Aussies with student loan debt are in for a big financial headache from June 1 after it was revealed HECS will be indexed by 4.8 per cent this year. There are millions of Australians with student loans and there are serious concerns for those will again have their debt grow by more than they've repaid, pushing many to "crisis" point.
Yahoo Finance has been flooded with responses from desperate former students who feel trapped by their growing debt. One of them is Lauren Eardley, who on Wednesday found out her near $80,000 debt will have more than $3,700 whacked on top.
"I'm falling into a cesspit of debt, which I’m expecting to be in the millions by the time it dies with me," the 28-year-old said.
"I'm going to have this decision I made when I was 18 hang around me forever."
Lauren went to university because she thought that was the right thing to do. Now she has a HECS debt she feel she will never pay off. (Source: Supplied)
Do you have a similar story about HECS debt? Email stew.perrie@yahooinc.com
Eardley did two degrees, one of which she no longer uses. The government worker loves her job, but doesn't think she will ever get control of her HECS debt while it continues to be indexed.
The fears for her future are becoming so serious, that she worries she won't be able to become a mother.
"I’m scared to ever have kids or use maternity leave [as that might] jeopardise my income," she said.
"This is a crisis.
"Many women I work with have ended up with a tax bill after maternity leave due to them not paying off enough of their HECS over the year."
How much will HECS go up by this year? Indexation explained
HECS is increased each year in line with inflation, based on the March CPI figures.
This year it's been calculated to 4.8 per cent, which will increase on June 1.
For a person on a salary of $60,000, with an average HECS debt of $24,771, their student loan debt will increase by $1,771.
Based on their wage, if they made the minimum payments they would've paid off $1,200.
There are almost three million Australians with a HECS debt, with the Australian Taxation Office reporting more than $74 billion in outstanding loan repayments.
Student loan debt has been indexed by more than 16 per cent in the last three years, which is about $12.3 billion.
Independent MP Monique Ryan said today's news would "send chills down the spines of more than 2.9 million Australians with a HECS debt", describing the situation as "untenable".
More than 273,000 people have signed her petition calling for the government to change the way HECS is indexed and she told Yahoo Finance she will continue to fight to help those now just "treading water".
"The reality is that half of the people who get a HECS debt now carry it into their 40s and the unintended consequence of that is that it's actually affecting much of their decision making," she said.
"It's a real active disincentive to people to make more, to increase their work hours and to re-engage in the work market."
HECS anxiety crippling Australians
Eardly's story is all too familiar. Some fear the debt is stopping them from getting a home loan, others are outraged by the wages they are offered in return for accumulating the education tab.
The law graduate told us she only realised how big her debt had become last year when indexation hit a number not seen in decades, a record 7.1 per cent.
She decided to put an extra $100 of her hard-earned cash per week into her student debt to try and pay it off sooner.
That amount of money might not seem much to some, but the 28-year-old said it put a dent in her finances and she was forced to live frugally as a result.
Lauren thought she was chipping away at her HECS debt and then was shocked when she discovered it had barely made an impact. (Source: Supplied)
When she went to check how much she had paid off, she was gobsmacked when she saw the number had increased again.
"I'd actually been hit with charges dating back to 2014 when I started my degree, saying 'amendment to indexation' and that came to almost $5,000 which set me right back again," she said.
"Those charges were amendments to indexation because of some mistake by HECS or HELP."
Australians have complained about the confusing increases to their debt, which the Australian Taxation Office describes as "an issue with the percentage calculation on some study and training support loans".
Eardley hoped to have knocked off around $3,600 from her loan with the weekly payments, but that's all gone down the drain.
She now feels any attempt to put any additional money toward bringing down her student loan is "redundant".
"I’ve been actively trying to no avail," she said. "It’s depressing, and I’m lucky enough to be in a position of privilege to be in a reasonably well-paying full-time job. "
What is the government doing about HECS debt?
Prime Minister Anthony Albanese has hinted the upcoming budget might have some relief for those struggling with HECS debt.
Albanese said the government will examine recommendations of the Australian Universities Accord, which called for indexation not to be tied to inflation alone, but to the lower of CPI or the page price index.
“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,” 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.”
His government is due to deliver the Federal Budget in May, ahead of indexation.
