Once considered a good 'social policy', students say HECS loans are a burden on an entire generation

Madigan Paine still has a HECS debt to pay off. (ABC News: Mark Leonardi)

When these eleven university students finally don their graduation gowns, they will collectively owe more than $750,000 in tertiary loans.

That’s before they even earn one cent from their coveted professions.

From neuroscience to medicine, psychology and law, they are daunted by the HECS debts they’re racking up and fear they will never be able to pay them off.

The nation’s three million HECS loans are set to soar by 4.7 per cent on June 1 in the second highest ever indexation under Labor.

It means HECS has risen by 16.62 per cent since Labor came into power in 2022.

While the federal government has now acknowledged the hardship faced by students and graduates in the cost of living crisis, there are fears it will be the can that is kicked down the road because there is no quick fix.

The University Accord — designed to improve the accessibility and affordability of higher education — called for a “fairer and simpler” system.

But even if the government reduced the indexation rate that is applied this year, students say it won’t be enough — and there are growing calls for a total re-write.

The country collects more in HECS repayments annually than it does in tax from oil and gas, and experts say hiking those taxes could pay down the HECS debt within three years.

A generational burden

All of the students we spoke to agree the loan scheme — where the government pays the course up-front and graduates pay it back over time as they start to earn an income — was once a good “social policy”.

But due to high inflation, students claim it’s now a burden on an entire generation.

Medical student Angus McRae, who is in his last year on placement at the PA Hospital, will owe more than $80,000 when he graduates.

As president of the University of Queensland Union, he is advocating for a better deal, insisting many students did not understand how HECS was calculated when they signed up.

“It is a huge amount of debt, it is very easy at the moment to try and trivialise it and push it away as a ‘later me’ problem,” he says.

“But now I am getting quite close to graduating, it will now be a ‘me’ problem.

“The government needs to take a long hard look at the rate it is increasing because the debt is just going up and up faster than students can pay it off.”

People with the average HECS debt of $26,494 will see it balloon by $1,272.

For the 55,000 Australians with at least $70,000 of debt, they will cop an increase of $3,360.

Scientist Jeryn Chang, who is doing a PhD into motor neurone disease, says her debt will hover around $100,000 on graduation.

Hoping to fulfil a critical role amidst a job shortage in the health industry, she questions whether HECS is “still the right approach when wages have not kept pace with inflation”.

It’s a sentiment echoed by student nurse and midwife Anastacia Prendegast, who’s greatest concern is being able to afford to live while on placement in a major teaching hospital.

She has to “commit to a thousand hours of unpaid placement” and says it will be years before she can start paying back her HECS.

“I live by myself, so it really takes a toll when it comes to paying the bills,” she says.

“I have anxiety about the rate of indexing. I felt like graduating was going to be the light at the end of the tunnel, but now it feels that light is getting further and further away.”

Could an extra tax on fossil fuels pay off HECS?

Amidst growing anxiety among students, petitions calling on the federal government to change the way HECS debts are indexed have gained hundreds of thousands of signatures online.

The Australia Institute has made no secret of its dismay that the country collects more in HECS repayments annually than it does in tax from the oil and gas industry.

Executive director Dr Richard Denniss is also running a campaign for change after highlighting the Petroleum Resources Rent Tax (PRRT) was nearly $2.3 billion in 2022-23, compared to $4.9 billion in student loan repayments — more than double.

“It is obscene successive governments say they want to encourage kids to go to university, they want to encourage people to improve their education, but here we are with this tax regime,” he says.

“I think the politics of fixing this problem is as easy as it gets — governments should tax things they want less of, and subsidise things they want more of, like higher education.”

Griffith University economist Professor Andreas Chai agrees.

He argues a full 10 per cent tax on oil, gas, and coal exports — without loopholes — would be enough to pay off the entire HECS debt within three years.

“We could potentially heavily subsidise, or at least write-off, some of that debt”, he says.

‘The goalposts have changed’

In a statement to the ABC, federal Education Minister Jason Clare said he was considering the 47 recommendations made by the University Accord.

But he added: “I also want to make the point that going to university makes you money”.

“The average annual income of an individual with a university degree is approximately $30,000 more than the average annual income of someone whose last year of education was Year 12,” he said.

It’s of little comfort to those like 28-year-old teacher Madigan Paine, who is still on the debt merry-go-round with post graduate studies.

Her debt is set to increase from $36,000 to $50,000 — a daunting prospect when that figure is considered by banks “when they are looking at home loans”.

“I feel like when I initially started the degree there was all this talk about HECS being a good debt, not to worry about it, you are doing this to better yourself,” she says.

“But … in the last few years, the goal posts have changed and it is actually having a tangible effect on my life.

“To sum it up, I feel despair.”