“I’m 100 per cent struggling.”
Sharne Wakefield is a university student who says she is struggling to pay her bills and food, while also juggling a full-time university course.
She is worried that this cost-of-living crisis will not allow her to pay off her $37,000 HECS-HELP debt for a long time.
“I haven’t processed the amount I will have to pay back.”
Her university studies leave her little time to work which leaves her little money to pay her bills, food, and petrol.
“Having to pay rent, then food plus electricity bills, then my petrol, I’m 100 per cent struggling.”
Sharne has since gone on Centrelink because she works less often but there was a 2-month period where she was heavily budgeting
“It was probably the most stressful time for me, I was allocating $50 for petrol, $50 for food, and bills so I was very frugal with what I ate.”
Sharne says the Centrelink payments have helped but she still struggles sometimes when she doesn’t work.
“Every week is budget to budget.”
Inflation and indexation bigger than repayments
The HECS program started back in 1989 when the Government decided to start charging fees for university courses to get more funding to improve the quality of higher education in Australia.
It has seen many revisions over the years and it is now called the HECS-HELP program (Higher Education Loan Program), which covers most undergraduate and some postgraduate courses.
Students can also choose to pay their fees upfront if graduating with a debt sounds unappealing.
Incentives were even given if students chose to pay their fees upfront. However, all of that has changed.
HECS-HELP interest has always been indexed every year to keep up with inflation, but that was only usually 1 or 2 per cent.
This was always considered reasonable because wages usually rose with the indexation.
In 2023, this was not the case. HECS-HELP interest was indexed by a massive 7.1 per cent, the biggest indexation seen in more than a decade.
This percentage increase meant that any debt increased by $1,759 for students with an average debt of $24,770, but it increased by $2,840 for students with an average debt of over $40,000.
Many students are not just struggling because of the HECS-HELP repayments but some are worried that with the cost-of-living crisis, they simply will not be able to repay their debt after they graduate.
HECS-HELP puts more money into government coffers than oil and gas
A recent report from the Australia Institute shows the Australian Government makes more money from HECS-HELP repayments than from the Petroleum Resource Rent Tax (PRRT).
PRRT is a special levy designed to benefit all Australians from the extraction of natural resources such as gas and oil.
In an address to the National Press Gallery, Australia Institute’s Executive Director labelled the tax debate in this country “dishonest.”
“You can’t even start a proper conversation about tax reform until our business community stops telling lies about our tax system.”
He further illustrated the issue by drawing upon an example from Norway.
“…they tax the fossil fuel industry and give kids free university education, in Australia we subsidise the fossil fuel industry and charge kids a fortune to go to university.”
This cost-of-living crisis combined with HECS-HELP repayments means people are seriously struggling to keep a stable financial situation, and for some it means having to choose between an education and a living.
Another rise coming
HECS-HELP is set to rise again this year by 4.8 per cent.
The Australian Universities Accord report which came out in February this year, made 47 recommendations for reforming the Higher Education system.
A number of the recommendations specifically aims to make education more financially sustainable for students – including better financial support, fee-free university preparation courses, more Commonwealth supported places, and introduction of financial support for unpaid work placements.
Universities Australia Chief Executive Officer Luke Sheehy said they will continue to advocate for a system that is “fit for purpose, simple and fair”.
“HELP has led to a significant expansion of the university system, and it is essential that we continue to open the door to university for more Australians”, said Mr. Sheehy.
Good financial management can ease the burden
Financial Planner Murteza Behrami from Viridian Advisory in Perth says it is easier to pay back your HECS-HELP loan with responsible monetary management
Mr. Berhrami says it is important to never use your savings to repay your HECS debt, as that eliminates the possibility for you to save up for essential items.
“If you have access to low interest loans, then use that to your repay debt,” he says.
Mr. Behrami also provided advice for students to ensure they do not struggle with paying their debt off.
“Budgeting is key, and managing your cash flow successfully and having a very solid financial plan, and financial discipline.”
He also suggests that any extra money you may have, put it towards your repayments.
“If you have any surplus cash when you save for a holiday, make sure the extra is put towards something important like your debt to make sure you are financially stable.”
“If you also have lump sum savings, consider putting that towards your student debt as well.”
However, there are some consequences to paying your HECS-HELP debt and not managing your money well.
“Having to pay your student loans out of your net pay means that you can miss investment opportunities and saving up money you would use to buy a house or retire later in life,” says Mr. Behrami.
The cost-of-living crisis combined with the debt spiral means young Australians have to make tough decisions about their future, and there’s no on solution that fits all purposes.
What is clear is that reform is needed, if the participation target proposed in the Australian Universities Accord.
