Unsurprisingly, HELP, formerly known as HECS, is starting to attract political attention. Education minister Christopher Pyne has said that the Commission of Audit, which is currently looking for savings in the federal budget, is going to look into whether “securitising” this debt would be better than leaving it on the government’s books.
HELP does have financial problems, but securitisation – selling the rights to future income streams from student repayments – does not of itself solve them. The danger is that it could create additional political problems that make reforming HELP harder.
HELP has two main financial issues, high doubtful debt and interest subsidies. The budget papers estimate that 19% of new HELP debt will not be repaid. There are interest subsidies because the government indexes HELP debt at inflation, but itself borrows at higher rates. As a result of the issues, the estimated market value of HELP debt is much less than its face value.