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Comment by atiredturte | Hacker News Reader

Australia has a system that, while different, has similar perks to this. We have a government loan system called HELP (formerly HECS).

Basically students can get a zero interest government loan (rises with inflation), and only need to pay it off once they make above a certain threshold ($51,957 according to the official website[1]). The payments are deducted as a percentage of your income, with the payments increasing with your wage.

This has a number of benefits:

1. Students whose degrees don't work out for them (i.e. can't find meaningful employment) aren't stuck with rising interest on their debts.

2. Allows poorer students to go to uni without parental support (I am currently a student and support myself entirely)

3. Reduces pressure on graduates to find a job just to pay off their debts. They can take their time to find a good job in their industry, rather than working lower-paying, unrelated work to pay off their loans.

My degree at UNSW in Australia will cost about $27k AUD (~$19k USD) and I'm unsure about the costs of others in my country. Under the HELP system, Australians are allowed a fair go at an education, and can take their future into their own hands (rather than relying on their parents).

[1] https://www.studyassist.gov.au/paying-back-your-loan/loan-re...

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Is it stepped at all? Do you owe nothing before 50k and then once you cross that threshold you now owe money? That would seem to incentivise staying below that threshold for a percentage of borrowers.

I also have difficulty seeing the first benefit you list as being a benefit. I don't have a problem with people pursuing degrees in fields that aren't big money makers, but I also don't know that the government should be in the business of incentivising people to study in these fields.

On the other hand, there is societal benefit to these fields being pursued in general. And the market economy may not adequately pay for the benefits it receives. As a society we wouldn't want everyone to major in poetry, though.

> I also have difficulty seeing the first benefit you list as being a benefit. I don't have a problem with people pursuing degrees in fields that aren't big money makers, but I also don't know that the government should be in the business of incentivising people to study in these fields.

It's actually one of the best things about the system. Maybe you want to be a social worker who will never earn much but will make a meaningful difference in peoples lives, or a lawyer that only works for non-profits, or a doctor that only works for doctors without borders, or any one of ten thousand other examples where a person can make an extremely valuable contribution to society, but doesn't earn a ton of money.

You made the mistake of assuming that only people earning a ton of money make valuable contributions to a society.

You make the mistake that the relationship between income and value to society is inverse. Delivery people, for example, or store clerks or the like are all not paid well, but their impact on society isn't particularly profound either. The loan payment structure gives people an incentive to have a lower paying job as opposed to a higher paying one, which isn't the right way to go about it.

Option #1: low-paid job. Probably routine job where you're not expected (or allowed!) to contribute anything that the last person who had the job could do. Live with roommates, rent your whole life, insecurity due to lack of savings, poor (if any) health insurance (US applicable).

Option #2: higher-paid job. Have to pay back loan, which might be a problem if you're just at the bottom of the "you have to pay it back" scale. May have your own apartment or possibly a house, savings, hopefully good health insurance, etc.

I've worked with people who would choose option #1 permanently. Their life was outside their work. They started thinking about the job when they clocked in and stopped when they clocked out. Most of them didn't go to college.

Others did go to college and graduated but didn't know what they wanted to do with their lives. Having the equivalent of a gap year or two (or ten!) after college without worrying about loan payments doesn't seem like the worst thing in the world.

> Is it stepped at all? Do you owe nothing before 50k and then once you cross that threshold you now owe money? That would seem to incentivise staying below that threshold for a percentage of borrowers.

You make no repayments below 50k but it when it kicks in starting at 50k it's something like 1.5% of income, with increments as you earn more. Combined with the fact that it's (1) real-interest free, (2) payments are collected by the Tax Office and automatically added on to your tax bill, and (3) Australia is really expensive, there's not much incentive to stay below 50k just to avoid paying it. Historically there have also been large discounts (10-20%) just for voluntarily paying it early too.

> I also don't know that the government should be in the business of incentivising people to study in these fields

That's interesting. So do you want government to only fund the vocational courses and allow the rich class to be the torch bearer in research, art, and culture because only they can afford it?

I'd think taxpayer money should be spent in ways that create measurable benefit to both the individual and the economy as a whole.

I'm not seeing the downside of only the rich being able to understand how Post-Impressionists like Suerat were different from Impressionists like Renoir.

