On 1 June last year, indexation was applied on my then HECS-HELP debt of $87,722 at 7.10 per cent. This resulted in a $6,228 debit being applied to my HECS-HELP account.
If the same indexation rate is applied this financial year, my HECS-HELP debt will increase again, to $94,863. HELP indeed!
I’m not the only one with a soaring student debt problem. On 1 June 2023, there were some 3 million Australians owing over $74 billion in student loan debt.
There are 3 different financial factors at play when it comes to HECS-HELP debts and repayments. The first is the size of the actual debt (in my case, currently $91,025). The second is the amount the debtor is required to pay each year, relative to their income and usually deducted from their salary each pay cycle (last financial year, my repayment percentage was 4 per cent and I therefore repaid $2,924 of debt in that year). The third factor is the rate of indexation, applied annually to the total debt (for me, last financial year this amount was $6,228).
I am a 41-year-old, university educated woman who has spent time in and out of the workforce, working mostly part-time, over the last 18 years as I raise my children. My education debt is significant – and growing, rather than decreasing. Is this really the way the system is intended to work? And do my male contemporaries have these same debt problems?
Higher education was actually free in Australia from 1974 until 1989 when the Hawke Labor government introduced the Higher Education Contribution Scheme (HECS). This iteration of the Scheme promoted students making a ‘contribution’ to their education costs.
The HECS system was then replaced with the Higher Education Loan Program (HELP) in 2003, under the Higher Education Support Act 2003. The ‘loan’ is interest free but is indexed, annually, to the consumer price index (CPI), i.e., inflation. This explains why we’ve seen the biggest, inflation-adjusted rise in 33 years. The change of language from ‘contribution scheme’ to ‘loan program’ highlights that the system has gone beyond students making a ‘contribution’ to their education costs.
The HECS-HELP system is one of the most complex schemes that is run by the Government. The student loan scheme aims to raise revenue from those who have benefitted from tertiary education to supplement government subsidies for tertiary education. Apparently, the Government aim to do this in a manner that is fair and reasonable. However, for some people, the repayment arrangements are not fair and reasonable. For a lot of women especially, the system does not feel fair or reasonable.
The 22/23 ATO data, showing comparison between men and women’s debts, is alarming (and depressing). Approximately 60% of total outstanding debts are attributed to women, with men holding approximately 40% of total outstanding debts. The age range break-down is also fascinating.
But when I put the 22/23 ATO data in front of an academic in the Higher Education field and point out the marked disparity in women’s debts during the child-bearing and raising years, they explain to me that, from the perspective of the theory behind income contingent loans, the effect I describe is the system working as designed, to reduce or suspend repayments during periods of lower income.
This is somewhat difficult to grasp. It feels counterintuitive that women’s debts are accumulating and compounding from the late 20’s age range, but that this is how the system is designed to work? The logic is not reassuring.
Alison Preston, a Professor of Economics at the University of Western Australia, describes that the current system is not sustainable and will see outstanding debt levels continue to soar into the future. “It is not suitable to a student population that is increasingly female and where women, on average, have a disproportionate share of family care responsibilities and, over their life-time, earn, on average around 50 per cent less than men.”
Tracey West, Financial Education Manager at Ecstra Foundation, is also concerned about the financial burden of studying, and the consequences of the accumulation of high HECS-HELP debts on women when they are more likely to spend time out of the workforce, work part-time, or generally get paid less than male counterparts. West too describes that “women are more likely to hold HELP debts for longer and be subject to larger amounts of inflation adjustment, compounding the time it takes to repay the loans. This is especially important when women undertake postgraduate study as mature students, potentially before child-rearing or to up-skill after child-rearing.”
On 25 February, the Australian Universities Accord Final Report was published by the Department of Education. I was hoping that the Accord would provide a gendered analysis of students’ debts and a plan for addressing the inequity, but I was disappointed.
Preston was also disappointed. She remarks that “any system that is linked to workforce participation and earnings by definition will, on average, disadvantage women”. She likens this to the superannuation system. Preston describes that maintaining the HECS-HELP income contingent loan system is problematic as, when the Accord talks about potential future earnings, they are not talking about potential future life-time earnings. “Studies show that, on average, women’s life-time earnings are around 50 per cent less than men’s.” This is a scary reality.
On 1 June, the indexation rate for the 23/24 year will be released. If another 7.10 per cent indexation rate or higher is to be expected, this will certainly only add further stress to existing cost-of-living and financial pressures. We will have to wait until the May budget to see if the education minister makes any change to how debtors pay back deferred university fees.
In March, independent MP Monique Ryan put a video up on Instagram asking people to sign her petition to make HECS debts fairer. Looking this morning, nearly 250,000 people had signed it. Ryan remarks that “young people face a cost-of-living crisis, a housing crisis and a climate crisis. We shouldn’t give them a HECS crisis as well.” But it’s not just young people who are affected.
At a time when the gender pay gap and the ‘motherhood penalty’ are central to our economic and social discourse, that the Accord has seemingly failed to apply a gendered lens to the education debt system is hard to swallow.