Student debt is a major issue in the lives of many Australian students. With growing concern about how this debt is calculated and managed, the Parliamentary Library is attempting to forecast the impact of potential changes to the HECS/HELP indexation system.
Higher Education Contribution Scheme (HECS) debts, now known as Higher Education Loan Program (HELP), are broadly indexed to inflation, which resulted in a massive spike increase of 7.1% in the amount of debts last year.
According to the most recent projections, students with an average debt of approximately $26,494 would face an increase in their loans of $1,113 in the best case scenario, and $1,272 in the worst case scenario. However, the real challenge is for students with higher debt, who may face loan increases of even more than $4,000. The increased burden on these students calls into question the sustainability of the current higher education funding system.
The final report recommends ensuring that loan increases do not exceed salary increases. This responds to concerns about students’ ability to cope with the increased financial burden caused by rising student debt. In addition to this, it proposes a reduction in student fees for low-income students and a change in the revaluation schedule to prioritise the repayment of compulsory obligations.
Prime minister, Anthony Albanese, has suggested the government is looking to reduce the rate of student debt indexation in response to debts growing by more than 4% this year.
“Yeah, I think there’s a range of areas where we need to do much better with the younger generation, basically, and HECS/HELP is one of them.”
“What we’ve done, we’re developing a Universities Accord, with all the universities across the board, and what that has said is the system can be made simpler and fairer,” he said.
Albanese noted that indexation of debts had “been in place for some time”.
“The idea of HECS is a good one, it is one that has led to a massive expansion in the number of people being able to do university degrees. But we’re examining the recommendations and we’ll be making announcements pretty soon on that – we of course have a budget coming up,” he noted.
Greens education spokeswoman Mehreen Faruqi said if Labor were serious about easing cost-of-living pressures, it must scrap indexation.
“Just talking about the cost-of-living crisis while ignoring the heavy burden of student debt is not going to ease the pain for anyone,” she said.
“Student debts are spiralling out of control, and the Labor government is sitting on its hands as it oversees an astonishing increase of 16 per cent in their first term of government. University and TAFE should be free and all student debt wiped, but let’s start with abolishing indexation and providing some relief to people being weighed down by an ever ballooning debt.”
Mehreen Faruqi’s plea comes after US President Joe Biden announced his latest student debt relief plan, cancelling the debts of 277,000 Americans.
