In a conservative estimate of what it would take the average engineering graduate in Australia to pay off student loans, one university crunched the numbers and found it would take 25 years to repay them.
Universities Australia published a report in response to the Australian government’s proposal to raise student loan interest rates from 2.6 to 4 percent (and possibly higher) on its “HELP” loans. This loan program assists students with funding higher education costs. The country’s education minister, Christopher Pyne, estimates the proposed interest rates add “only” an additional US $3 to $5 a week to the outstanding debt based on a $40,000 loan. According to the university’s report, the average amount owed by engineering grads is much higher. The extra interest payments would add years to how long it would take students to pay off the debt.
The researchers found that students could be left with debt of as high as $113,170 for tuition, room, and board, plus an additional $48,573 in interest. This is more than $20,000 in interest compared to the rates today. This calculation is based on graduates finding a job right out of school, earning an average income of $56,000, and their pay rising to $90,000 by the time they are in the workforce for 13 years.
Belinda Robinson, chief executive of the school, told The Guardian it had made “reasonably conservative fee scenarios” in its report.
The government’s proposals are expected to bring in $3.2 billion of revenue over four years. If approved, the new interest rate will also affect students who have already graduated and are still paying off loans.
Several Australian politicians are opposed to the proposal, as is Stephen Parker, the vice chancellor of the University of Canberra, in Bruce. “This is the worst piece of policy I’ve seen in Australia in my 26 years,” he tells The Guardian. These changes are unfair, unethical, reckless, and poor economic policy.”
Concern over student debt is not unique to Australia. Students from many countries around the world are struggling to pay off their loans. In the United States, there is $1.2 trillion in outstanding student loans. Many loans are in default and that number has been sharply rising since 2005, according to Bloomberg data.
Tuition has spiked by more than 250 percent in the United States over the past 30 years at public four-year colleges, compared to just a 16-percent rise in family incomes. Those who attend private institutions are hit the hardest, which includes schools like MIT where undergraduate tuition is $43,210 a year, excluding room and board.
What is your take on the rising cost of higher education? Has paying back tuition hampered you in any way?