Leave it to Lead Section Editor Sophie Poredos to whip up a handy, Grapeshot-approved guide to calculating and managing your HECS debt!
Ah the poor old woes of a university student - however will I pay off my Sisyphean HECS debt?
University fees are a tale not even as old as your parents, since they had free tertiary education in Australia from the Gough Whitlam government from 1974. Then, in 1989, the dreaded Higher Education Commonwealth Scheme, known as HECS appeared. Whilst all degrees cost a mere $1,800 a year (translating to $3,811 in 2024), the Howard coalition government brought three-tiered rates in 1996, beginning the divide between humanities, law and STEM [1].
Since then, university degrees have exploded in indexation. Indexation is a process that involves dividing the Consumer Price Index (CPI) or the change of prices of goods, by last year’s results. Therefore leading to the commonly used term; “inflation”.
So how does indexation apply to university degrees and why the hell doesn’t the government care about us broke students?
Well, HECS indexation will soon be overhauled with loan indexation matching whichever out of the Consumer Price IndexI or Wage Price Index (WPI) is lower, so that HECS can’t outpace the WPI. Some economists have long called for indexation to fall in line with the WPI, as it would create less strain on students who often dominate the minimum-wage sector workforce. With one in seven students regularly going without food and other necessities (rising to one in four for Indigenous students [2], student debt-levels at a record high of $74 billion [3]. For students such as myself, this reversal feels like the beginning of a promising future for young people.
Prior to 5 May 2024, indexation was forecasted to be another 4.7% jump in 2023. The even better news? The new HECS policy will be backdated to June 1 2023, meaning that 7.1% indexation from last year (the highest increase since 1990) will fall back to the WPI of 3.2%. This will be a saving of $1,200 for the average student. The impact of this is huge and cannot be understated; $3 billion of student debt will be wiped out if the policy passes. [4]
Students will be receiving an indexation credit for their outstanding loan for 1 June 2023, but should still expect indexation of 1 June 2024 to be a 4% increase.
Here is a handy table guide to show (domestic) university students, how much savings they will be getting back this jump will be:
Previous HECS Balance | Indexation Credit to Receive |
$15,000 | $675 |
$30,000 | $1,345 |
$40,000 | $1,795 |
$50,000 | $2,245 |
These are long called for changes, as the issues that arise with indexation are the misconstruction of labelling HECS as ‘interest free’ or a ‘good debt’. The government's new changes, if passed, act as a precedent to better the future for young students, though more work is needed in areas providing secure employment for graduates and further increasing the minimum wage in-line with the CPI.
After 1 June 2024, if the Federal Government passes the new rates, you should be able to see your new balance in eStudent and calculate the savings according to your repayments. What started off as a dreaded news story about indexation, has led the Grapeshot team feeling very optimistic about the rest of 2024.
ENDNOTES
[1] Black, J. (2023), “From free university to $15,000 a year for an arts degree — tracking the cost of Australia's higher education over three generations”, ABC News, https://www.abc.net.au/news/2023-07-27/generational-hecs-debt-university-access-higher-education-cost/102480290#:~:text=Higher%20education%20was%20free%20in,Education%20Contributions%20Scheme%20(HECS)
[2] Universities Australia (2018), “One in seven uni students regularly go without food”, https://universitiesaustralia.edu.au/media-item/one-in-seven-uni-students-regularly-go-without-food/
[3] Hamilton-Smith, L. (2023), “Australia's HECS-HELP debt has topped $74b. How long does it take the average student to pay theirs off?”, ABC News, https://www.abc.net.au/news/2023-04-15/hecs-help-debt-financial-advice-indexation-student-loan/102218826
[4] Duffy, C. (2024), “HECS indexation to be overhauled in budget with $3 billion in student debt 'wiped out'”, ABC News, https://www.abc.net.au/news/2024-05-05/help-hecs-debt-indexation-2024-cut-easier-to-pay-off/103800692
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