Independent MP calls for HECS indexation overhaul to save graduates billions
Proposed change to indexation date could save students over $3 billion in a decade
"Graduates' payments are not accredited in real time, costing them dearly." – Monique Ryan
Independent MP Monique Ryan has called for changes to HECS indexation rules, citing costings from the Parliamentary Budget Office (PBO) that indicate students and graduates could save over $3 billion in a decade if the indexation date were moved from 1 June to 1 November. The proposed change would reduce the budget's underlying cash balance by $1.2 billion over four years due to forgone revenue.
Current Indexation
- On Monday, HECS debts will be indexed by 2.8%, increasing total debt by a combined $1 billion across about 3 million borrowers.
- HECS debts are indexed annually to maintain real value, using either the rate of inflation or the wage price index (whichever is lower, following a change in December 2024).
- Compulsory payments are collected by the tax office but are not applied to the debt until after the person files a tax return, which occurs after indexation.
Proposed Change
- Changing the indexation date to 1 November would allow compulsory payments made during the year to reduce the principal before indexation is applied.
- Estimated savings: $58 million in the first year, rising to over $150 million per year by 2035-36.
Statements
Monique Ryan described the current system as "broken," stating that graduates' payments are not accredited in real time, costing them dearly.
Education Minister Jason Clare acknowledged the issue, noting previous changes—indexing to the lower of CPI or WPI, and a 20% debt reduction promise in the 2025 election. He said there is "more work to be done."