Students and graduates could see their student loans increase by thousands of dollars, after a Senate inquiry rejected a proposal to freeze indexation on the debts.
Indexation on HECS-HELP and vocational education loans is expected to increase by up to 7 per cent on June 1, in line with cost of living increases.
Greens Senator Mehreen Faruqi last year introduced a bill to pause indexation and increase the repayment threshold. A Senate inquiry looking into the proposal rejected the bill on Monday.
"While the committee agrees that measures should be taken to ease the cost-of-living burden on Australians, it is unclear whether the measures proposed in the bill will achieve this effectively," the report said.
"In addition, the committee notes that an increase in the minimum repayment threshold may significantly increase the proportion of debt that is not expected to be repaid, in turn impacting the long-term financial sustainability of the loan programs."
There is currently more than $75 billion in outstanding university and vocational education loans owed to the federal government.
The Department of Education estimated Senator Faruqi's bill would cost an additional $9 billion over forward estimates in foregone payments.
The number of HECS-HELP loans has gone up sharply, from more than 600,000 loans in 2016, to nearly 830,000 loans in 2019.
The number of student loans for vocational education like TAFE doubled over the same time period.
The department said the system took into account the fact that it would get all of that money back, but it still saw the proposed changes as a risk.
"The proposed changes are likely to significantly reduce the amount of debt that gets repaid," a spokesperson said.
'An unobtainable future'
The expected increase in indexation could see loans go up for some people, like 26-year-old Jessica Tran.
Ms Tran graduated from university with a Bachelor of Arts in 2018. She was left with more than $28,000 in HECS-HELP debt.
Despite drawing it down for the last few years, indexation has meant Jess's overall debt has increased.
"In total my debt has increased by $2,907 due to indexation since 2016," she said.
Jess dreams of moving out of home. But with cost of living skyrocketing, and a massive debt hanging over her head, she knows it's just not a possibility right now.
"It's become an unobtainable future for me to even think about moving out," Ms Tran told Hack.
Back in 2018 the then-Coalition government lowered the repayment threshold from nearly $56,000 to just over $48,000.
This meant people in lower-paid professions had to start paying back their loans sooner.
Ailis Steele, 24, is doing a double degree in nursing and midwifery.
She knew going into her degree that it wasn't a high-paying area of employment.
"It's not about the money. I currently work in accounting, and if I stayed in accounting I would earn significantly more than I would if I ended up as a midwife, which is what I plan on doing," she told Hack.
Senate inquiry into freezing debts
Senator Faruqi said the rejection of her bill proves the federal government was out of touch with the struggles students and graduates face.
"By refusing to support the bill, Labor has completely ignored the loud and desperate calls from students, from graduates, from young people, from women to act urgently on the student debt crisis," Senator Faruqi told Hack.
She said the government had its spending priorities wrong.
"This government has committed $368 billion for war machines and $254 billion to give back and tax cuts to billionaires."
"It's not an issue of affordability."
The Greens have promised to continue pressuring the government in the lead up to the June 1 indexation deadline.
Loans impacting young people's life plans
The expected increase in student loans means young people like Ms Steele and Ms Tran are rethinking plans for their future.
"It's been a dream of mine to move out of home, and also travel. But that's been completely put on the backburner and it's not a reality," Ms Tran said.
Ms Steele said she and her partner have had to put off conversations about buying a house and having kids, because of their financial situation.
"I have a partner and we want to live together. So in that first year of working [as a midwife after graduating], I'll be trying to put together a deposit while probably still living at home with my parents at 26," she explained.
Ms Tran told the Senate inquiry she supported the Greens' bill to freeze debt and increase the repayment threshold.
She said knowing her student loans weren't growing out of control would have a positive impact on the way she lives her life.
"Knowing that I have such a debt, and it's an accumulative debt as well, one that will just continue to increase, looming over my head – it's taken a real toll on my mental health and motivation."