> I'm not seeing the downside of only the rich being able to understand how Post-Impressionists like Suerat were different from Impressionists like Renoir.

You are picking the edge case here. Art and culture are much more then just rich class's pretense.

As far as wasting money is concerned, spending it just to create more replaceable cogs for capitalistic profit seeker is also a wasteful exercise. Why not ask the Industry to invest in producing those cogs and let government think the long term by focusing on things which cannot be measured in next quarter.

Why Government should subsidize the Industry?

> things which cannot be measured in next quarter.

I'm all for long-term investments, but can these ever be measured? If not, it will take more than your claims to convince me that it's worth investing in.

There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, etc. These are all free or much cheaper than a course in a college. You haven't demonstrated how an academic setting is better and worth the cost.

Govt doesn't need to subsidise industry. I'd be fine if these loans are issued by private investors, as with Lambda school.

> capitalistic profit seeker is also a wasteful exercise

No, their benefit can be measured in GDP. Imperfect, sure, but 100x better than your hand-waving claims. No personal offence intended.

>There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, etc. These are all free or much cheaper than a course in a college. You haven't demonstrated how an academic setting is better and worth the cost.

Academics is necessary to teach people how to create, understand and appreciate Art and Culture. People writing books (not necessarily, but most probably) have a degree in Language and Literature, people creating documentaries have a degree in Film-making etc. If you think these skills can be obtained from reading books, watching videos on YouTube etc, then the same thing can be said about STEM fields as well.

> Academics is necessary to teach people how to [...] understand and appreciate Art and Culture.

Any evidence in favor of that claim?

> If you think these skills can be obtained from reading books

I didn't say that nobody should study these fields; just that they needn't do so on taxpayer money.

Here is the OECD report http://www.oecd.org/education/ceri/arts.htm which stresses the importance of Arts in education and benefits of arts to students (even students of non-arts subjects). They also conclude that "The arts have been in existence since the earliest humans, are parts of all cultures, and are a major domain of human experience, just like science, technology, mathematics, and humanities. In that respect, they are important in their own rights for education."

Some Universities have Arts appreciation course for non-arts students who are interested in knowing, understanding and appreciating Art.

>just that they needn't do so on taxpayer money

May I know the rationale behind this? If I understand correctly, what you're trying to say is that letting people study these subjects on taxpayers money is a waste of public money, which I think is not true. There are people with Academic arts background who have contributed to the society. Even (for the sake of argument) if these are not economically rewarding areas of study, is it justified that the whole field of arts which has been there almost since the beginning of mankind to be not funded by the government just because the system under which we currently live doesn't find it profitable? Is it justified to deny access to an entire group of people who are interested to study Arts but they can't because they don't have the money to pursue it?.

Thanks for a reasonable disagreement, unlike the other respondent to my post.

I was saying that govt should perhaps not give subsidised loans to individuals (as in the Australian example) to study things like art because:

- the subsidised loan program needs to have a positive measurable ROI for it to continue. Otherwise, the next govt may bring it to an end, because there are hundreds of projects competing for government resources.

- in a world where poverty still exists, programs that are more bang for the buck may have the maximum positive impact on people. I live in India where millions are poor. Some amount of money should definitely be spent on arts / culture, but probably 100x more should be spent on pulling people out of poverty, and the way to do that is to identify high ROI investments in people.

- there are already other venues than Australian-type student loans for govts to subsidise arts / culture-type education, like university grants.

- I'm not sure about the ethics of giving a loan to a student for a course that may not pay back financially, but the loan will with the student for life, even if payment is delayed till his income increases. If arts are considered important to society, is it ethical to burden a student with the loan?

It was just a thought. I'm not adamant about it. I'm happy to see that we've had a good exchange of views, which is supposed to be the purpose of a forum like this.

Thanks for sending the link to the OECD report. I'll read it when I'm free to learn more about this topic.

> There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, et

And who becomes incharge of those museums? Who makes those documentaries and those books?

Someone not studying with taxpayer money.

So rich pretencious snob becomes incharge of the culture?

Since it doesn't seem like either of us is going to change the other's mind, let's move on from this debate.

You do realize all the art and culture that matters is not government funded, right? It doesn't come out of universities.

Probably a lot of culture that gets attention is counter culture but that's does not happen in vaccum. In order to create the counter culture, one needs to learn the culture first. It can happen outside universities as well but that does not discount the importance of art and culture education.

