Are student loans too big?

Australian voters tend to reject US style education favouring more egalitarian systems where income does not determine access.

In the US, average student debt is USD $37,693 (public and private debt) taking an average of 20 years for individuals to repay. But, students often have a gap not fulfilled by loans.

For Australian domestic students, the cost of completing a bachelor degree is generally between $20,000 and $45,000, excluding some of the higher value courses. HECS-HELP loans are available for eligible students to cover the cost of tuition up to $121,844 for most degrees, and $174,998 for higher value degrees like medicine. The average higher education student debt in Australia is around $27,000 and on average takes just over 8 years to repay. Close to 3 million Australians have a student loan debt with debt totalling over $81 bn. Over 7 million have loans above $100,000.

Currently, student loans start to be paid back when an individual’s income reaches $54,435, with a repayment rate that scales according to income ranging from 0% to 10% when income reaches $159,664.

The Government has announced a series of changes to HECS-HELP including:

• Indexation rate calculation change to the lower of consumer price index (CPI) or wage price index (WPI) – currently CPI. Intended to be backdated to student loans on 1 June 2023, effectively removing the 7.1% spike that occurred in 2023.
• Increased minimum repayment threshold to $67,000 in 2025-26. The repayments will also be calculated on the income above the new $67,000 threshold rather than total annual income.
• 20% loan reduction for all study and training support loans before 1 June 2025 (around $16bn).

These changes are subject to the passage of legislation and are not yet law.