Teals back cutting HECS indexation

Julie HareEducation editor

Mar 20, 2024 – 4.45pm

Subscribe to gift this article

Gift 5 articles to anyone you choose each month when you subscribe.

Already a subscriber?

Education Minister Jason Clare is under mounting pressure to fix the “broken” student loans system, from independent MPs who say indexation is saddling young people with unconscionable levels of debt.

“If you are an average Australian now finishing a degree and earning around $60,000 a year and have an average-size HECS debt, it increased last year by $1700 because indexation was higher than the amount you paid off,” teal independent MP Monique Ryan said.

“Young Australians are falling behind, and they are drowning in debt.”

Independents Zali Steggal, Zoe Daniel, Monique Ryan and Kylea Tink are pushing for reform of the student loans system. Alex Ellinghausen

Under the Higher Education Loans Program, more commonly known as HECS, student contribution rates are set for a calendar year, based on the annual CPI increase at December of the previous year. As such, contributions for 2024 are the 2023 rates indexed by the December 2022 CPI annual increase of 7.8 per cent.

On top of that, fee hikes of about 50 per cent over five years in disciplines such as law, business and arts have resulted in students paying $16,323 a year for their courses. Because student contributions are indexed at the same rate as accumulated debt, that is up from $15,142 in 2023.

Dr Ryan said the student debt crisis was causing people to choose not to go to university, despite critical skill shortages in the economy, including allied health, engineering and psychology.

She said young people were struggling to get home loans because of their HECS debt and were further struggling because of the cost-of-living crisis.

Universities accord

Dr Ryan and fellow independent Zoe Daniel have backed recommendations in the universities accord calling for indexation to be either based on the consumer price index or the wage price index.

They also want the calculation of indexation on student debt until the end of the tax year to ensure the calculation is based on the actual amount.

Currently, the Tax Office takes out compulsory payments for the previous financial year and indexes the balance, meaning students are being indexed on parts of the loan that have been repaid.

A spokesman for Mr Clare said the universities accord released in February made recommendations about how to make HECS simpler and fairer. The government would respond in the coming months.

Higher education expert Andrew Norton has proposed capping indexation at a maximum of 4 per cent. This would be fairer to students in inflationary times and rarely cost the government because CPI only occasionally rises above that figure.

He said a long period of low inflation, and consequently low indexation, had removed student debt as a priority issue. But that had now changed.

“Between 2002 and 2021 it averaged 2.4 per cent. It was below 2 per cent between 2016 and 2021,” Mr Norton said.

“This extended period of low inflation left HECS indexation as a latent issue.”

A petition started by Dr Ryan had gained close to 120,000 signatures in a week by Wednesday afternoon.

Someone on the median wage with the average HECS debt paid off $1500
last year but had $1700 added on July 1.

Ms Daniel said students and young graduates were “confronting unprecedented cost-of-living pressures as they commence their careers and consider establishing families”.

“They do not need the added cost and anxiety caused by inflation-fuelled indexation of HELP having a crippling impact on their lives.”

Julie Hare is the Education editor. She has more than 20 years’ experience as a writer, journalist and editor. Connect with Julie on Twitter. Email Julie at julie.hare@afr.com