Anthony Albanese flags huge changes to HECS debt: What it could mean for young Aussies with a student loan

Prime Minister Anthony Albanese has promised he will tackle the growing debt spiral faced by university students face stuck with hefty HECS repayments.

On Thursday the PM promised to make HECS 'simpler and fairer' after he admitted the average student debt has skyrocketed in the past three years. 

He blamed high indexation rates - tied to soaring cost of living inflation - and increased contributions for subjects like law and arts, brought in by the previous government.

'There’s a range of areas we need to do much better for the younger generation and HECS is one of them,' Mr Albanese said.

This year, Bachelor of Arts students will pay $16,323 for their course, with the government funding of $1,236, bringing the three-year cost to almost $50,000. 

Payments on a HECS debt start once the compulsory repayment threshold has been reached. Currently it kicks in when a graduate starts earning $51,550 a year, with a minimum repayment rate of 1 per cent a year.

There is no deadline for the entire debt to be repaid but the repayment rate works on a sliding scale, with the mandatory minimum contributions increasing with rising incomes.

HECS debts are indexed to inflation, which last year hit 7.1 per cent, after rising 3.9 per cent in 2022, meaning the debt often outstrips the payments made and increasing the overall total.

This is where the devastating HECS debt spiral can start.  

Psychology graduate Amy Jolliffe told ABC News she feels stranded and now wishes she'd dropped out of school and became a chef, rather than going to uni.

Amy says her HECS debt of $64,000 prevents her from completing the further studies required for her to work in community mental health. 

'I'm feeling completely overwhelmed and disillusioned and hopeless about the future,' she said. 

Amy says she is now considering giving up on her education, and heading overseas to become a scuba instructor.

'Leave my country behind me, all my study, all my hopes, all my dreams... everything I've worked for,' she said.

On Thursday Mr Albanese said an announcement was imminent on an overhaul of HECS, with the government expected to adjust the timing and rate of HECS indexation in the upcoming federal budget. 

The crippling cost of living crisis and increasing student debt are having a massive impact on graduates, with another index-linked hit to HECS debts expected in June.

Independent teal MP Monique Ryan has so far more collected over 260,000 signatures in a petition calling for HECS reform.

She cites debt-spiral instances where students' loans are increasing faster than the can make repayments.

On Thursday, Finance Minister Katy Gallagher said that the 'cost of living is the main priority' in the May budget.

But higher education policy expert Andrew Norton warns that any changes to HECS debt in the May budget would be too late to prevent the upcoming increase. 

'Student loans will have been hit by 15 per cent increase due to indexation over the past three years,' Mr Norton said. 

Mr Norton added: 'Indexation wouldn’t be such a problem if debts hadn’t got so big.'