When the Australian government declined in January to implement recommended increases in teaching funding, or permit the franchising of university degrees, some observers perceived a growing nervousness about the cost of the country’s uncapped higher education system.

Some academics believe the cost of the loans system could prompt a future government — particularly one from the coalition grouping of right-of-centre parties — to reintroduce a cap on student numbers. The removal of caps on undergraduate numbers was recommended in a 2008 Review of Australian Higher Education, chaired by former University of South Australia vice chancellor Denise Bradley, to boost skill levels of the Australian workforce.

Since then, undergraduate numbers have shot up in the wake of aggressive expansion by many universities, including Group of Eight members such as Monash and the universities of Queensland and New South Wales. According to government figures, all 39 Australian universities saw their count of government-subsidised students grow by more than 10 percent between 2007-2012, with overall growth of 27 percent.

University fees are largely met by students, who typically borrow the money from a government-subsidised, income-contingent student loan system set up in 1989, and now known as the Higher Education Loan Programme (Help). According to the latest government figures, highlighted in a January report by the Grattan Institute think tank, student debt is rising quickly. It currently stands at an unprecedented A$ 26.3 billion (Rs.147,280 crore), a rise of A$ 3.3 billion (Rs.18,480 crore) on the previous year and nearly A$ 10 billion in real terms since 2008. That sum accrues a net interest cost to the government of A$ 600 million (Rs.3,371 crore) per year.

The proportion of the total student debt that is expected not to be repaid is also steadily increasing, currently standing at 17 percent of the total, or A$ 6.2 billion. The figure has risen by A$1 billion in one year. Meanwhile, annual government spending on tuition subsidies — which do not have to be repaid — is expected to increase from A$ 5.5 billion in 2011-12 to A$7 billion (Rs.39,200 crore) in 2015-16, according to the Grattan Institute’s report, Mapping Australian Higher Education, 2013.

The report is written by Andrew Norton, the think tank’s higher education programme director and in the 1990s an adviser to the centre-right coalition government of the day. Upon its publication in January, Norton was quoted in Australian media calling for the country to fall in line with the UK and New Zealand and require debtors to keep up repayments even when they move overseas. In his response to the report, Chris Evans, minister for tertiary education, skills, science and research at the time, said the government was working to “determine an effective way’’ to do this.

The wisdom of such a move is also supported by the original architect of the Help programme, Bruce Chapman, professor of economics at the Australian National University. He has estimated that graduates living abroad who took out loans through the original Help programme, known as the Higher Education Contribution Scheme, now owe the government around A$ 450 million (Rs.2,528 crore).

Prof. Chapman says it would be “easy and important’’ to institute a legal requirement for graduates who emigrate to keep up the minimum repayment of A$ 2,000 a year. However, he is unconcerned by the estimates of how much Help lending will never be repaid, noting that an income-contingent system necessarily involves debt forgiveness for those earning below the repayment threshold — which currently stands at A$ 49,096 (Rs.27 lakh) a year.

(Excerpted and adapted from Times Higher Education)