Australians living with HECS or HELP loans will likely be facing thousands of additional dollars added to their debt in the new financial year due to indexation, after a bill proposing major changes to the higher education loan system was rejected.
In a report released on 17 April, the Education and Employment Legislation Committee recommended the Senate not pass Greens Senator Mehreen Faruqi’s bill to abolish indexation and increase the minimum repayment threshold.
Due to rapidly increasing inflation, HECS/HELP loans are predicted to increase by 7 per cent. This is a record high level of indexation; between 2013 and 2020, indexation varied between 1.5 per cent and 2.6 per cent.
Australian Greens Deputy Leader and Education spokesperson Senator Mehreen Faruqi said the committee’s recommendation is an insult to everyone who provided evidence in support of the bill.
“Labor has ignored the loud, desperate calls from students, graduates, young people, women, unions, think tanks and experts for urgent action to address the student debt crisis,” Senator Faruqi said.
“The committee majority relied selectively on evidence provided by a handful of witnesses to justify what seems like a foregone, ideological conclusion.”
Senator Faruqi’s bill proposed for indexation to be abolished and removed from HECS/HELP loans and for the minimum repayment threshold to be increased to the median wage of a full-time worker, which is currently $62,400 per annum.
One of the major concerns the report outlined is how much debt would not be repaid if the minimum repayment threshold was lowered, and that lowering the threshold will just increase the time it takes someone to repay their debt.
This makes sense: if the minimum repayment threshold is higher, then it will take many graduates longer to reach that number and therefore longer to repay it over their lifetime. And some may never reach that level of income.
However, when graduates do reach that point of having to repay their loan, they will be in a better financial situation as they will have a higher income. Therefore, they will be more likely to be able to make those repayments without struggling to make ends meet.
Emeritus Professor James Guthrie, Professor John Dumay and Dr Ann Martin-Sardesai explained to the Committee that the introduction of the income contingent loans (like the minimum repayment threshold) were implemented to ensure graduates were only made to pay their loans once they began earning a comfortable income.
The current minimum repayment threshold is approximately $48,000. This figure is only $6,000 more than minimum wage and almost $15,000 less than the median annual income.
One of the other major arguments against the bill is that it will have no impact on cost-of-living for most students right now. The majority of university students study full-time, typically earning less than the minimum repayment threshold and therefore are not required to repay their loans yet.
However, this does impact graduates or those students earning at or above minimum repayment threshold. The most recent data from the Department of Education shows that over 40% of all students in Australia study part-time.
This is a substantial number and indicates there are potentially many current students who may be required to repay their loans, while still studying.
The QUT Student Guild was one of the many organisations which submitted a report in support of this bill, and the President, Secretary and Treasurer presented directly to the Committee at a public hearing in Sydney earlier this year.
QUT Student Guild President Aamna Asif said while she understands the HECS loan scheme was created on the basis that students pay off what they can afford, the current economic landscape simply does not support this system.
“In today’s fiscal and economic environment, we know students and young people will be the first generation to go backwards due to intergenerational debt. Governments need to be doing whatever they can to ease these pressures because everyone should have the right to receive quality education without stressing about future financial implications.”
“The longer we wait to see action on this, the more student debt will skyrocket. We will see more and more students in higher debt, financial and mental stress, and unable to ever afford a home.”
The QUT Student Guild Environment Officer Isabella Foley hosted a “Speakout Against Cost of Living Crisis” on Gardens Point campus on Thursday 27 April. Foley said the event was about “…the cost-of-living crisis, and the lack of action by the government to intervene into this crisis that particularly affects students and workers”.
One of the major concerns raised by students at the event was the rate of indexation. Foley said the average time for paying off a HECS debt has increased from 7.3 years to almost 10 years, and she called for students to attend an upcoming protest of the last night’s Federal Budget, which has been endorsed by herself, the UQ Environment Office, Greens MP Stephen Bates, and the NUS Education Office.
QUT Student Guild Treasurer Usama Shafiq said the decision not to support changes to indexation could result in students and graduates struggling to pay off their debts, and could result in fewer young people being interested in pursuing tertiary education altogether.
“Some students may need to take out additional loans or work longer hours to deal with increased cost of living, which could affect their academic performance and career prospects.
“This decision could exacerbate the existing socio-economic gap in accessing higher education, and unfairly impact disadvantaged students.”
He also said that despite the challenges and setbacks, it was admirable to see students remaining resilient and committed to pursuing their education goals.
“Whilst the Senate’s decision to reject the bill may have dealt a difficult hand, it’s important to continue voicing our concerns and advocating for positive change.”
You can read the Committee’s complete report here.