Australians with student debt face the highest increase in decades from 1 June, leading to calls from a growing group of MPs and advocates for the government to urgently reform the repayment system amid the cost-of-living crisis.
The March quarterly figures, released by the Australian Bureau of Statistics (ABS) on Wednesday, revealed the consumer price index (CPI) for the first three months of 2023 was at an annual rate of 7%, down from the 32-year high in December of 7.8%, but up on last March’s 5.1%.
This means millions of Australians will face a 7.1% increase on their student debts when indexation is added on 1 June, with the Greens urging the government to intervene to stop the “unprecedented and deeply unjust” rise. The repayment of Hecs and Help loans are tied to indexation, which calculates the level of compulsory repayments.
Australians with an average student debt of $24,770.75 will see it increase by $1,758.72. For more than half a million people with debts of $40,000, it will add another $2,840.
The independent MP Zoe Daniel on Wednesday urged the federal government to implement urgent reforms to ease the pressure on students following the release of the latest indexation figures.
Daniel said Help was not fit for purpose at a time of “unprecedented” cost-of-living pressures.
“The data shows that women are disproportionately affected by rising university costs, and that the current indexation system further exacerbates the gender pay gap,” she said.
“If indexation were applied after compulsory repayments, Australian students would be saving hundreds of dollars this year alone.
“These are all stopgap measures. After being set up in the 1980s, Help is no longer fit for purpose and is overdue for independent review.”
Earlier this month, a Senate committee recommended against passing a bill put forward by the Greens senator Mehreen Faruqi to abolish indexation and increase the minimum repayment threshold to the median wage.
Under the Coalition in 2019, the threshold was reduced from $52,000 to $48,361 – about $6,000 above the current minimum wage.
In its report, the committee said it was “unclear” whether freezing indexation would ease cost-of-living pressures and was concerned at its financial implications on the budget.
On Wednesday, Faruqi said the “clock [was] ticking” for Labor to stop the “devastating blow” of a “student debt avalanche”.
“Nurses, teachers and other essential workers face the double whammy of low wages and ballooning student debt,” she said.
“At the very least, Labor could pause indexation for at least the next two years while inflation remains high and the cost-of-living crisis rages. To do nothing at all is just plain cruel.”
Daniel said the federal government had “made it clear” it would not cap debts but said there were immediate options that could ease the pain on graduates.
She proposed determining indexation based upon the more stable wage price index, as occurs in the UK, tying indexation to the Reserve Bank of Australia’s trimmed or weighted average rate of inflation as a better determiner of underlying inflation, or changing the timing of compulsory repayments.
Bailey Riley, the president of the National Union of Students, welcomed Daniel’s support to tackle “the crisis of skyrocketing student debt” on young Australians.
In 2021-22, outstanding Help debt rose to about $74.3bn, up from $68.7bn in 2020-21.
“We are already looking at becoming the most indebted generation in Australia’s history and now the federal government is looking to profit from young Australians during a cost-of-living crisis,” she said.
The National Tertiary Education Union echoed calls for a higher repayment threshold and abolishing indexation.
The union’s president, Alison Barnes, said students were going backwards and could not repay debt fast enough to build financial security.
“Indexation, a growing fee burden and low repayment thresholds are an ever more toxic combination. This is the equivalent of financial quicksand,” she said.
“As a nation we can and must do better.”
The education minister, Jason Clare, said affordability was a “real issue” and had tasked the Universities Accord team to look at student debt.
“It’s important to remember that Help loans are not required to be repaid until a person reaches the income repayment threshold,” he said.
“Help repayments are a set percentage based on your income. It’s built on a really important principle – you pay what you can afford. And you don’t pay more unless you earn more.”
