Brisbane wealth adviser Alanna Fraser has been battling to pay off a university student debt of $102,000.
She's just 26 and fears the current system of loan indexation will leave her still owing the government money for her Bachelor of Economics and a Masters of Financial Planning degrees in 20 or even 30 years' time.
Own a house? Not likely any time soon given banks see student HECS-HELP debts as a "real debt" and it thus affects a graduate's ability to borrow money.
Interest is not charged on student loans, but the full amount is indexed to inflation and added to the loan amount on June 1 each year.
Ms Fraser has joined a growing chorus of graduates, supported by The Greens, in calling for an overhaul of the system as student loans balloon as a result of high inflation.
Although the rate of inflation has just fallen for the second month in a row, with CPI at 6.8 per cent for the 12 months to February, already this year the average loan of $25,000 has risen by $1,500.
Ms Fraser's debt rose by $3,076, and she has only managed to pay off a good chunk of her debt thanks to her company contributing to her masters degree.
The National Union of Students (NUS) has done the sums and says with 3 million graduates tied to the HECS system, the latest hike of 3.9 per cent increased student debt by $4.5 billion.
It's allowing the federal government to pocket a windfall from the high indexation, based on CPI over a two-year period.
Ms Fraser said when she logged onto her myGov account to look at her HECS-HELP debt she found it "terrifying, heartbreaking and depressing".
"It is definitely a flawed system," she said.
"The sensible choice would be to freeze indexation until inflation gets under control, but the selfish person in me says abolish it.
"They certainly need to stop charging CPI, as it was conceived in low-inflation environment."
Slugged after loan paid off
School teacher Gemma McWhirter, 52, graduated with a Bachelor of Arts and Diploma of Education with a debt of $10,800.
But she was out of the workforce for 15 years raising three children — in that time the debt more than doubled.
She has just launched a "Stop HECS-HELP" petition and is gaining support by the day.
"Paying mine off was a case of two steps forward, one step back. It took me 27 years to get rid of the debt," she said.
The sting in the tail was that even though she was in credit last year because she managed to make a final payment in January 2022, she was still indexed, because the ATO looks at the debt for the entire year.
That meant Ms McWhirter was retrospectively slugged on the seven months she had still owed the government money.
"I found out the hard way. I was so excited to pay off my debt, but the ATO did not appear to update the debt payments," she said.
"It took me a while to even understand what had happened.
"I think it's profiteering — people need to know about it and it has to stop now."
$35,000 debt and pregnant
Lotta Halsted, 25, is about to have her first baby with a $34,900 HECS-HELP debt hanging over her head.
The nursing graduate has whittled it down from $42,000, but now fears it will soar while she is on maternity leave.
"It kind of feels like, 'When am I going to pay this back and am I going to be 50?'
"I am not asking anyone else to pay me debt off, I took it knowing I would have to pay it off.
"But definitely at a minimum I would support a freeze on indexation.
"Let's say I get pregnant again within two years … HECS just keeps going up and up, in which case all the money I have put into it to pay it off so far is just essentially nothing.
System complexity 'a mystery'
Financial adviser Marisa Broome said the system was so complex "it is almost like a mystery black box".
"I don't think the government wants us to understand how HECS works," she said.
Ms Broome said there was some inequality in the pay garnishing system in which graduates service their loan at various rates depending on what they earn.
For 2022-2023, repayments kick in at 1 per cent when income passes $48,361.
It is 10 per cent for anyone earning more than $141,848, but everyone is indexed at the same rate.
Ms Broome said higher income earners had thousands of dollars held by the ATO each year, but it was not paid directly off their student loan.
"If you are having money taken out every fortnight depending on how you are paid and it is not actually reducing the debt, then that does seem to be unfair."
CPI-linked loans 'not a reflection of the cost'
Ms Broome believes a smarter and fairer system should be to set up for student loans that was more like home loans.
"Then the ATO could data-match income on a regular basis, say each quarter, rather than the year or 18 months it takes now."
She was also backing some a "pausing, or alternatively a link to the cash rate" rather than using inflation as the measure.
"Having the HECS debt linked to CPI is not really a reflection of what the cost of funds are for the Reserve Bank to fund the HECS debt in the first place.
"Linking it to something more realistic, is a better way to help people pay it off faster."
'A profit of up to $2.5 billion'
NUS general secretary Sheldon Gait said outstanding debts have reached $74.4 billion under the student loan program, since it started in 1989.
He agreed graduates were being punished because of the way the government borrowed money to fund the program.
"It accesses the cash at the Reserve Bank cash rate, a 10-year bond yield, which currently sits at 3.6 per cent," he said.
"But we are seeing a historical high for indexation where they are estimating it will be roughly 7 per cent or 6 per cent next year based off the previous two years CPI.
"That means the difference between bond yield and CPI means the government is going to make a profit of up to $2.5 billion.
"The government should not be profiting off students using student debt as a way to fix their budget deficit, especially when we are facing a cost-of-living crisis."
Several student bodies recently presented papers or addressed the Senate and Education and Employment Committee which is inquiring into the Greens Bill to abolish indexation and raise the minimum repayment income to the median wage which sits at $62,400.
'Unsustainable and broken'
NSW Greens Senator Mehreen Faruqi said an education system that piles on more and more debt to students is causing enormous stress and harm.
"The prospect of obscenely high student debt is forcing people to rethink higher education. It is unsustainable and broken", she said.
The Greens argue their bill will provide much needed financial relief to 60 per cent of women graduates and 54 per cent under 40.
"It is an absolute cop out for the government to pretend that they can't do anything to help those facing crushing student debt until the Universities Accord process is complete," she said.
The Universities Accord, aimed to address major issues likely to face the tertiary education sector over the next 30 years, is due to be delivered by December.
"Students debt is firmly on the political and public agenda, millions of people are impacted by it and the government cannot keep ignoring it and thinking the student loan system is not broken," Senator Faruqi said.
'That is how the system works'
Despite growing pressure, Treasurer Jim Chalmers for the moment remains unmoved, arguing the student debt program is fair.
"I understand and obviously listen respectfully when student unions and others raise their concerns," he said.
"But this is an ordinary indexation and in terms of payments and pressure on people, the repayments go up when your salary goes up.
"That is what determines how much you pay back. That is how the system works."
A Job Ready Graduates Package was introduced in October 2020 which substantially reduced fees for degrees including science, health and teaching.
But students studying law and commerce faced a 28 per cent hike, while course fees for humanities and social sciences more than doubled.
The current average student debt is $20,000, but arts students now pay $43,000, for a degree, and up to $75,000 for a combined arts/law degree.