Once you earn over the threshold your HELP repayments apply to your entire income. So, yes, at low incomes you get a pretty significant tax increase when you cross the threshold. I think they should make it marginal like regular income tax is...

https://www.studyassist.gov.au/paying-back-your-loan/loan-re...

Technically you always owe the money, you just don't have to repay it when you have a low income. It is stepped in the rate of repayment -- it might be 2% of income at $50k and 8% at $100k. It certainly seems like your biggest raise ever when you pay it off.

>That would seem to incentivise staying below that threshold for a percentage of borrowers.

That only makes sense if its not implemented like taxes are. For example if when you exceed 50k and your repayment rate for the first 10k of income past 50k is 2%, and you earn 59k, you would take home $58,820. Why would you not want to take home this extra income.

Is of course is assuming it works like taxes in the US (which it probably does). The same kind of bad logic occurs in the US when people won't take a raise because they don't want to "jump tax brackets", but they don't realize you only pay the higher bracket rate on the income that was in that bracket!

Our taxes work the same way, but HECS repayments don't work the same way as tax. When you hit the threshold, you pay the percentage on your entire income, not just the income over the threshold. There are also multiple thresholds, so when you hit $57,730 you go from paying 2% of your total income to 4% of your total income. Personally, I've turned down overtime due to being just below one of the thresholds.

The repayment scheme is stupid.

The link I sourced [1] answers this better than I can. Please give it a read. Although in conjungtion I would note that hardly any university-educated students would wish to live below 50k AUD (~35K USD) forever. I'm not sure that avoiding such a relatively small payment each year would be worth stunting your earnings growth. It could be possible, but I don't see why anyone would shoot themselves in the foot like this.

I understand your problem with the first benefit I have listed. Here are a few things to consider though:

1. Should a student be penalised for not making the best degree choice (most doing so at the age of 18 or so)?

2. Even if the degree choice is perfect for them (in a potentially risky profession), should one not be allowed to give it a go?

3. In university you see many students who have graduated, started working, decided they hated their profession, and then subsequently returned to university to reskill. Rising debt interest would have prevented many of these students from taking the new risk of changing industries. The threshold allows people to re-enter education without being drowned by their payments for the duration fo their degrees.

I agree with you that the arts are an important part of society. However, I don't believe that, given the chance, absolutely everyone would pursue them fully. I believe those who do embark on the potentially risky career of the arts should be allowed and supported to do so, as well as being able to change career paths if they so need.

[1] https://www.studyassist.gov.au/paying-back-your-loan/loan-re...

How long can you be on HELP? For as long as you are a student? In my country, we have a similar system but you can only be on loan for _exactly_ as long as a medical doctor degree is which is 6 years. Say for instance you study an engineering degree (5 years), that leaves you with one more year that you can take a student loan which is rarely enough to reskill.

Up until recently, if you left the country, Australia had no real way to make you pay back the loan since they wouldn't track your income and would see no tax return. Last year new rules came into place to claim back income from people who had left without paying their loans, and will claim a % of your income (before tax, I believe) if your income is > $13,968 ... I ended up paying the whole loan in one sum so I didn't have to keep double reporting incomes, so I guess the system has worked.

> https://www.ato.gov.au/Individuals/Study-and-training-suppor...

The only % you pay, is on the money above the threshold amount. So if you earn 52k, you only pay the 8% of your student loan back on the 2k above the threshold.

So yes, it is stepped, and no, there is no incentive for staying below that threshold.

re: your second point, there is no 'incentive' to study in those fields, it is merely possible to do so. It is good, as fields that are low-earning like literature and art; are not reserved only to people in society who have parents with disposable income. It's an egalitarian policy, more in line with Australian cultural values than American.

re your third paragraph: indeed. The result of our system however is that the vast majority of students major in commerce & science; perhaps because the incentive of a lucrative career is enough to stop everyone pursuing arts.

HECS repayments are one of the only Australian taxes I can think of that actually isn’t progresssive and the percentage is applied to your whole income, not just that above the threshold. Which is why it’s also such a gradual tax, not even hitting 8% until a fair way past 100k.

The payments work the same way as tax brackets, so say 10% of your salary above 50k. Would you keep your salary lower to stay in a lower tax bracket?

