Unexpected Aussie struggling with $27,000 HECS debt exposes $2.2 billion problem: 'Can't retire'

Erica Winter wants to retire and enjoy her latter years but an outstanding HECS bill is forcing her to keep working. (Source: Supplied)

An Australian worker who should be preparing to retire soon is instead considering how much longer she will need to work with a $27,000 HECS debt still hanging over her head. Erica Winter is not the typical Australian you'd expect to be struggling with student debt.

She has notched up an impressive set of degrees and diplomas in her 65 years. However, she told Yahoo Finance that studying later in life has created a situation that's impossible to escape.

Winter was never a high earner, which meant she hadn't been chipping away at her student debt.

Now, after landing a better-paid role in social work, the money she'd like to be putting toward her golden years is being siphoned off and she feels trapped.

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"I'm going to have to continue working full-time for quite a few years," Winter said. "But then every year my pay will go up, and then I'll have to pay back more HECS."

Winter isn't alone, with the most recent data from the Australian Taxation Office showing more than 132,000 Aussies over the age of 60 still have a combined HECS debt of $2.2 billion.

That's more than double the $576 million recorded in 2014.

She is also from a generation that can have a much lower superannuation balance as mandatory super contributions only started in 1992.

Plus, Winter said she already dipped in to try and bring down her mortgage as she approached retirement.

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Four and a half decades of education and a $27k bill

Winter decided to further her education as she wanted to improve her chances of getting a better-paid job.

She has struggled at every turn. From graduating with arts and urban sociology degrees in 1980 and 1985 coinciding with the birth of her two children, to becoming a teacher at a time Victorian schools were closing.

Winter ran a general store for 10 years but said it wasn't much of a money-making operation.

So she tried to upskill in psychology and hit another roadblock. She'd have to quit her job to do her honours year, an impossible move with children to support and a mortgage.

Winter managed to take on a master's in social work to finally get a leg up, but it was "extremely difficult".

She was working full time at Australia Post during the day and spending every free hour at night and at the weekend studying.

She graduated with her masters in 2022 and her HECS bill for all that education over nearly 45 years stands at around $27,000.

Finally free but burdened by $4,000 a year HECS repayment

While the 65-year-old has finally reached the industry she wants to work in, she now faces a new issue.

"I knew that my income would be high, and I would have to start paying back [my HECS], fair enough," she said.

"The first year, I think I paid back $500 when it came to tax time. But in the following year, it went up to $3,500. And now I think it's $4,000 every year."

Winter has expressed concerns about what her golden years will look like if her pay continues to be funnelled toward her student loan.

"I'm always going to be behind the eight ball now because I don't have that sort of money to be able to just fork out and pay off the HECS debt," she said.

The 65-year-old could retire, which would put her under the threshold again.

She wouldn't have to pay of her HECS, but Winter said she doesn't have the nest egg to support herself.

In a bid to boost her income, Winter started picking up part-time work on the weekend.

But, a second job doesn't have a tax-free threshold and a portion was siphoned off for her student loan.

This left her feeling hopeless.

Government support is not enough

The Albanese government is trying to wipe around $3 billion off the collective HECS bill of former Australian students.

Legislation was introduced last month to change the way HECS is indexed.

Instead of being linked directly to the consumer price index (CPI), it will now bee calculated from whichever is lower between CPI or the wage price index.

The idea is to stop debt growing faster than the wages former students have to pay it, particularly as inflation broke ahead as the cost-of-living crisis worsened.

If the move is approved, it would be backdated to last year and reduce the average HECS debt of $26,500 by roughly $1,200.

Winter said it would not have a "huge" impact on her as her loan will be indexed again next year, pushing her backward at a time she'd like to be reducing her work hours.

The "pitiful" age pension was not a silver lining for Winter either. She and her partner have struggled to navigate their finances as when her pay increased, his pension would decrease.

The 65-year-old predicts she will have to keep working until at least 70 before she can retire.

"I find working five days a week is very full on," she told Yahoo Finance.

"Maybe in six months or so, I might want to drop down to a nine-day fortnight, or four days a week, just to make life a bit easier and a bit more restful.

"I just find that my work is so busy during the week, the days just roll along, the week's gone, and I feel like my life is passing me by."

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