The proposed changes have been welcomed by many, but some, including a young Aussie teacher, said the government "needs to do a hell of a lot better".
While the government's plan to wipe $3 billion in HECS debt was welcomed by many, some say it's not enough to make a decent dent in their student loans. (Source: TikTok/AAP)
Are you struggling with your HECS debt? Email stew.perrie@yahooinc.com
The Tasmanian teacherdid a double degree at university and graduated with a student loan debt of a little more than $34,000. Five years later, she has paid $17,365 towards her HECS debt.
Frustratingly, when she heard the announcement and checked her account, she found she still owed $27,530.
"The entire education system from preschool to tertiary education needs an overhaul because it is not serving its purpose," she said on TikTok.
"It's not working for us anymore. Do better Australia."
She, like many prospective university students, said she didn't properly understand the financial commitment she was making when she signed up for the HECS program.
The Tasmanian said she now feels like she was sold a lie, that her course would be "basically free" and that repayments wouldn't haunt her for years after she finished.
She's not alone in her frustrations with Labour's plan to change how HECS is indexed.
"It’s a start but I don’t think it’s enough they need to change when it’s indexed and when our withheld repayments are applied to the loan," said one person.
"I think they should do more, it is still something but it’s not much of a change. Like people are still going to struggle financially," wrote another.
"I'm not going to lie, it doesn't give me much hope for paying my debt off anytime soon," added a third.
HECS indexation reform 'just the first step': 'A lot more to do'
Teal MP Dr Monique Ryan has led the charge in a campaign for the Albanese government to change the way HECS operates.
Her petition amassed nearly 300,000 signatures and while she said the $3 billion plan was a win, she said there's more to be done.
"I think that was only the first step really, and there's a whole lot that's left to do on HECS that the government has indicated they're considering and that they will hopefully put on the agenda in the next short while," she told Yahoo Finance.
She would like to see the government address the following areas:
Get rid of the Job-ready Graduates Package: This was introduced by the Morrison government in 2021 to encourage people to choose university degrees that had real-world market demand like teaching and nursing. But it saw the cost of low-demand courses like arts degrees skyrocket.
Unpaid placements: Ryan said the government's announcement of $320 weekly payments to certain courses that require practical placements was a good step, but it needs to be more money and rolled out to more degrees.
Change the date for indexation: HECS is currently indexed on June 1. Ryan said this is an "inappropriate" time of the year because it means the student loan gets indexed for the previous year, regardless of what they've paid in the last 12 months. The MP told Yahoo Finance that the indexation date has to be moved to after the start of the financial year, not just before the end of the previous one.
Banks need to change how they assess HECS: If someone wants a bank loan, the lender will assess how much HECS debt they have and it can sometimes knock up to $100,000 from their borrowing power. Ryan said student loan debt needs to be viewed differently to make it fairer for people trying to buy a house or a car.
She said those unhappy with the government's plan should sit tight as there could be more changes coming soon.
"This is just the beginning of a significant change to our HECS system," Ryan told Yahoo Finance.
"I think that it is time for a significant review of something which is no longer fit for purpose and doesn't, at this point, reflect the aspirations of the system when it was launched in 1989."
How the government's HECS overhaul will work
HECS debt is currently tied to the Consumer Price Index (CPI), and it was set to be indexed by 4.7 per cent on June 1 this year.
It was a brutal blow for Aussies who saw their student loans go up by 7.1 per cent last year and 3.9 per cent the year before.
Under the government's proposal, which is yet to pass, HECS will be indexed by CPI or the wage price index (WPI), whichever is lower.
This plan would be backdated to June 1 last year, lowering the record inflation of 7.1 per cent to just 3.2 per cent, in line with WPI.
Education minister Jason Clare said the move would provide much-needed relief to those who have been struggling with the collective debt of over $74 billion.
"An individual with an average HELP debt of $26,500 will see around $1,200 wiped from their outstanding HELP loans this year, pending the passage of legislation," the government said.
Here's an estimation of the benefits:
HELP DEBT at 30 June 2023
TOTAL ESTIMATED CREDIT FOR 2023 AND 2024*
$15,000
$670
$25,000
$1,120
$30,000
$1,345
$35,000
$1,570
$40,000
$1,795
$45,000
$2,020
$50,000
$2,245
$60,000
$2,690
$100,000
$4,485
$130,000
$5,835
*Actual credit amount will vary depending on individual circumstances including repayments made during the year. All HELP debts that were indexed in 2023 and are subject to indexation on 1 June 2024 will receive an indexation credit.
The relief will also apply to apprentices with debt through the VET Student Loan program or Australian Apprenticeship Support Loan.
What happens if I already paid off my HECS debt?
Many Aussies worked extra hard to pay off their student loan debt by chucking money on top of their regular payments.
Some put in tens of thousands of dollars to dramatically reduce or pay off their HECS in full and they are now asking what the government's plan means for them.
Luckily, it's not all wasted cash.
“Those that paid off their outstanding HELP loan between 1 June 2023 and the time the legislation is passed will be eligible for a tax credit,” a spokesman confirmed.
People who have fully paid their HECS loan will receive their indexation credit as a cash refund if they have no other tax liability when they lodge their tax returns this year if the government's proposed legislation passes.