Sadly they don't work like income tax. If you go into the next bracket, you owe the new rate on your entire income.

Please read the link provided [1]. The percentage is not high enough to purposefully keep your salary lower.

[1] https://www.studyassist.gov.au/paying-back-your-loan/loan-re...

I have to at least partially disagree with #1 being a benefit. Universities and loans for universities should not be encouraging students to waste many years of their life for a degree which does little to help them get meaningful employment. Additionally, with at least the american student loan system as I am more familiar with it, neither the university or the bank offering the loan faces any repurcussions for encouraging and financing these bad decisions, with the government guaranteeing the debt will be paid.

In regards to your first point, most US students when they go to college don't have the life experience to know which degrees will give them meaningful employment. A kid who was passionate about reading and was encouraged by their teachers and parents to follow their passions would, unsurprisingly, be likely to pursue a degree in English literature. After they've graduated the real world hits them like a sack of bricks and they can't find a way to earn a living.

At this point they've lost those 4 years of their life, end up with unreliable sources income (gig economy, part time work, borrow from family, etc), they're bogged down with crippling debt, and the world tells them it's their own fault. They even feel deep down that it is their fault, but now they're resentful and bitter because they're suffering despite that they had been working hard just doing what they were told to do all along.

With this proposed kind of loan forgiveness, the years are still lost to them but at least they're not crippled with debt as they try to get out of the hole they've found themselves in.

I also think a system like this incentivizes universities to help students make money and be productive after college. Under the current system, schools will shake down anybody for what money they can get. If tuition is based on future earnings, the university is going to try to get the student to make as much money as they possibly can.

In fact, this system would likely swing the pendulum so far the other direction that it might kill colleges of art and literature because they would suddenly be deemed unprofitable to the university.

Just to hit on your last point (that result oriented loans could kill "unprofitable" university programs) I'd add that universities existed for centuries when, relative to the entire population, practically nobody attended them.

This "businessification" of university education is an extremely new thing. I know you didn't intend it this way but that comment in a way hits me like when the music industry was trying to claim that piracy would kill music. We could pass a law that any and all music could be copied indefinitely and for free which would indeed kill the music as a mass industry, but music would undoubtedly continue to thrive. We just wouldn't have so many Justin Biebers or Britney Spears. Darn.

And so too for education. Get rid of systems which motivate profit driven education (which is no longer an issue just at universities which are overtly for profit), and you don't destroy education - you destroy the artificial facade masquerading as education.

That's an interesting thought. Amusingly I just assumed I'd still pay for Spotify in that case, since they save me the time of maintaining and carrying my library around. Similarly, I'm pretty sure that industries may shift or change fundamentally, but we're far better off with these changes ultimately.

Indeed. Arts degrees have suffered large funding cuts in Australia in recent years. Perhaps for the reasons you describe.

In the Australian case neither the university or a bank is financing the loan. It's all the government. Most of the universities are public as well so there's less incentive for profit, although it does still exist.

Most people will probably earn over the minimum HELP repayment barrier over their lifetime and if they don't then I don't think they should be saddled with debt.

Biggest advantage by far: no extra paperwork.

As a student you give your tax number to the university, and then the loan repayments are handled by the tax system when you do your regular annual tax return.

Germany has something like this as well (it's called BAFOEG). It's not for tution (because there isn't any) but for your cost of living during study. It carries zero interest, you only have to pay back half of it and the pay back is capped to 10k total.

It should be mentioned that a) your parent's income (or yours if you are over 25) needs to be low enough for you to qualify b) it requires you to finish within the expected timeframe (possibly also have certain grades? Not sure about that as I didn't qualify) and c) it's not just for university but also for vocational training.

Wouldn't you delay a raise or try to remain below 51 until you can make over 71 to avoid getting paid less?

The system looks good on paper. It reminds me of a type of public housing offered that allows you to give 30% of gross wages. Many people stop working completely and get welfare/assistance (to qualify you need to be working or getting a regular cheque) or delay raises, etc because the less you make the less you pay. The more you make the more taxes you pay so it creates a situation where the harder you work the less you make unless you can get a huge pay increase and leave. It creates a trap.. there is a huge fear of leaving because you will never get back in.

I like the free if you qualify German model but even that has problems.

