Young Aussies to be slugged with $1k increases to HECS debts in fresh blow

Young Aussies are about to be hit with another major increase to their tax bill, but there are signs relief could be on the way.

Almost three million Australians with a HECS debt have found out just how much their debt will increase this year.

The indexation rate that will apply from June 1 was determined on Wednesday by the release of the latest quarterly inflation figure.

It locked in an 4.7 per cent increase. For a graduate with the average student debt of $26,494, their debts would rise by an additional $1,258 in 2024.

Student loans, known as HECS-HELP, are not charged interest. Instead, the full amount is indexed to inflation each year.

It’s often labelled a “good debt” – being far cheaper than other types of debt.

Over the past decade, the average indexation rate was just shy of 2 per cent.

Three million Aussies currently have outstanding HECS debt.

However as inflation has skyrocketed, the indexation rate has too. Last year, it hit a decade high of 7.1 per cent.

The year before it reached 3.9 per cent.

But it’s not all bad news. Prime Minister Anthony Albanese has hinted that help could be on the way for Aussies with HECS debt.

“I think there’s a range of areas where we need to do much better with the younger generation, basically, and HECS is one of them,” Mr Albanese said.

“What we’ve done is we’re developing a Universities Accord, essentially with all of the universities across the board. And what that has said is that the system can be made simpler and be made fairer.”

It’s understood an announcement will be made in the coming weeks, before the May 14 budget is handed down.

But question marks remain about whether the government will have enough time to legislate any changes before the June 1 deadline.

Independent MP Monique Ryan, who in March released a petition for reform that has been signed by more than 270,000 people, said any tweaks must kick in before June 1.

Both Jim Chalmers and Anthony Albanese have hinted relief is on its way. Picture: NCA NewsWire / Martin Ollman

“Hundreds of thousands of Australians with a HECS debt are either treading or seeing their HECS debts increase despite working hard to pay them off,” she said.

The Universities Accord, the first broad review of the higher education system since 2008, released its final report in February. It recommended an overhaul to how student debt is calculated and when it is deducted.

It proposed calculating the indexation rate from the lowest of either the Consumer Price Index (inflation) or the Wage Price Index (which measures wage increases).

The review also recommended changing the timing of indexation to deduct compulsory repayments first.

It also called for a look at bank lending practices to ensure HELP loans are not treated in a way that limits people's borrowing capacity for home loans.

Speaking on Wednesday, Treasurer Jim Chalmers was tight-lipped on his next move but acknowledged the stress students and young people were under.

“The Universities Accord makes a number of suggestions around HECS-HELP and we are considering those suggestions,” he said.

“As the Prime Minister, the minister (Jason Clare) and myself made clear on earlier occasions, if there’s something that we can do on that front in addition to the cost-of-living help that we are already providing, then we are prepared to consider that.”

But Greens senator Mehreen Faruqi demanded indexation be scrapped altogether. She said that since Labor had come to office, student debt had increased by more than 16 per cent.

“Anything less … is a betrayal to students,” she said.

“A system that traps people into a lifetime of student debt is a broken system and needs to go.”