University graduate gives her verdict on whether HECS indexation overhaul goes far enough

When university graduate Nariman Dein started studying, she felt privileged to access Australia’s student loan system.

Bright-eyed and eager to jump into university after finishing high school, Dein said the messaging around Australia’s university fee program, HECS-HELP, was it was “basically like free university”.

“I was told you don’t have to worry about it because you pay it off later,” she told 7NEWS.com.au.

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“I thought if I had $40,000 in debt, it would stay $40,000 until I paid it off.”

But the University of Western Sydney graduate soon faced the harsh reality of indexation.

Each June, HECS debts are indexed to make sure the amount owed keeps up with inflation.

For almost 35 years, this indexation has been calculated based on the Consumer Price Index, which has reached record highs.

Last year’s 7.1 per cent increase was the largest hike since 1990.

The process has been slammed as outdated and flawed, with more than 288,000 Australians signing a petition that demanded an overhaul to the system.

The government answered the call when it recently announced it would wipe about $3 billion in student debt and change the way HECS was indexed.

But Dein and others say it is not enough.

The changes were spelled out in the Federal Budget 2024, where Treasurer Jim Chalmers explained, the government would move to cap indexation at the lower of the CPI or Wage Price Index (WPI), so HECS debts do not outpace wage growth.

“Spikes in inflation have exposed a flaw in this system – and put young people under unfair pressure,” Chalmers said.

“We are fixing that and changing it so it won’t happen again.”

The policy will be backdated to June 1, 2023, meaning last year’s 7.1 per cent indexation will be decreased to the WPI of 3.2 per cent.

It is expected to cut about $1200 from the average debt of $26,500.

The move was one recommended in the Australian Universities Accord, a review of higher education that suggested making HECS “simpler and fairer”.

Among its recommendations were changing the timing of indexation so it occurred after annual compulsory payments, and reviewing bank lending practices so it did not prevent people from taking out a loan to buy a house.

While the change to indexation has been lauded as a win for students, advocates say it should only be the beginning.

The National Union of Students welcomed the measure but said more must be done to build a truly fit-for-purpose HECS system.

“The reality is that even under this change, tertiary students will continue to get a raw deal,” NUS National President Ngaire Bogemann said earlier.

“WPI has only been lower than CPI on four occasions since 2000.”

Dein echoed this, saying the move was a “good start”.

“But it’s like the government saying they’ll help a little bit but they still want us to struggle. It’s not fair,” she said.

The accord warned student debt levels were turning people off universities – and Dein said she was not surprised.

Stress about HECS debts followed the graduate and her friends around, with many saying they “haven’t made a dent” in their repayments despite making contributions.

“It’s a real concern,” Dein said.

“I thought I was privileged to have HECS at first and not have to worry about paying for university up front, but now I’m like was it really a good idea to get myself into that debt.

“It’s a setback for no reason when we want people to be getting educated.”