Aussie graduate's major $83,000 HECS warning: 'Out of hand'

An Aussie worker wishes she had properly thought through her university degrees before undertaking them. People all across the country are struggling with paying off their HECS-HELP student loans and some fear they will never get that number down to zero.

Yahoo Finance has been inundated with messages about how the growing debt has put them off starting a family, getting a house or other big life milestones. Jessica's HECS loan has ballooned out to $83,000 and she said a "different path" might have been better for her.

"I don't regret going to uni, but I do regret not thinking it through with the cost," she told SBS's Insight programme.

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"I think if I'd chosen something that wasn't as heavily saturated, like event management, something more like nursing or teaching, I think that it would have led me down a different path, and there'd be less HECS debt."

She did a Bachelor of Business, majoring in event management and a second major in marketing, before embarking on two Masters degrees.

However, Jessica said it was almost impossible to work, live, and study as there wasn't enough financial support from the government.

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So, she dropped out after her first semester of her Masters.

The graduate explained that when she first entered the event management sector, she wasn't earning above the threshold (which currently sits at $54,435) and therefore wasn't paying off her HECS.

"So over that period of time, interest was occurring on my debt, and it kind of got a little bit out of out of hand, so to speak," she said.

In a further blow, her industry was decimated during the COVID pandemic because events were effectively put on ice until people could be in the same room together again. So, she doubled down and pursued "more education".

That saw her HECS loan go even higher.

What is HECS and how does it work?

The Higher Education Contribution Scheme (HECS) was introduced in 1989 and is one of the programs under the Higher Education Loan Program (HELP) that provides financial support for students.

If you earn under $54,435, then you will not contribute to that loan. However, the moment you go above that threshold, a portion of your salary will go towards paying off your HECS.

That portion is determined by your income. You can also make voluntary contributions if you have spare cash and want to get to zero faster.

However, the HECS loan is indexed every year to keep up with inflation, which is why the debt is seemingly never paid off for many Aussies.

Chloe Rae said the indexation she was charged this year was more than triple what she repaid through her compulsory repayments.

The 23-year-old, who works in publishing, told Yahoo Finance her HECS debt has already jumped from about $18,000 to $23,500 in the last two years despite her compulsory repayments.

This year's indexation kicked in on June 1 and was 4.7 per cent, which was the second highest in years.

Rae, like Jessica, said the cost of tertiary education should have been a bigger factor when deciding to go to university.

“I think we’re sold a lie about how harmless HECS is … They always say it’s the best debt you’ll ever have but at the end of the day, it’s still a debt, you still owe money and it still grows,” she told Yahoo Finance.

Aussies split on how they view HECS

Aussies appeared to be divided on Jessica's complaints on the HECS system, with some agreeing that it's unfair to slug young people with so much debt, while others said that's the way the cookie crumbles.

"Indexation on HECS is disgusting, as is the constant lowering of the income at which you must pay it back. It's practically fraudulent the way HECS are sold to 18yo's as an interest-free loan, only to be surprised and confronted by a yearly indexation," wrote one person.

"When we were in high school, we were told to think of HECS as an interest-free loan. We were told to go to university or we wouldn’t be employable. We were convinced that the only way towards being successful was to go to university," said another.

But one student hit back, saying: "The HECS system is excellent. People need to take more personal responsibility for their choices. I’m currently halfway through my bachelor of science, the Commonwealth pays half, I pay the other half. That’s more than fair."

A fourth commented: "I graduated in engineering 2.5 years ago, but was already paying back my HECS during uni, there is no free lunch. Work, pay back your debt, but it will require sacrifice (I also have no family in Australia, no financial help from my family. I paid rent by myself while studying and working, and now I even own my place."

Is anything being done about HECS indexation?

The government announced earlier this year it was introducing legislation to change the way student loans were indexed.

At the moment, the indexation is tied to the Consumer Price Index (CPI), however, the new rules would see your debt impacted by whatever is lower out of CPI or the Wage Price Index.

That would have seen this year's indexation be 4 per cent and the 2022-23 year be just 3.2 per cent instead of 7.1 per cent.

The move is expected to be backdated and could wipe a collective $3 billion from everyone's debt.

The change is yet to pass through parliament.

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