The more that students, families and education institutions digest the magnitude of what’s being proposed, and the potential consequences, the more we realise just how big is the ice berg that sits just beneath the surface.

Universities Australia has been calling for a less rushed, more considered, and more consultative process for advancing the Government’s plans. It is not just the size, complexity and likely impact of the reforms causing concern, but the fact that once we head off down this path, the gate will shut behind us and going back will be all but impossible.

The reforms comprise four key elements: expanding the demand-driven system and associated government assistance to non-university providers and to sub-degree programs; reducing the Government’s contribution to students’ education by an average of 20 per cent; allowing providers to set the fees they charge; and uncapping the size of the HECS loans while introducing a real rate of interest on the amount students borrow.

Instead of tackling the reform program in a single courageous bound, a better line of attack would be a staged approach paying detailed attention to each design element in ways that promote the public interest each step of the way. Policy settings, fee structures and the design of the student loans scheme – HELP – could be monitored and adjusted in response to the emerging shape of the new market. As Professor Peter Dawkins observed in his recent Mitchell Institute Policy Lecture, new markets need to be nurtured if regrettable mistakes are to be avoided.

There are a number of areas that require further attention. UA is taking a deep interest in all of them, including the proposed decrease in the Government’s support for students and the introduction of a real rate of interest for student HELP loans.

HELP has been a great success in keeping higher education accessible and affordable. But that was in a fee-regulated world. Fee deregulation changes everything and a fundamental review is needed.

With the reduction in the Government contribution, the student contribution to course fees will rise by an average of 23 per cent. For some courses the increase will be closer to 60 per cent. This could be much higher at institutions with strong market power and in the absence of an upfront cost to mute the price signal.

The pernicious combination of higher fees and a real interest rate doesn’t only make for substantially higher debt levels for graduates, but will lead to more unpaid debt on Government balance sheets and rising levels of bad debt ultimately paid for by the taxpayer.

This is not fair for students or taxpayers nor is it sustainable in the long term. It also fundamentally undermines the integrity of the HELP system.

Spooked by the prospect of hefty student debts and long payback periods, there have been calls for the reinstatement of CPI for indexing debt. By further diminishing the price signal, this can only exacerbate the fragility of the system. The Government is unlikely to countenance such an increase in its future liabilities without a design feature that puts downward pressure on price or an equivalent saving found elsewhere.

A more sophisticated approach is required. We need to rethink the intersection between fee deregulation and HELP so that fees are affordable for students and HELP is affordable for the taxpayer. This can be achieved by adopting design elements advanced by various experts in the field.

The new UK system, for example, incorporates a higher rate of interest but has debt expiring after 30 years. A lifetime loan cap or maximum HELP balance could be applied. Collecting debt from those travelling overseas, interest rate holidays for those taking time out of the workforce, reducing the interest rate and restraining fees by paring back the Commonwealth subsidy as fee levels rise, or applying a simple administration fee are all options that require further consideration.

The Commission of Audit recommended that time should be taken to think through the issues associated with a deregulated model. UA agreed with this recommendation and renews its call for the Government to pause, take a breath and consult with the peak body in rebuilding a package based on principles of fairness, equity, affordability and quality. Such an approach will optimise the chance of broad community and sector-wide respect, even if unmitigated support remains elusive.

Published in Australian Financial Review on 4 June 2014.