Simple HECS fix would save students billions, new analysis shows

Today, students across Australia will see their HECS debts rise again, by a total of over $1 billion, in another clear sign that Australia’s student debt repayment system is fundamentally broken. 

Dr Monique Ryan MP, Independent Member for Kooyong, said the annual increase highlights the urgent need for structural reform. 

“Young Australians are already under immense financial pressure. Today they're waking up to find their student debt has grown again. We need to fix this broken system,” Dr Ryan said. “When you make a payment on your home loan, its balance goes down. Graduates’ HECS payments aren’t being accredited to their accounts in real time, and that’s costing them dearly, as indexation is applied before the end of the financial year.”    

New analysis from the Parliamentary Budget Office, commissioned by Dr Ryan, reveals that a simple change could deliver significant savings for nearly 3 million current and past Australian students. 

The analysis finds that moving the indexation date from 1 June to 1 November - after tax returns are processed - would ensure a fairer system by taking into account repayments already made during the financial year.  

This simple change will save Australians with a HECS debt $3.192 billion in indexation over the next 10 years. The savings each year compound, such that graduates will save $58 million in indexation in 2026-27, growing to $150 million in savings in 2035-36 alone, with savings increasing each year within that timeframe. Currently, indexation is applied before compulsory repayments withheld over the financial year are considered, meaning many Australians are effectively charged indexation on debt they have already started paying.  

Around 2.9 million Australians carry HECS debts. Many graduates owe over $50,000 for a three-year degree and up to $80,000 for post-graduate study. These debts often take a decade or more to repay. 

“Rising student debt is not an accident. It’s the result of deliberate policy choices made by Liberal and Labor governments,” Dr Ryan said. 

“The cost-of-HECS crisis was created by Scott Morrison and has been allowed to continue under Anthony Albanese."

“The Job-Ready Graduates scheme has doubled the cost of many degrees. It’s the worst tertiary education policy in this century. Scrapping the Job-Ready Graduates scheme remains unfinished business.” 

In the last Parliament, Dr Ryan led a successful campaign that forced the government to wipe $3 billion from the student debt of three million Australians. 

While the Albanese government has made some adjustments, including how indexation is applied and increasing repayment thresholds, it has failed to address the core structural problems fueling Australia’s cost-of-HECS crisis. 

Dr Ryan called for comprehensive reform, including changing the timing of indexation, making student contributions fairer, and restoring affordability across the higher education system. 

“Every young Australian deserves access to the same affordable education that previous generations – including many current politicians – benefited from,” she said. 

Explainer on PBO costing:  

HECS loans are interest-free but indexed annually on 1 June using a Consumer Price Index or Wage Price Index formula (whichever is lower) to maintain their real value over time. While the ATO collects repayments throughout the year, these are not applied to a person’s balance until after tax returns are processed, months after indexation occurs. This can result in Australians seeing their debt grow despite making regular repayments. 

Dr Ryan asked the PBO to cost a simple change: moving the indexation date to later in the year on 1 November, after tax returns are processed, so that repayments already made are considered first. PBO analysis demonstrates this change would ensure a fairer system and reduce the amount of indexation applied, delivering real savings to millions of Australians with student debt.