When I was younger, I wanted to be a nurse. But I never pursued it because my family didn't have the money for me to go to uni. My story isn't unique - it's the same for thousands of students across the country. But a fear of debt shouldn't stop people from pursuing further education.
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HECS debt repayments are biting more than ever. Young adults are told to go to university and worry about the debt later. But then 'later' comes during a cost-of-living crisis and factors into whether you can buy a house or not. Suddenly it's all very real.
The Albanese government recently made a flashy announcement about changes to the HECS debt system. They want to tie the rate of indexation to either consumer price index (CPI) or wage price index (WPI), whichever is lowest at the time. It sounds good in theory, but in reality, it won't make much of a difference.
CPI and WPI are both measures that look backwards in time to the change in prices over the last 12 months: the price of goods, and the price of labour. The problems with using inflation as a measure to index HECS debt are identical to using wages to index HECS debt.
If wages are growing slower than inflation, then every worker is basically getting poorer. If we decide that's a time to add to every worker's credit card bill - after all, they're the ones students are indebted to - seems like a funny sort of way to make the system fairer.
It's worth pointing out in the past 25 years, the WPI has only been lower than CPI four times. So taxpayers are set to foot a $3 billion bill for something that's not changing much long-term.
It doesn't matter what the rate of indexation is if the system doesn't work. And right now, it's not working because of the timing of indexation.
If you're not familiar with the system, here's how it goes: compulsory repayments are taken from a person's salary throughout the year for their HECS debt. The amount depends on how much you earn. On June 1, indexation hits the debt. But the repayments from throughout the year don't come off the debt until a person submits their tax return.
It doesn't make sense to me that someone's debt is indexed before taking into account the thousands of dollars they've paid throughout the year. Imagine if banks did that with your home loan - took your money, charged you interest but the repayments don't come off the outstanding balance for 12 months. I reckon people would be pretty upset about that. So why do we expect students to put up with it?
The timing of indexation has to change. It needs to happen after someone's repayments for the year are processed. This will save students money over the lifetime of their HECS debt, and will help them more than the government's proposal to tie the rate of indexation to CPI or WPI.
Changing the timing might not sound as flashy as other ideas thrown out there. But it's the one that makes the most sense and helps struggling students at the same time.
- Tammy Tyrrell is an independent Tasmanian senator.
