Single mum's 'insane' second HECS debt balloons to $90,000: 'Very scary'

HECS debts will be slashed under changes introduced to parliament today, with $3 billion of student debt set to be wiped. But it’s a cold comfort for Aussies already staring down the barrel of tens of thousands of dollars of debt.

Penny Locaso completed a Master of Business Administration nearly twenty years ago and managed to pay her $15,000 debt off within a couple of years. The single mum told Yahoo Finance she made the decision to go back to university and is now facing a $90,000 HECS debt when she graduates.

“I’m nearly 49 and I decided in COVID to go back to university and qualify as a psychologist. That is roughly around six years of study and I’m nearly halfway through,” Locaso said.

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“My HECS debt at the moment is around the $40,000 mark. By the time I finish Honours, it will be at $60,000 and by the time I finish Masters, it will be at $90,000.

“It’s insane. We have a national shortage of psychologists and a mental health crisis and yet it is $90,000 for the privilege of becoming a psychologist.”

Do you have a HECS story to share? Contact tamika.seeto@yahooinc.com

Locaso previously worked as a business executive and now runs her own business, Hacking Happy, where she works as an international speaker and coach for female entrepreneurs and executives. She is planning to practice as a psychologist when finishes her studies to build on her current work.

“I have paid off a debt before but it wasn’t anywhere near the scale of what I’m now signing up to, which is uncomfortable,” she said.

HECS debt causing ‘considerable concern’

New research by Choosi found Aussies studying at university were looking at spending an average of $27,010 for their degree - which is the same price as an entry-level Hyundai i30 or the deposit on a $500,000 home.

Half of students who have taken out a HECS or HELP loan expressed “considerable concern” about being able to repay it, Choosi found, with 56 per cent worried it will negatively impact their home ownership prospects.

Locaso said she tries not to worry about her HECS debt but acknowledged it was a concern, particularly as she is hoping to take out a home loan in the next five or so years.

“Of course I worry about it. I’m a single woman and I’m in the highest bracket of homelessness,” she said.

“I never even knew that [HECS debt] could potentially impact my ability to borrow a home. That worries me.”

Nearly a decade to repay HECS

It takes 9.6 years on average to repay HECS debt, according to budget papers, as of the end of June 2022. This is an increase from the 8.2 years recorded a decade ago.

Locaso said her situation was different from someone who started university at 18 and then had the rest of their life to pay it back.

She said she is looking at things “short term” right now and focusing on how her degree will help other people “live their best lives”.

“I just have to look short because I think if I look beyond that it is very scary to think about what I am truly signing up to,” she said.

“My hope is that I will in a position one day to just pay it down. Whilst it is a massive debt, if my earnings are not at the level that it is appropriate then they won’t take it out.”

But Aussies like Chloe Rae have found compulsory payments won’t necessarily go far in clearing their debts, given how much indexation adds each year.

The 23-year-old has a $23,500 HECS debt and says her compulsory repayments aren’t even scratching the surface.

She works in publishing and has been making repayments for the last two years but calculated there were only a third of indexation, meaning her debt is just getting bigger.

“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.

The bill introduced to parliament today would calculate indexation on the lower of inflation or wages. This would bring down last year’s mammoth 7.1 per cent indexation rate to 3.2 per cent. This year’s 4.7 percent hike would come down to 4 per cent.

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