MY MONEY

HECS debt not expected to be repaid to top $13 billion

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New graduates of Australian universities faced the toughest labour market yet for university-qualified workers in 2014. Nearly a third of those looking for full-time work had not found it four months after completing their degrees.

Against this bleak background, the higher education loan payment (HELP, formerly known as HECS) program will lend students more than $6 billion this year. Eligible students under the 2015 FEE-HELP limits can borrow from the federal government up to $122,162 for medicine, dentistry and veterinary science while other students can take on debt up to $97,728.

For 25 years loan programs have been a great success, financing the education of millions of students. But as student numbers increase and new loan schemes are established, HELP is getting expensive.

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Total doubtful debt - loans that are not expected to be repaid - is likely to be as high as $13 billion by 2017, according to Andrew Norton, the higher education program director at the Grattan Institute.

While undergraduate bachelor degrees cost $15,000 to $33,000, post-graduate qualifications are much more expensive, with some masters and doctorate programs costing more than $50,000.

Most university students finish their degree with a HELP debt that automatically begins to be paid off when they start earning money (more than $54,126 in the 2015-16 year). Some parents help fund their kids' university studies so that they don't start their working life in debt.

"Alleviating student debt can be invaluable to their early adult life, opening the way to the important things of bygone times, such as buying a home, starting a family, overseas travel or even starting a business," says Ross Higgins, managing director of Austock Life, a leading issuer of insurance bonds.

Norton says graduates of performing arts and visual arts and crafts courses are the least likely to repay their student loan in full, while graduates of commerce, education, nursing, science and humanities contribute most to doubtful debt, once their larger numbers are taken into account.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.
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