuming a constant $1400 net payment each year for simplicity), the debt will be repaid in under 15 years. Quicker when you remove the simplification.

Would take a bit longer at 6% interest, but still no where near 220 years.

Think about it.
4% of $50,000 per year for 220 years is $440,000 – way off for payment of a $20k debt.

Agree that its a silly analysis but he said $20k per year of university, not $20k total debt.

#16
gooterz12:05 am, 28 May 14

The net effect of this will be for those will hecs debt to find overseas jobs.

Don’t live in Australia, never pay off Hecs.

#17
dungfungus11:06 am, 28 May 14

gooterz said :

The net effect of this will be for those will hecs debt to find overseas jobs.

Don’t live in Australia, never pay off Hecs.

The simple solution to this is to bar re-entry to Australia until the debt is pain in full. I know someone who failed to pay Residency Tax in France after a previous visit and he was told he would not be able to enter France again until the debt was paid.

#18
m_ratt11:20 am, 28 May 14

chewy14 said :

Agree that its a silly analysis but he said $20k per year of university, not $20k total debt.

Good point – I missed that. My apologies.

However I don’t believe there’s been anything to indicate that degrees currently costing the student in the order of $5000 per year (ie HECS-HELP) will suddenly quadruple in price.

And for those that were already paying potentially that much (FEE-HELP), an additional few percent in interest won’t make _that_ much difference in the overall repayment timeframe

#19
gooterz9:58 pm, 28 May 14

dungfungus said :

gooterz said :

The net effect of this will be for those will hecs debt to find overseas jobs.

Don’t live in Australia, never pay off Hecs.

The simple solution to this is to bar re-entry to Australia until the debt is pain in full. I know someone who failed to pay Residency Tax in France after a previous visit and he was told he would not be able to enter France again until the debt was paid.

I’m fairly sure this would be a breach of international law if the person was a citizen of Australia. Where would they send them too?

#20
dungfungus6:53 am, 29 May 14

gooterz said :

dungfungus said :

gooterz said :

The net effect of this will be for those will hecs debt to find overseas jobs.

Don’t live in Australia, never pay off Hecs.

The simple solution to this is to bar re-entry to Australia until the debt is pain in full. I know someone who failed to pay Residency Tax in France after a previous visit and he was told he would not be able to enter France again until the debt was paid.

I’m fairly sure this would be a breach of international law if the person was a citizen of Australia. Where would they send them too?

It would be ironic if an international lawyer had to act for an Australian lawyer with an unpaid HECS / HELP debt. What a moral dilemma that would be.

#21
Az8:26 am, 29 May 14

“Better do a degree that doesn’t lead to below average wage then.”

And kiss goodbye to science degrees. Who needs all that R&D investment that pays off so handsomely?

Let’s all just buy c$%p off the Chinese and sell expensive mud.

#22
dungfungus9:08 am, 29 May 14

I am surprised that mandatory collection of a HECS/HELP debt has not been standard procedure in the past. Our previous governments have been complaining about diminishing revenue while sitting on their hands.

I fully support what Christopher Pyne is putting forward.

http://www.smh.com.au/federal-politics/political-news/christopher-pyne-suggests-collecting-hecs-debts-from-dead-students-as-way-to-help-budget-20140528-394rx.html

#23
chewy1410:05 am, 29 May 14

dungfungus said :

I am surprised that mandatory collection of a HECS/HELP debt has not been standard procedure in the past. Our previous governments have been complaining about diminishing revenue while sitting on their hands.

I fully support what Christopher Pyne is putting forward.

http://www.smh.com.au/federal-politics/political-news/christopher-pyne-suggests-collecting-hecs-debts-from-dead-students-as-way-to-help-budget-20140528-394rx.html

I agree and it should be extended to other areas.
How about recovering pension payments from the estate of pensioners who own property when they die?

I don’t understand why it should be the taxpayers responsibility to fund windfall inheritances.

#24
dungfungus10:16 am, 29 May 14

chewy14 said :

dungfungus said :

I am surprised that mandatory collection of a HECS/HELP debt has not been standard procedure in the past. Our previous governments have been complaining about diminishing revenue while sitting on their hands.

I fully support what Christopher Pyne is putting forward.

http://www.smh.com.au/federal-politics/political-news/christopher-pyne-suggests-collecting-hecs-debts-from-dead-students-as-way-to-help-budget-20140528-394rx.html

I agree and it should be extended to other areas.
How about recovering pension payments from the estate of pensioners who own property when they die?

I don’t understand why it should be the taxpayers responsibility to fund windfall inheritances.

This would be a practical and justifiable way of levying a “user pays” death tax. I don’t have any problem with that and there would be no objection from the people levied.

#25
watto2312:31 pm, 29 May 14

See thats where the proposals are all wrong. the emphasis should be on getting people to repay their debt. It should be 2% of wages at a minimum on all income then scaling upwards like it does. Increasing charges will just lead to debts not being paid off. Surely a fix to the budget is to get the debts repaid. I have no issue, if someone dies and has a HECS debt, that is should be repaid from any estate the person has. I do object to making Uni more expensive. The only way we will compete in the world in the future is with educating ourselves.

#26
justin heywood1:27 pm, 29 May 14

watto23 said :

See thats where the proposals are all wrong. the emphasis should be on getting people to repay their debt. It should be 2% of wages at a minimum on all income then scaling upwards like it does. Increasing charges will just lead to debts not being paid off. Surely a fix to the budget is to get the debts repaid. I have no issue, if someone dies and has a HECS debt, that is should be repaid from any estate the person has. I do object to making Uni more expensive. The only way we will compete in the world in the future is with educating ourselves.

Exactly. The focus should be on whatever gets the money repaid. All else is politics.

Sponsors
RiotACT Proudly Supports
Advertisement
Copyright © 2014 Riot ACT Holdings Pty Ltd. All rights reserved.