HECS trap: How did I end up here?



My ears turned hot when I heard the HECS indexation rate was increasing. When June 1arrived, I swung between wanting to check my account to assess the damage and never logging into MyGov ever again. How did I end up here, $60,000 in debt?

Flash back to 2012. I’m 17, I’ve just graduated high school. My parents, who both run small businesses on the Sunshine Coast, have never had a lot of spare change but I’ve been lucky to get Youth Allowance. I’m stoked. I can’t wait to start my degree at Queensland University of Technology.

At no point in this journey does anyone explain to the 17-year-old Maddie what HECS actually is, or more importantly, how my higher education loan works. I’ve heard the word HECS before, it stands for Higher Education Contribution Scheme, but only in the context of my teachers, or politicians who say on the TV how lucky we are in Australia; how lucky we are to not have an American student debt system.

Student debt has the power to pull people into poverty, while simultaneously scaring the next generation of learners away from undertaking study.

I hear how lucky I am (and on a global level, I truly am) to get an education. No one explains that I’m signing a contract for tens of thousands of dollars of debt. No one explains that this debt increases if you don’t pay it off. No one explains what indexing is, nor inflation or CPI. I’m 17, I don’t have a clue financially, I’m just really lucky.

The Federal Government's Study Assist portal explains there is no interest charged on student debts. However, indexation is added to your debt on June 1 each year by "adjusting it in line with changes in the cost of living".

Cut to December 2021. I'm 27. I’m a playwright and theatre producer in the middle of a pandemic. I’ve been very lucky in my career, but I see the writing on the wall for the arts and decide to undertake further study to make myself more employable. At this point the total HECS debt on my Fine Arts (Drama) degree with a Dip-Ed is $26,920. In the five years since I graduated I have paid off $917.

In February 2022, I start my online Master’s degree in journalism at UNSW Sydney. When I make this decision, HECS indexation is at 0.6 per cent of my debt (a modest $160 pa). I choose the Master’s because it’s a two-year coursework degree, designed to leverage my existing writing experience. Not indulgent. Not lengthy. It’s a decision that will boost my long-term financial security and fulfil my love for all things news.

Cut to May 2023 and the economic picture has changed: with surging inflation, spiralling interest rates, a cost-of-living crisis and a potential recession around the corner. I earn enough to pay down $1,892 in HECS tax. I've finally made it. I'm making enough money to start paying off my debt.

However, that indexation thing I didn't register at 17 is now in sharp focus. The loans may be interest-free but they are tied (indexed) to inflation. On June 1, my student debt jumped 7.1 per cent.

When I logged in to MyGov, ears burning, to survey the damage, my HECS debt had increased to $60,569. That's made up of my original HECS debt, plus $27,988 in new debt for my Master's. And then there's indexation.

When the rate of indexation is 7.1 per cent, the rate at which my debt increases per annum is higher than the amount I pay off each year through tax. On June 1, the government billed me $2,838 in indexation ($946 more than I paid off in my May tax levy).

If you earn $65,000 per annum (the national median salary), your annual HECS repayment will be $1950. For me, despite paying it down, my debt keeps rising. Indexation will not always stay at 7.1 per cent but let’s presuppose it’s staying high for a while. By 2030, with 7.1 per cent annual indexation, and factoring in my mandated tax levy repayments, my estimated debt will reach $92,653.
I see only four possible solutions to escape this debt spiral.
  1. I pay off my $65,000 debt as a lump sum (which means winning lotto).
  2. I focus on paying off the thousands in indexation on top of the annual tax levy each year and in that way keep my debt at $65k for the rest of my life.
  3. I wait for the Federal Government to change its policy.
  4. I die and the debt dies with me.

Of the four, none seems realistic. One of them is actually possible but it needs the Federal Government to engage.

Before this month’s indexation rise Federal Education Minister Jason Clare said that he was open to potentially doing something about it but hasn’t announced anything concrete. When asked about a debt freeze, he argued against it, declaring “I don't want people thinking that universities are not worth it”. But that’s the issue, they’re simply too expensive for students to think it is worth it.

I could end here with a monologue about how university was free when half of the Members of Parliament were at uni, or a criticism of the Labor Party running an election campaign that declared “No one left behind” when that is exactly what they’re doing. I could even point towards The Public Universities of Australia last week penning an open letter to the Minister for Education calling to scrap indexing. But we’ve heard these arguments all year. Nothing’s changed.

Instead, I’ll end with this. I’m sitting here, reasonably lucky, well educated, mostly frugal, scared for my livelihood. I don’t have a solution within my own means. I don’t have the Bank of Mum and Dad. HECS has priced me out of a home loan. Trust me, I checked. I applied for a home loan to my bank with a hypothetical modest $20,000 deposit and my $62,000 annual wage. Firstly, without my HECS debt disclosed, and then again, with it included. My borrowing power was a HECS-free $306,000, but dropped to $78,000 when I acknowledged my student debt. For $78,000, I can get a run-down church in remote Queensland. Pews included. Halleluiah.

I have friends in their 30s, moving back home. I have friends sleeping on couches. I walk past an increasing number of tents under bridges, in parks, people sleeping rough. This is a HECS and housing crisis.

It is affecting the most disadvantaged right now, and it’s coming for early-career professionals, single income earners and young families next. Student debt has the power to pull people into poverty, while simultaneously scaring the next generation of learners away from undertaking study.

We used to pride ourselves for being different to the United States. For having “free education”. For being the “lucky country”. Not anymore.


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