‘Not enough’: Brutal HECS change looming for millions of Australians

From tomorrow, millions of Australians will be impacted by a brutal change, with experts warning people are going to be “hit hard”.

From Saturday, millions of people across the country, many of them young Australians, are going to be hit with a brutal increase to their student debts.

On June 1, anyone who has an unpaid HECS-HELP loan will see their debt increase by a significant 4.7 per cent.

HECS-HELP debt does not accrue interest, however, it is indexed for inflation every year.

Last year, those with student loans saw their debts rise by a whopping 7.1 per cent – the biggest jump seen in 30 years.

It comes as the Federal government recently announced a plan to wipe $3 billion in student debt for just under three million Aussies.

The proposed change, included in the May budget, will see the lower of either the Consumer Price Index (CPI)or the Wage Price Index applied to the indexation process. Currently, indexation is done in line with CPI.

Legislation still has to pass in order for the change to be applied but, once it does, it will be backdated to June 1, 2023 and the revised indexation rates will automatically be added by the Australian Taxation Office to people’s loans.

This means, last year’s 7.1 per cent indexation will be reduced to 3.2 per cent and this year’s will be reduced 4 per cent, instead of 4.7 per cent.

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Prime Minister Anthony Albanese recently announced that almost $3 billion in student debt would be wiped under the HECS indexation changes. Picture: Tracey Nearmy/Getty Images

However, despite the proposed changes, tomorrow’s indexation will still have a significant impact on the 2.9 million Australians currently saddled with HECS debt.

One of these Aussies is 24-year-old Queensland woman, Lauren, who is currently sitting on a $71,240 HECS debt.

The Townsville local is in her sixth and final year of a Bachelor of Medicine, Bachelor of Surgery. She also completed a one year Bachelor of Nursing Science degree and is completing year one of two of a part time honours degree.

Speaking to news.com.au, Lauren revealed the latter is a research degree and is one that is strongly recommended and “essentially required” in order to specialise in her chosen field.

“I haven’t started paying off [my HECS] since my degree requires me to do full-time placement – minimum 40 hours per week, 40 weeks per year,” the young university student said.

“Often, these shifts are much longer, including having to work six days a week and/or 14 hour shifts. This does not leave time to work.”

Lauren says the changes to HECS are ‘not enough’. Picture: Supplied

According to the government’s HELP Indexation Credit Estimator, once the new changes kick in, Lauren will receive an estimated $2595 credit for last year’s indexation, bringing her debt down to $68,645.

However, a 4 per cent increase for this year will see an extra $2745.80 added to her debt and, because the 24-year-old hasn’t hit the earning threshold to start paying off her loan, she will be left with an even higher debt of $71,390.80.

Despite the changes being made to HECS, Lauren says “it’s not enough” and more needs to be done to support students.

“We are suffering placement poverty. There is no option to do my degree part time,” she said.

“The fact that this year I have no exams yet am being charged $9000 for the degree is outrageous.”

Samantha Sakr is another young Aussie who is looking down the barrel of tens of thousands of dollars in student debt.

The 27-year-old currently has a HECS debt above $50,000 that she has been paying off since 2018 after completing a Bachelor of Advertising, Public Relations and Marketing.

While some think the changes announced by the government don’t go far enough, Samantha believes they are a “step in the right direction”.

“Many of us with HECS debts are striving to maximise our tax returns and more importantly, our savings,” she told news.com.au.

“Hopefully, when implemented in this tax season, the indexation will provide some much-needed financial relief.”

Samantha Sakr has more than $50,000 in student debt, which she has been paying off since 2018. Picture: Supplied

A recent Finder survey of 1071 respondents – 271 of whom have student debt – revealed more than 3 in 5 are slightly or extremely concerned about their ability to repay their interest-free loan – up from 54 per cent last year.

The research found 12 per cent don’t think they’ll ever be able to repay their student debt.

That’s more than 354,000 people who have no confidence that they will be able to pay off their student loan.

Outstanding HECS-HELP debt has risen to just over $78.2 billion for the 2022–2023 financial year, up from $74.3 billion in 2021-2022.

More than half of those with student debt owe up to $40,000, 21 per cent owe between $40,000 and $100,000, and just over 1 per cent owe above $100,000.

Richard Whitten, money expert at Finder, told news.com.au that, even with the government changes to indexation, it is still going to “hit many Australians hard”.

“Four per cent this year is still a fairly high indexation rate. If your debt is in the tens of thousands you’re looking at a hefty increase,” he said.

“Student debt is still a less urgent debt compared to credit card debt, personal loan debt or even buy now pay later charges. You always want to focus on those high interest debts first.

“But with the cost of university rising, and future indexations likely to be higher than in the many low inflation years we’ve had before 2022, people with student debt should consider paying some of it off if they can.”