A Growing HECS Debt Spiral
Amy Jolliffe's story is a stark reminder of the growing burden of HECS-HELP debt for many graduates. With a debt of $64,000, more than double the average, Amy feels trapped in a "debt spiral" fueled by high inflation and annual indexation.
This situation is not unique to Amy. Government statistics show a significant increase in the number of graduates with debts exceeding $60,000. In 2011, only 4,600 students had such high debts, but by 2016, that number had jumped to over 29,000. Today, over 86,000 Australians owe between $60,000 and $70,000 in HECS debt, totaling a staggering $5.5 billion.
This growing debt burden is causing significant financial strain for graduates, many of whom are juggling mortgages, rent, children, and other living expenses. The situation is particularly challenging for women, who often face reduced working hours due to caring responsibilities, delaying their entry into the higher income bracket where mandatory repayments begin.
The annual indexation, introduced to preserve the value of loans over time, adds to the burden. Many graduates are unable to pay off even the interest on their loans, resulting in a yearly increase in their debt.
The solution to this "debt spiral" requires a multi-pronged approach. Graduates need to prioritize debt repayment while managing other financial obligations. However, the rising cost of living and limited disposable income make this a difficult task.
Leanne's story exemplifies the challenges faced by many graduates. As a single mother and teacher, she struggles to make ends meet while juggling mandatory HECS repayments and additional voluntary payments to escape the debt spiral.
The upcoming budget is a crucial opportunity for the government to address the growing HECS debt burden. Millions of Australians are eagerly awaiting details of any changes and hoping for relief before the next indexation on June 1st.