A senate inquiry report into a bill that would freeze $74 billion in student debt is set to be tabled in federal parliament next week.
The Australian Greens' push to abolish indexing on HELP debt (formally known as HECS) comes as more than 3 million graduates face up to a 7 per cent hike on their debt this June due to spiking inflation.
The Greens, backed by the National Union of Students, argued the scheme was "unsustainable and broken".
The bill also looks to amend legislation in a bid to "improve the fairness" of various loan schemes by raising the minimum repayment threshold for the loans and tying it to the median wage.
Deputy Greens leader Mehreen Faruqi warned the problem would get much worse if the government did not intervene.
The bill pushes for a rise to the minimum repayment income and abolition of indexation before June 1, 2023, when the likely record inflation-driven hikes kick in.
The Greens said a Parliamentary Budget Office analysis showed that of the 3.2 million graduates still trying to get on top of their growing debt, 60 per cent of those who would benefit from a freeze were women and 54 per cent were under 40 years of age.
The Senate Standing Committee on Education and Employment, chaired by Labor Senator Tony Sheldon, received at least 60 submissions, of which nearly 40 were for students or graduates struggling to pay back spiralling loans.
Mr Sheldon, who chaired the committee, said it was the former Coalition government's decision to lower the minimum repayment threshold from $52,000 to $45,880 which had substantially increased the hardship suffered by low- and middle-income graduates.
"We also heard that the former Coalition government's Job Ready Graduates package has resulted in a 15 per cent cut in total public funding per student, with that added cost shoved back onto students," he said.
"Students also shared disturbing stories about universities keeping student accommodation vacant at a time when rental properties around universities are more scarce and less affordable than ever before.
"After enduring years of funding cuts and the erosion of working conditions in our universities by the former Coalition government, a wholesale review of the sector was needed, and that is what the minister has initiated through the Australian Universities Accord process."
'Suffocating' debt
Many submissions raised concerns about the ATO holding onto garnished wages, instead of paying them straight off the debt, similar to a home loan.
Science graduate Clare Ripsher, who trained in nutrition and food, wrote: "After being somewhat brainwashed that uni [sic] was the only way, we were then signed up to a debt that I don't believe I fully comprehend at the time.
"I tried to enter the workforce only to find I was over-qualified for most jobs or under-qualified for the rest.
"This then meant I had to pay to study more and further increase my debt.
"I didn't end up in the career of a nutritionist due to the reasons above and that so many other students came through and studied the same thing, making what little jobs there were even harder to get.
"The weight of this accumulating debt for a career I couldn't get into, does make me feel suffocated.
"I don't believe it's fair that it is now accumulating interest on top of being a large debt, especially when that wasn't the policy when I signed up."
An 'un-Australian scam'
Student Ahmed Khater told the inquiry he believed the payment system was a "rip off".
"Indexation interest is applied on the 1st of June every year, while repayments are deducted every fortnight from one's pay cheque, only to be amassed and deposited on the 1st of July annually, instead of superannuation-style weekly contributions," Mr Khater said.
"This ensures students of all tertiary levels are subject to higher interest repayments with no chance of reducing their loan without voluntary contributions.
"This is a downright scam and un-Australian."
Mr Khater said increased interest rates, "[entraps] students, who cannot afford to pay tertiary education fees lump sum, into an arbitrary life of paying debt".
"If a financial institution did this to Australians, it will be illegal and charges will be laid on the financial institution, there would be uproar."
A lifetime of debt
Other submissions came from university student bodies like the QUT Student Guild, which argued the scheme failed students and would "follow students to their death".
"In two senses, the cost of living on mental health and the application of indexation means it's taking longer for students to be debt-free," the guild said.
"The yearly index applied on higher education training loans is mindlessly strengthened with a tactless reduction of the minimum repayment income."
Further in its submission, it claimed a student saddled with debt after a three-year QUT Business Degree, and based on the median wage, would take 108 years to pay off their loan.
Finally, a submission from Suicide Prevention Australia (SPA) said it strongly supported the reforms in the bill due to the links between debt burden and suicide.
Director of Policy and Government Relations, Chris Stone, said there was a demonstrated link between unmanageable debt and the risk of suicide.
"We also know suicide is the leading cause of death for young people," he said.
"Research indicates that those who die by suicide are eight times more likely to be in debt.
"A lifetime burden of debt stretching out into the horizon is very worrying, that is why it is really good we are seeing this push to change the loan system to reduce the burden."
He said evidence linking student loans to the potential risk of suicide had come out of the US, where student loans were much higher.
"But the point is we do not want to see our system, as economic conditions get worse, drift into a more punitive style," he said.
"SPA is concerned about the increasing inflation and the impacts of this on student loans and associated compulsory repayments."
No immediate plans to halt indexing
Music graduate Baillie McWhirter, 23, said she would like to see better education about how HELP and indexing worked through programs in high school.
"I honestly have no clue and that is the most terrifying thing," she said.
"It is really hard to find out what your debt is, how it works, you are not taught it when you leave school and go into uni.
"There are so many young people like me, who don't understand."
She said her hope of ever buying a house was "not even possible in my future".
"Right now we just need to stop the indexation, put that on hold and have a discussion so students know exactly what debts they are facing."
Treasurer Jim Chalmers was asked at a recent press conference in Brisbane whether he would consider a pause or freezing of HECS indexation.
"It is not something we have been considering," he said.
"This indexation that happens around the middle of the year, every year, happens regardless of who is in office ... That is how the system works."
The ATO has a B-Pay system where former students have the option to pay directly into their student loan account which comes straight off the debt, rather than being held by the ATO until a tax return is filed.
