Former and current university students will face bigger student loan repayments with interest on HECS and HELP debts due to increase in 2016.
The government has confirmed that all student loans, regardless of when they were originally taken out, will move to the new scheme that will be calculated by the 10 year treasury bond rate rather than the consumer price index (CPI).
In the last 15 years, the treasury bond rate has been considerably higher than CPI, meaning ex and future students need to prepare for significant increases.
Future students are facing a double blow with the deregulation of university fees expected to drive up the cost of many courses.
Charles Sturt University student president Warren Fraser said the move will put students under more financial pressure and could discourage some from attempting university at all.
“People will end up with big debts that will take them years to pay back and with the higher interest rates that will make it even harder to pay off,” Mr Fraser said.
“I was encouraged to come to university because the amount of interest I had to pay was small but that is all going to change now.
“It might make more people look at apprenticeships because the potential to earn a lot of money is still there but without the giant debt to start with.”
Students who are already enrolled in a degree won’t be affected by the deregulation, which comes into effect in 2016, unless they change course.
Anyone who enrolled after May 13 will be subject to the new fees when they are introduced.
However the HELP scheme will be applied to everyone, regardless of how long ago they completed their studies.
“From 1 January 2016, the government is streamlining the HELP scheme so that the same arrangements apply to all students. The new arrangements will apply to all HELP debts that are subject to indexation on 1 June 2016, regardless of when the debt was incurred, or if the student is still studying or has completed their studies,” an Education Department spokesperson said.
In the past five years the CPI has hovered between 2 and 3 per cent, while the treasury bond rate has generally been between 5 and 6 per cent, although in the last two years it has been between 3 and 4 per cent.
The government has capped interest at 6 per cent and in six of the past 15 years, the bond rate has exceeded that mark.
This year, past students will be charged 2.6 per cent price indexation but the treasury bond rate is 1.4 per cent higher, sitting at around 4 per cent.
Country Education Foundation CEO Sarah Taylor said there is still confusion surrounding the changes and she is urging the government to clarify all the changes so prospective students can fully understand what they will be facing in the future.
She said country students are already the hardest hit, with high costs associated with relocating for university and the future changes major imposts.
“Rural students are more likely to use a gap year to earn money before starting their studies but the students we have spoken to are now working out whether the advantages of that are greater than getting in and starting their courses before the fee changes take place,” Ms Taylor said.
“There’s a lot of guesswork because some courses will rise dramatically and some will fall because of the deregulation but it’s guesswork to know how each will change.”