HELP debt spirals to $74.4 billion as calls to ‘freeze’ loans intensify

Student loan debts of more than $100,000 sounds like something out of the US. But it is now an Australian reality for more than 35,000 students as calls to ‘freeze’ loans intensify.

With a $100,000 student debt hanging over his head, university student Harry Ryan worries he’ll be “debt trapped” for decades.

He’s one of three million Australians currently owing a combined $74.4 billion in Higher Education Loan Program (HELP) debt - an amount that’s risen 20 per cent in the last five years alone.

More than 35,000 of those students, like Mr Ryan, are straddled with crippling debts of $100,000 or more as they enter the workforce. Ten years ago, just over 3300 students had debts that high according to the Australian Taxation Office data.

It’s led to calls from the Greens and unions for a “freeze” on student loans - which aren’t affected by rising interest rates but are indexed in line with inflation. They also want to see the minimum repayment income - currently $48,361 - raised and tied to the median wage.

It’s an idea welcomed by Mr Ryan, 23, who completed a communications degree before starting a postgraduate law course at the University of Technology, Sydney.

University of Technology Sydney fifth-year student Harry Ryan has a massive student loan to pay off when he starts work. Picture: Brendan Read

“At the end of my undergraduate degree I owed around $50,000, but just 18 months into my postgrad degree my debt has risen to $101,000 - just short of the $108,000 loan cap - and rising,” he said.

“I’m absolutely happy to pay it off, but it’s an uphill battle. I’m worried it will impact my ability to get a home loan, or any other bank loan, in the future.

“I would like to see a freeze on indexation because while that might not affect a small loan, when your loan is over $100,000 it can be a substantial rise.

“I’d also like to see the income threshold for paying it back raised, so that those on relatively low incomes get a bit of breathing space.”

Harry Ryan is concerned his spiralling HELP debt will create issues for his financial future. Picture: Brendan Read

The cost of degrees has risen steadily over the past decade, though the introduction of the Job Ready Graduate Package from 2021 has led to a greater disparity between courses.

For instance those studying law, arts, commerce or communications courses pay top dollar while those taking on courses in national priority areas like education and nursing have seen fee cuts.

At Sydney University for example, a three year arts degree will set you back $45,426, while you’ll pay $17,100 for a nursing degree in the same timeframe.

Meantime Federal education minister Jason Clare announced on January 19 that teachers who worked for four years in very remote areas would have their student debts reduced, by an average of $35,000.

National Union of Students president Bailey Riley said loans were putting an added burden on students.

“We’ve seen some HECS loans increase due to the Job Ready scheme, which is disheartening for those keen to pursue those courses,” Ms Riley said.

Federal Education Minister Jason Clare has announced plans to help reduce HELP debts for teachers willing to work in remote areas. Picture: Bronwyn Farr

“They know they’re going to be riddled with debt by the end of their degrees, which will only rise in line with cost of living.

“That’s why we’d like to see a freeze on indexation on student loans for at least a few years so debts don’t keep climbing.”

Late last year Greens deputy leader and education spokeswoman Mehreen Faruqi introduced a private senator’s bill to parliament, calling for the abolition of indexation of all education and training loans from July 1, 2022 and for the income threshold to be tied to the median wage from July 1, 2023.

Submissions to the Education and Employment Legislation Committee are due in February, ahead of hearings, with a report expected in April.

Student debt is currently indexed by the Consumer Price Index (CPI) annually on June 1. In 2022, debts were indexed by 3.9 per cent - the highest rate in a decade - with the average student debt estimated to have risen by $923.

Greens Senator Mehreen Faruqi wants the abolition of indexation of all education and training loans. Picture: Joel Carrett

The latest CPI data shows inflation at 7.3 per cent, meaning an even higher indexation rate is expected in 2023.

“Student debt has exploded over the last decade and more and more people bear the burden of crushing debt,” Ms Faruqi said.

“This year, debts will grow even more with high expected indexation. We have to tackle this urgently.

“Abolishing indexation on student debt and raising the minimum repayment threshold will provide much needed money in people’s pockets at a time when they are struggling to make ends meet or pay rent. My bill will provide much needed cost of living relief and reduce the cost of education.

“Ultimately, we have to treat education as a right, not a privilege, and make TAFE and university fee-free.”

The Whitlam government abolished university fees in 1974, with politicians including former prime ministers Malcolm Turnbull and Scott Morrison among those to benefit.

But with a rise in Year 12 completion rates and the number of prospective tertiary students steadily growing, the student loan program (previously known as Higher Education Contribution Scheme or HECS) was introduced in 1989.

Since that time, more than two million people have repaid their debt in full, while around 19,000 debts have been written off due to death.

Universities Australia chief executive Catriona Jackson said the funding system had enabled millions of residents to study at university who otherwise wouldn’t have been able to.

“A student loan doesn’t immediately hit your hip pocket like other loans,” she said

“Unlike a mortgage or car loan, you don’t pay interest on a student loan, and you’re only required to make repayments when you earn above a certain salary.

“Inflation does drive up the ultimate size of a student loan, extending the period over which it is paid off.

“However, even though interest rates are rising and the cost of living growing, student loan repayments aren’t increasing in size.”