I addressed this in another comment more fully. For this version though, consider that even though it might be possible to do such a thing, the vast majority does not. You could potentially be sneaky about this, but the effort would not be worth the small savings you would make.

The current HELP/HECS system doesn't just work on paper. It's been used successfully for a while.

Remember, we are about repayments starting at 2% at 50k AUD (35K USD) and going up to 8% at $107+ AUD (77k USD). This is not a crazy, crippling payment. It is not worth making substantially less in your job in order to save such (relatively) small sums.

Australia is not a welfare state. We rank 5th in economic freedom [1] (USA is at 18). While the nation does have many problems, I do believe that Australia performs decently at balancing a free market and government support. While we used to have completely free universities, I believe that the current loan program is a decent midpoint between the US and European systems.

[1] https://www.heritage.org/index/

Economic freedom rank is a bit confusing. Comparing Canada to US the tax burden is listed at 65 for the US and 76 for Canada. Comparing income taxes, capital gains, local/provincial/state the US is much lower.

It’s fairly comparable at around 200k USD (converted to equivalent CAD). Total tax in SF isn’t all that much lower in the US.

We also have the same system here in South Africa. It is called NSFAS(National Student Financial Aid System). It is government loan. If you pass all modules you registered, the whole loan used to be converted into a bursary as an incentive. Starting from 2018, education is now free for people who earn below a threshold of R350,000(~USD25,000) household income.

There is also a contingency plan for students who come from families with a household income of R600,000(USD 43,000) per annum.

The key thing missing from this is the incentive for the education provider to provide courses that have real world demand, they get paid either way by the government and it's the rest of society that has to pay for that underwater basket weaving course.

Not an issue in practice. Most students choose degrees that have real world demand.

The difference being that you step out of university with an internationally recognized and respected accredited diploma that will qualify you for other employment down the line. These programs are scams.

> ~$19k USD

Was this with room and board? FWIW, there are many college degrees in the USA that are in the $7k/yr range, and many of then were around $20k total prior to the last round of state-level austerity in the USA.

Getting a US college degree for under $20k is still very possible if you a) commute and b) do the first two years at a community college (typically closer to $2k/yr, or $18k-$21k for 2 years cc + 2 years state college).

With a bit more public subsidy (or differently targeted subsidy), many US colleges could be well within the $20k USD range for commuting students. And some courses of study already are.

Australians tend to stay in the same city for college, so room and board are generally not required. Most students live at home with their parents. All students have access to government assistance in the form of centrelink [1] (though centrelink is a beauracratic pain to get through), and out-of state students are entitled to more.

In terms cost, UNSW is one of the top universities in the country. (EDIT: this is an ambiguous sentence, I am sorry. I mean that UNSW is one of the top universities, and cost is still lower than many US universities) I understand that US college can be done on the cheap, but it's definitely not the norm. You can always find work arounds I'm sure, but I was just emphaising that going to a top uni for this price sans-hassle is very much the norm here.

On top of this, it's important to note that even minimum wage jobs here pay pretty well (the highest by buying power in the world [2]). Thus, even if you are doing university and working part time you can do ok.

[1] https://www.humanservices.gov.au/individuals/subjects/paymen... [2] https://money.cnn.com/interactive/economy/top-10-national-mi...

> In terms of cost, UNSW is one of the top universities in the country.

This is certainly the major difference.

For undergraduate studies, the federal government also subsidises classes at standardised rates depending on subject.

So no matter which university you go to you'll be paying the same "Commonwealth supported place" rate for your field of study. For engineering it's $9185/yr for what's usually a 4-year degree. [0]

Postgraduate study is strange because some universities charge full-fee, some offer commonwealth supported places for certain degrees, and some offer CSP as scholarships. My masters degree at UNSW for example was commonwealth supported so I only ended up adding $8k onto my loan for it.

[0] https://www.studyassist.gov.au/help-loans-commonwealth-suppo...

Living in a dorm is not very common in Australia - atleast this was my experience in Sydney. I did not have many friends who lived on campus. Most students commute from home, and among my circle of friends most of us lived with our families.

Agreed. Although as someone who has studied in both the US and Aus (did an exchange semester at Georgia tech), I'd say that living on campus does have some benefits, socially and academically.

Fiji has this too. The Tertiary Education Loan Scheme (TELS).

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