Albanese’s HELP student debt cuts are not good policy. Here’s why

Labor has promised to cut all student loan debt by 20% if elected, wiping out nearly $16 billion in debt for nearly 3 million Australians. Under the new system, people earning less than $67,000 a year will have their remaining debt repaid without mandatory repayment. Both measures need parliamentary approval But is this good policy?

Writer for this week’s Fight Friday Ben Eltham argues in favor of the policy and Steve Hamilton makes the negative argument.

I am stunned by the government’s plan to cancel 20% of HELP debts. Of course, those who receive gifts will be happy. But for someone who cares about the good of the majority, he has literally nothing to recommend him.

This is a policy that the left, of all people, should hate. But in today’s topsy-turvy political discourse, they are the ones who support it most enthusiastically.

If you think forgiveness is a good idea, here are eight reasons why you might be wrong.

This is regressive

The policy transfers money from taxpayers to those who owe HELP. On averageThe second earns much higher profits than the first. This is the definition of regressive. But the situation is even worse. Around a quarter of existing HELP loans will never be repaid because HELP is only repaid if your income is high enough. So this doesn’t even go to the poorest 25% of HELP borrowers! Rather, it goes to the richest 75 percent of a group whose incomes are higher than those who already pay.

It’s not fair

If you have already paid your aid debt — and record numbers of people you don’t get anything if you chose to do so in the last two years (it sucks to be them!) – or if you never went to college or haven’t started yet. Why is such an arbitrary subset of the population entitled to an average windfall of $5,500 paid by everyone else?

Many people (including the prime minister) argued that this was fair because university used to be free and existing HELP borrowers also deserve a subsidy. This ignores the fact that university education in Australia is heavily subsidized by the government and foreign students before even reaching HELP fees.

As a comparison, my non-profit university, which offers similar services to a typical Australian university, charges around $100,000 in annual tuition fees. Do you really think the $15,000 HELP fee is only paid when you earn above a certain income, and even then with zero real interest? Is it unfair?

This is injustice between generations

Many have argued that this is important for intergenerational equality; Although the boomer generation received free education, why not today’s young people? The problem is, it’s not the Boomers who will pay for this. The workers of today and tomorrow will have to pay higher taxes to pay off the $11 billion debt we owed to cover this. The exact opposite of equality between generations! Just like our parents were with us, we leave this burden to future generations.

It’s not magically free because it’s off-budget

Certainly, policy is not off-budget. This is a subsidy, so it will be reflected in the budget over time, as HELP loans are not repaid, but otherwise would have been. While this undoubtedly provided a great incentive to continue the policy, we should not pretend that it was free. The government will issue a loan of $11 billion that must be repaid.

It lowers our living standards

That means we need to raise $11 billion more in taxes or cut spending by $11 billion. Both are economically harmful. Every dollar the government spends costs our living standards. That’s why it’s so important to ensure that every dollar creates social value. Our living standards have been stagnant for over a decade. The last thing we need is the burden of financing another regressive transfer.

It is of no use to education

The HELP grant was framed as an educational measure, but it is nothing of the sort. Beneficiaries have already made their training decision! This is just a free gift after the fact. One of the biggest reasons we support education is to encourage people to get educated because it benefits us all. This policy provides no such incentive. We do nothing to improve our education.

This is political blackmail

Why did the government announce this policy now, before the election, but not actually implement it until after the election? He can present a bill to the Parliament today and have it enacted. There is no reason for this. This was the crudest vote-buying exercise I can remember. If you owe HELP, you’ll get an average of $5,500 if you vote Labour.

It’s a shame

This government has a shameful obsession with imitating the Biden administration. Albo’s employees spend a lot of time on TikTok. The government’s competition policy is a copy of Lina Khan’s competition policy at the US FTC and Future Made in Australia, Inflation Reduction Act. But the idea that Australians, who have a higher education funding system that Americans would kill for, need the kind of “student debt” relief Biden is proposing is utterly disgraceful. And if what happened to Democrats this week is any indication, that’s not a platform worth emulating! It’s time for Albo to come up with his own ideas.

Read the counter argument Ben Eltham.