Students would save $3bn over a decade if Labor changed Hecs indexation date by five months | Australian education
University graduates would save more than $3 billion over ten years if the government changes the indexation date for HECS debts, which independent MP Monique Ryan calls a “broken system” in its current form.
Hecs debts of nearly 3 million students and graduates will increase by $1 billion when indexed by 2.8% on Monday.
Interest does not accrue on Hecs debts, it increases annually depending on the inflation rate or wage price index to maintain the “true value” of the money owed.
Students make mandatory payments to Hecs, which are collected and maintained by the tax office, but this money is not deducted from the debt until the person files a tax return.
This is done after debt indices.
Costs by the Parliamentary Budget Office, seen by Guardian Australia, show that if the government changes the indexation date from June 1 to November 1 after compulsory payments are paid, it would cost the budget’s underlying cash balance $1.2 billion in lost revenue over four years.
Ryan, who did the costing, said young Australians were already under huge pressure and called on the government to make the system fairer.
“It is no coincidence that student debt is rising. It is the result of deliberate policy choices by the Liberal and Labor governments,” Ryan said.
“We need to fix this broken system. When you make a payment on a mortgage, the balance decreases. Graduates’ Hecs payments are not transferred to their accounts in real time, and this is costing them money.”
Analysis of the data shows that students will save $58 million in indexing in the first year; This will rise to over $150 million a year by 2035-36 as university tuition, HECS debt and student numbers increase.
Social security payments, including job seeker’s pension, old age pension and youth allowance, are indexed at different times each year. While the elderly pension, disability support pension and carer’s payments are indexed on 20 September each year, job seekers are indexed twice a year on 20 March and 20 September.
On Thursday, Education Minister Jason Clare said Labor was changing indexation rules to increase debt in December 2024 by the rate of inflation or the wage price index, whichever is lower. Labor also reduced Hec’s debts by 20 percent, with a 2025 election promise.
“We have already made some significant changes to the way Hecs are indexed and this has had significant benefits for young people across the country… There is a lot of unfinished business and much more to do,” Clare said.
“We want to make it easier for young people to get a diploma cheaper and faster.”
