Australia’s student loans could be extended to cover living costs, with the idea under consideration by the government’s Universities Accord review.

The accord’s discussion paper says “a supplemental living allowance through an income-contingent loan arrangement” has been proposed to encourage study in areas of skill shortage.

While the panel has received “mixed feedback” on the idea, “many stakeholders” have raised income support inadequacies as a “significant barrier” to successful participation.

Some consider it the biggest barrier. Most young students are ineligible for income support grants, which, in any case, fall far short of the amounts needed to keep students afloat.

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But experts have questioned whether loans are the answer. Griffith University vice-chancellor Carolyn Evans said the best solution would be for Canberra to increase income support subsidies and “reduce the barriers” to receiving them.

“Income-contingent loans would be a clearly inferior option, [but] still preferable to the current situation,” she said. “It should be supported if it will increase access for students.”

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Andrew Norton, professor in the practice of higher education policy at the Australian National University, said the proposal would exacerbate debt issues for students and the country.

“A lot of this will never be repaid anyway. Rather than burdening [students] with debt for what is going to effectively be a grant in the end, if we’re going to increase it, it should be a grant,” he said.

But this would be “extremely hard” in the current fiscal situation because of the sheer number of recipients. “Even a few thousand dollars each is going to make a big dent in the budget,” Professor Norton said.

The 2008 Bradley Review modelled income-contingent loans to cover student costs and found them “prohibitively expensive”. Loan schemes allowing university students to were introduced in 1993 but axed in 2004.

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Bruce Chapman, the architect of Australia’s income-contingent loan system, said a scheme for income support could be a “very useful approach” as long as it was designed properly.

He said factors such as eligibility criteria, loan caps and surcharge fees would need careful attention, along with measures to limit unpaid debt.

Outstanding student debt A$74.4 billion (£41.8 billion) in mid-2022, up almost A$6 billion in a year and A$50 billion in a decade. Debtor numbers and repayment periods are growing steadily, with a 2021 from the Australian Government Actuary estimating that 23 per cent – and possibly as much as 39 per cent – would never be repaid.

New Zealand, Thailand and England are among the sectors that already offer income-contingent loans to help meet living costs. New Zealand’s repayment threshold is so low that some students find themselves repaying living cost loans while they are still borrowing. English maintenance grants have mostly been converted to loans, with means-testing determining how much can be borrowed – meaning that the poorest students incur the largest debts.

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john.ross@timeshighereducation.com