Australia’s Student Debt System Under Fire
Australia’s student debt system is facing intense criticism, with some calling it a “broken system” that is creating “debt spirals.” On Monday, $1 billion was added to HECS debts as the annual increase benchmark was applied. This increase has raised the average student debt by about $770, bringing the total to $27,600.
The federal government has already lowered the annual increase benchmark, but on Monday, all HECS debts increased by 2.8 per cent. This change has sparked concerns among students and policymakers alike.
The Impact of Indexation Dates
Independent MP Monique Ryan commissioned modelling that highlights how changing the date when the annual debt hike is applied could make a significant difference. If the index date were moved from June 1 to November 1, HECS debtors would face $58 million less next year, compounding to $150 million less per annum by 2036.
Dr. Ryan tasked the Parliamentary Budget Office with running the numbers on pushing back the annual index date five months until after tax time. Compulsory HECS debt payments do not reduce someone’s student debt until after they have filed their tax return. The hypothetical November 1 index date would mean the annual HECS debt index increase was applied to a smaller debt.
“When you make a payment on your home loan, its balance goes down,” Dr. Ryan said.
“Graduates’ HECS payments aren’t being accredited to their accounts in real time, and that’s costing them dearly, as indexation is applied before the end of the financial year.
“Young Australians are already under immense financial pressure. Today they’re waking up to find their student debt has grown again. We need to fix this broken system.”
Financial Implications for the Government
The November 1 index idea would cut the federal government’s underlying cash balance by $1.2 billion across the coming four years if it were implemented this year, the modelling shows. But, the scheme would actually lead to “a decrease in debt not expected to be repaid,” the official policy assessment document shows; $3.49 billion over the coming decade. The $3.49 billion loss on the government’s books is set against $4.92 billion less in concessional loan discounts being handed out.
The November 1 proposal would overall wipe $1.005 billion off the government’s fiscal position over the next four years.
“Rising student debt is not an accident,” Dr. Ryan said.
“It’s the result of deliberate policy choices made by Liberal and Labor governments.
“The cost-of-HECS crisis was created by Scott Morrison and has been allowed to continue under Anthony Albanese.”
Criticism of the Job-ready Graduates Scheme
Dr. Ryan also took aim at the Job-ready Graduates scheme, introduced in 2021 and aimed at getting more people into science and mathematics degrees. The scheme has cut the cost of those degrees by 59 per cent but pushed up arts degrees to more than $50,000, and has also slashed university enrolments for people from low socio-economic backgrounds.
“The Job-ready Graduates scheme has doubled the cost of many degrees,” Dr. Ryan said.
“It’s the worst tertiary education policy in this century. Scrapping the Job-ready Graduates scheme remains unfinished business.”
Government Actions and Reactions
Fulfilling an election promise, the federal government wiped 20 per cent off all HECS debts in 2025. The annual indexation benchmark was also tweaked, pinned each year to whichever is lower of the inflation rate or wage price index.
Greens senator Mehreen Faruqi said the “debt spiral” on the $50,000 arts degrees intensified with Monday’s index increase.
“The Prime Minister cannot claim to be addressing intergenerational inequity while keeping in place the grossly unjust Job-ready Graduates fee hikes, which are disproportionately impacting young people and already disadvantaged students,” Senator Faruqi said.
“Young people are already being locked out of the housing market, denied loans and rethinking dreams of further study, and things are only getting worse because Labor has not scrapped Job-ready Graduates.”
