Allan Reinikka

Major cuts to university funding expected

THE Federal Government is expected to announce major cuts to the university loan system in the coming budget in the wake of a report revealing a massive cost blowout in the scheme over the next decade.

Released yesterday, modelling by the Parliamentary Budget Office on the cost of the Higher Education Loans Program showed the total value of students' loans was set to hit $180 billion in 2026, up from $60 billion this year.

Net debt linked to the loans scheme would rise from $13 billion this year to $48 billion by 2026.

The independent PBO costings lay the foundations for likely cuts to the loans program in the coming federal budget, with Education Minister Simon Birmingham reiterating the government's mantra of "living within our means".

Senator Birmingham also recently raised the prospect of a policy return to wider university funding cuts, similar to those his predecessor, Christopher Pyne, proposed in 2013, but which failed to pass the Senate.

The release of the modelling came as the ABC reported the government faced a loss of about $13.5 billion on loans in four years. One of the reasons those loans would not be repaid was the failure of former students to reach the $54,000 income repayment threshold.

The modelling also showed the cost of running the scheme would hit $11 billion for the Federal Government by 2025-26 - up from about $1 billion this year.

Forecasts in the PBO's report showed student debts alone would reach 18.3% of the national debt in the next 10 years. The figure for the last financial year was 4.8%.

Senator Birmingham said the rising cost of the scheme and associated debts were due to measures put in place by the former Labor government.

He said the government had to ensure its promises and policies were affordable.

Labor higher education spokesman Kim Carr said the report showed the government was intending to "Americanise" Australia's university system.

The report was completed with the help of the Grattan Institute, which recently argued the debt repayment threshold should be reduced to $42,000.