Young people will soon have thousands of dollars added to their student debt, with HECS debts set to rise by 7.1 per cent on June 1 this year.
The 7.1 per cent rise is in line with the release of the latest inflation data, which will see the biggest increase to student debts in decades. HECS debts are not subject to interest, but are indexed to inflation which is based on the consumer price index (CPI).
The 7.1 per cent increase will see the average HECS debt of $22,636 increase by $1,584.
28-year-old small business owner Ruby Bisson is concerned about the impact the increase will have on her personal finances.
“My HECS debt is around 60 or 65 grand, which is three times the amount of what I have in my superannuation,” Bisson told Women’s Agenda.
“As I ventured into the small business world, I started to increase my financial literacy and got advice from various accountants who all said: ‘not all debt is bad debt, leave your HECS as it is’.”
“The advice was always to leave your HECS and invest your savings in other areas, like shares, to grow your assets. But now, it feels like a different situation and I’m confused about what I do with my money now – what if indexation is increased to something even higher in the future?”
Bisson says if she had been more aware of the possibility that indexation would go up by as much as 7 per cent, she would have tried to pay her HECS debt off earlier.
She also suggests financial literacy should be provided for those taking on student debts, so that young people enter into degrees with their eyes wide open.
With the cost of living rising, rents soaring and an out of reach housing market, increasing student debts are adding to the financial burden hitting young Australians.
Meanwhile, increasing student debts are cutting into young people’s borrowing power.
Data also shows that women are disproportionately affected by the rising cost of university degrees, while students undertaking arts, law and business degrees are dealing with large increases to the cost of their degrees.
Independent MP Zoe Daniel has called for the federal government to intervene on rising student debts, and suggested a range of immediate options to ease the pain. One of her suggestions was to determine indexation based on either the CPI or the Wage Price Index, whichever is lower, a method used in the UK.
Elsewhere, Greens senator Mehreen Faruqi is pushing for a freeze to indexation on HECS debts, a proposal supported by the National Union of Students, who say young people are fast becoming the most indebted generation.
“We are already looking at becoming the most indebted generation in Australia’s history and now the federal government is looking to profit from young Australians during a cost of living crisis,” NUS National President Bailey Riley said.
“The time to act is now, not years into the future once students are thousands of dollars further in HECS debts.”
Feature Image: Ruby Bisson.