The HECS balances of around three million people have today increased by 7.1%, after the federal government rejected wide-ranging calls to address the student-debt crisis.
What does this mean for students?
The indexation, which sees debts rise at the same rate as the Consumer Price Index (CPI), is the largest increase to student debt in over three decades.
Over 3.1 million people have HECS debts in Australia, collectively owing the government just below $80 billion. Of those 3.1 million, the hardest hit by the debt increase will be young people: with many students commencing university since 2021 affected by the Job-ready Graduates Package.
The average student debt of $25,000 will increase by $1500 as a result of the indexation.
Students enrolled in just their third-year of an Arts degree already have student debts exceeding this amount.
President of the University of Sydney’s Students’ Representative Council, Lia Perkins said, “It is appalling that the Labor government is taking thousands of dollars from students through HECS indexation, while pursuing stage 3 tax cuts for the rich.”
“In the current cost of living crisis most students are struggling to afford basic necessities, and will now be burdened by debt for years longer. Higher education reform is desperately needed to ensure education isn’t only for the wealthy, but is accessible to everyone.”
The government’s response
The Albanese government has rejected multiple calls to alleviate the significant pressure the indexation will cause students, already suffering in a prolonged cost-of-living crisis.
In April, Greens Senator Mehreen Faruqi proposed a private members bill to freeze student debts and to increase the income threshold for compulsory loan repayments from $48,361 to the median wage of approximately $62,400.
A Senate committee rejected the bill, after members from both Labor and the Coalition rejected Faruqi’s proposal.
The committee resolved to review student debt at the upcoming Universities Accord.
Faruqi said in response to the committee’s rejection of the bill that “Labor has ignored the loud, desperate calls from students, graduates, young people, women, unions, think tanks and experts for urgent action to address the student debt crisis.
“The committee’s recommendation is an insult to everyone who provided evidence in support of the bill, especially those individuals who gave brave and harrowing testimony of how student debt was affecting their lives.
“By teaming up with the Liberals, the Government has shown that they are completely out of touch with the reality of millions struggling with student debt.”
Students and young people have long been advocating for the government to pause and wipe student debt.
In a submission to the Senate inquiry, the National Union of Students (NUS) recommended that “in order to assist young people with the cost of living and future prospects for accessing mortgages in their future,” the government should freeze HECS/HELP and VET indexation for the next two years, permanently lower indexation to the official cash rate (currently 3.85%), increase the minimum repayment income to the median wage of $62,400 pa and investigate permanently removing indexation.
“The impacts of indexation are particularly felt by students from lower socioeconomic backgrounds and graduates working in lower paid fields,” the NUS submission said.
“Graduates working in essential services like aged care, disability care, nursing and teaching are going to feel the reduction in their take-home pay this year — making it harder to retain graduates in these industries.
“Indexation increases to HELP debts also disproportionately impacts young women, who owe a higher proportion of student loan debt and earn less due to the gender pay gap.”
Members of the crossbench in both houses of federal parliament have called on the Albanese government to better protect students from increasing debt.
In an open letter to Education Minister Jason Clare, eight MPs including Helen Haines, Dai Le, Sophie Scamps, Kylea Tink and Andrew Wilkie and Senators Lidia Thorpe and Tammy Tyrell said, “it’s beyond clear that urgent intervention is necessary.
“Indexation is causing student debts to increase faster than they are being paid off. Larger debts take much longer to pay off, with student debt becoming a lifelong burden for too many.”
The crisis has been escalating for years
The extraordinary indexation of HECS comes after years of inaction by successive governments to address the pressure student debt is putting on young people.
The amount of student debt owed to the government has substantially increased over the last two decades. While 47.5% of people with student debt owed more than $10,000 in 2005, that proportion is now more than 72%, data from the Australian Taxation Office shows.
In that same time period, the average time taken for students to pay off student debt has increased from 7.2 years to 9.5 years.
A report released by the National Tertiary Education Union predicts that it will now take 40 years for the average humanities student with an honours degree to repay their student loans. For business students, the Union predicts it will take 44 years to repay their loans.
For Law students studying a four year degree, the Union predicts that it will take 32 years to repay student loans, with female students to take 36 years. This reflects the disproportionate effect the indexation will have on women across all sectors, given the persistence of the gender pay gap.
The Union’s dire predictions were made on the assumption that wage growth stays at 2.3% (the current ten-year average) and that HECS indexation falls back down to 2.2% over the next seven years. A worse economic environment, with higher inflation or slow wage growth, will see it take students longer to repay their loans.
For students studying degrees including Arts, Law, Business and Economics, the increased cost of university degrees following the Morrison government’s implementation of the Job-ready Graduates Package has made the indexation increases more acute.
At the same time as the cost of degrees and total debt has increased, the threshold for compulsory repayments has decreased. Legislation passed by the Coalition government in 2018 saw the threshold for repayments dropped from $51,956 in the 2018–19 financial year to $45,880 for 2019–20. With the national minimum wage currently just above $40,000, the current HECS system sees low-wage workers forced to pay for their higher education.
With student debt considered by lenders when assessing mortgage applications, and with the housing grossly unaffordable, HECS indexation will perniciously affect students’ ability to purchase a home.
Fourth-year Arts student at the University of Sydney, Rose Donnelly, told Honi “I started at the University of Sydney in 2019 pursuing an English and History major. I was encouraged my whole life to pursue higher education.
“Since I began my degree the fees for that degree have doubled. It feels like the goalposts are constantly moving.
“I feel like my HECS debt has been swept under the rug because education is not considered valuable to society by the government.
“As a part-time student I feel the urge to finish my degree as quickly as possible so I can go out and work to pay it off, so I don’t have to stress about more indexation.
“There is shame associated with having debt. I have many friends who don’t even want to look at their debt because of the stress it induces. We have been told that a measure of success is financial security — that we will never have because of the high price they have put on education.
“We cannot make grand plans like generations before us, because we know our plan; we will be in the workforce, paying off a debt that we acquired in order to get into the workforce.
“The future does not feel exciting for us.”
