Australia’s student debt system is facing renewed criticism as $1 billion is added to HECS debts on Monday, with the annual indexation hike of 2.8 per cent taking effect. The increase adds approximately $770 to the average student debt of $27,600, sparking concerns over a “broken system” that leads to “debt spirals”.
Proposal to Shift Index Date
Independent MP Monique Ryan has proposed moving the annual indexation date from June 1 to November 1, after tax time. Modelling commissioned by Dr Ryan and conducted by the Parliamentary Budget Office suggests this change would reduce HECS debt by $58 million next year, compounding to $150 million less per year by 2036. Compulsory HECS payments are not applied to reduce debt until after tax returns are filed, so a later index date would apply to a smaller balance.
“When you make a payment on your home loan, its balance goes down,” Dr Ryan said. “Graduates’ HECS payments aren’t being accredited to their accounts in real time, and that’s costing them dearly, as indexation is applied before the end of the financial year. Young Australians are already under immense financial pressure. Today they’re waking up to find their student debt has grown again. We need to fix this broken system.”
Fiscal Impact
The November 1 index proposal would reduce the federal government’s underlying cash balance by $1.2 billion over the next four years if implemented this year. However, the policy would lead to a $3.49 billion decrease in debt not expected to be repaid over the coming decade. This loss is offset by $4.92 billion less in concessional loan discounts, resulting in a net reduction of $1.005 billion in the government’s fiscal position over four years.
Criticism of Government Policies
Dr Ryan criticised both Liberal and Labor governments for the rising student debt, stating, “Rising student debt is not an accident. It’s the result of deliberate policy choices made by Liberal and Labor governments. The cost-of-HECS crisis was created by Scott Morrison and has been allowed to continue under Anthony Albanese.”
She also targeted the Job-ready Graduates scheme, introduced in 2021, which cut costs for science and mathematics degrees by 59 per cent but raised arts degrees to over $50,000 and reduced university enrolments from low socio-economic backgrounds. “The Job-ready Graduates scheme has doubled the cost of many degrees. It’s the worst tertiary education policy in this century. Scrapping the Job-ready Graduates scheme remains unfinished business,” she said.
Government Actions and Greens’ Response
In 2025, the federal government fulfilled an election promise by wiping 20 per cent off all HECS debts. The annual indexation benchmark was also adjusted to be tied to whichever is lower of the inflation rate or wage price index.
Greens senator Mehreen Faruqi said the “debt spiral” on $50,000 arts degrees intensified with Monday’s index increase. “The Prime Minister cannot claim to be addressing intergenerational inequity while keeping in place the grossly unjust Job-ready Graduates fee hikes, which are disproportionately impacting young people and already disadvantaged students. Young people are already being locked out of the housing market, denied loans and rethinking dreams of further study, and things are only getting worse because Labor has not scrapped Job-ready Graduates,” Senator Faruqi said.
