Australia's student loan scheme is facing increased scrutiny as a record-high indexation rate of 7.1% is set to take effect on 1 June, adding thousands of dollars to graduates' debts. The indexation, tied to the consumer price index, has risen sharply from 3.9% last year and 0.6% in 2020, exacerbating the financial burden on millions of borrowers.
Zoe, an arts law graduate from Victoria with a $123,000 debt, has been working full-time in the public service for five years but has seen little progress. Despite earning a $100,000 salary and making compulsory repayments, her debt will increase by about $9,000 due to indexation, while her estimated $10,000 in repayments this year will barely make a dent. 'It's a bitter pill to swallow,' she said. 'Wages don't keep up with indexation, so why do our debts?'
For the average borrower with a debt of $24,770, the indexation will add $1,759, while those with debts over $40,000—some 585,000 people—face an increase of $2,840. Graduates report that the debt cycle is hindering their ability to secure mortgages and achieve financial stability, with repayment periods now averaging nearly a decade.
Independent MP Zoe Daniel is calling for an urgent review of the Higher Education Loan Program (Help), arguing that indexation should be applied after compulsory repayments to ease the burden. 'After being set up in the 1980s, Help is no longer fit for purpose and is overdue for independent review,' she said. The Greens senator Mehreen Faruqi criticised the government for being 'completely out of touch' and allowing a 'student debt avalanche'.
Education Minister Jason Clare defended the scheme, stating that it removes upfront cost barriers and encourages tertiary education. However, with over 3 million Australians owing more than $74 billion in student debt, many graduates feel trapped. Jacob Atkins, who has a $36,000 debt and works in London, said his approach is to 'try to forget my Hecs exists'.
