Students will receive a lower indexation cap on their HECS-HELP loans to ease cost of living pressures, as part of the federal government’s budget announced tonight.

However, key recommendations by the Universities Accord to reform higher education, such as the unfair cost of some degrees and date of indexation, remain unaddressed.

In his federal budget speech tonight, Treasurer Jim Chalmers confirmed the changes announced last week by Jason Clare, the Minister for Education.

HECS loans will now be indexed to whatever is lower, inflation growth or wage growth, as recorded by the Consumer Price Index and Wage Price Index respectively. The move aims to stop HECS growing faster than wages while still keeping up with changes in the cost of living.

“It will wipe $3 billion in student debt for over 3 million Australians and save the average person around $1,200,” Chalmers said in his address to parliament.

The main thing it will do is reduce the amount of time it takes for people to pay off their debt over a longer period of time.

These changes will be backdated to mid-2023, which will halve last year’s indexation rate from 7.1 per cent to 3.2 per cent.

Dr Gareth Bryant, lecturer in the Discipline of Political Economy at the University of Sydney, said the biggest impact of changing the way indexation operates will be to lower overall outstanding student debt.

“It doesn’t make too much impact because repayments are based on people’s incomes, rather than how much debt they owe, so nobody will really notice it in the short term,” he said.

“The main thing it will do is reduce the amount of time it takes for people to pay off their debt over a longer period of time.”

Students with HECS debts will receive indexation credit for the unfair amount charged last year. Individuals can find out their estimated indexation credit using the government’s estimator tool.

Table of estimated indexation credit for HELP debtors

Estimated indexation credit for HELP debtors. Source: Jason Clare, The Minister for Education


Dr Bryant said the biggest reason for expanding student debts had been driven by increases in student fees due to the previous government’s Job-ready Graduates program, rather than indexation alone.

“That program, which was introduced back in 2020 and 2021, meant that Arts and Humanities as well as Business and Law have been subject to extremely high fees, so around now about $16,000 to $17,000 a year. That means the average cost of an undergraduate course is around $50,000 for those students,” Dr Bryant said.

He called on the government to urgently review the issue, with the Universities Accord also identifying reducing courses fees as a priority.

“So far, the federal government hasn’t moved to change those fees … changes to the Job-ready fee structure can be done as an immediate response and pending a more structural plan,” he said.

“There’s no need to wait, they could respond to the Accord recommendation starting [with] next year’s university year and then put in place a proper review process responding to the Accord in full over the next year or two.”

Calls to amend this flaw in the HECS system have also been made by politicians like Zali Steggall, the independent MP for Warringah.

Zali Steggall in her office

Zali Steggall in her office. Image: Jessica O’Bryan


“I was very critical of the Morrison government introducing changes to university fees trying to prioritise STEM subjects over arts subjects and humanities, and I thought that was really wrong and voted against it, but we haven’t actually reversed those decisions yet, so the financial model is still very skewed at the moment,” Steggall said.

“We have a huge need for people to skill up and go and get qualified in a lot of professions, and so we have to do more to help that.”

In addition, the federal government’s failure to change the date when indexation occurs is another “missed opportunity in terms of creating a fairer student loans system”, according to Dr Bryant.

HECS debts are currently indexed on June 1 each year, meaning that repayments aren’t taken into account before indexation is applied.

“Student debt is indexed on the basis of a higher proportion of the debt because it doesn’t take into account any repayments that have been made throughout the year,” said Dr Bryant.

Steggall agreed that the date when indexation happens “needs to change”.

“Either repayments withheld by the ATO are applied in real time to decrease the debt balance prior to indexation or the indexation date should be moved to 1 October of each year or a date after the end of the financial year,” she said.

It was a broken system. I’m glad the government has changed it.

Among other federal Teal MPs, Steggall’s support of a petition to change HECS indexation was a significant contribution to the pressure that prompted indexation cap changes featured in the budget.

The petition, launched by Dr Monique Ryan, the independent member for Kooyong, gained nearly 290,000 signatures from Australians, making it one of the biggest petitions in Australian history.

Dr Ryan, who started the petition in March this year, responded positively to the government’s changes of indexation caps.

“Since I launched my petition, my office has been inundated with messages from people who’ve told me their HECS debt is the reason they can’t afford to buy a house or start a family,” Dr Ryan said.

“Hundreds of thousands of Australians with HECS debts have worked hard to pay them off in recent years, only to see the size of their debts stay the same or — worse still — increase. It was a broken system. I’m glad the government has changed it.”

However, Dr Ryan warned the HECS issue is emblematic of the various challenges facing younger generations, such as the dire housing, climate and cost-of-living situations.

“This isn’t just about HECS debts – it is about getting the government to fulfil its promise to the next generation,” she said.

Main image by Saint Michael’s College/Flickr