‘They tell you it is interest-free’: Cherish feels stuck in HECS debt trap
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University of NSW student Cherish Kuehlmann says she feels stuck in a debt trap after amassing $20,000 in loans for an arts degree she is still completing.
The 23-year-old is among current and former univwhose ersity students whose debts will jump in line with inflation from June, adding $1760 to an average student loan of $24,771 and at least $2840 for half a million graduates with debts of $40,000 or more.
Cherish Kuehlmann attended a rally in Sydney on Wednesday hosted by the Greens and the National Union of Students to protest the indexation of student loans. Credit: Wolter Peeters
“I didn’t even know until now that it increases with inflation because they tell you it is interest-free – you think it won’t vary the amount that you pay,” said Kuehlmann, who was attending a rally in Sydney on Wednesday hosted by the Greens and the National Union of Students to protest the indexation of student loans.
While no interest is charged on student loans, the gross amount is adjusted in line with inflation on June 1 each year.
Inflation figures released by the Australian Bureau of Statistics on Wednesday confirmed student loans would rise by 7.1 per cent from June. Between 2016 and 2020, the average indexation rate was less than 2 per cent.
Greens leader Adam Bandt seized on the figures to amplify the party’s call for a freeze on student loan indexation as the cost-of-living crisis persists, adding to the party’s youth-focused push for a halt on rent rises.
Treasurer Jim Chalmers acknowledged some students found it difficult to pay off debts but emphasised they were only required to pay down debts once they earned more than $48,361 a year, with repayments fixed at a percentage of that income. This ranges from 1 per cent for lower-income earners to 10 per cent for people earning more than $142,000.
“One of the good things about the HECS system is it means people only begin to pay back a sliver,” Chalmers said.
“Obviously, this inflation in our economy has a lot of consequences. It means that payments [such as unemployment benefits] are indexed so people can try and keep up, but it also means there are other aspects which are indexed as well.”
Bandt accused Labor of putting the interests of big corporations ahead of students with loans.
Greens leader Adam Bandt accused Labor of putting the interests of big corporations ahead of students with loans.Credit: Alex Ellinghausen
“Labor is saying that we will put students and former students who have done the right thing into further debt in order to help balance the budget and ignore [taxing] the big gas corporations,” he said at the National Press Club.
Izabella Antoniou, 27, graduated from the University of Sydney with a $22,000 debt in 2019. She has been paying down the debt but the principal has not changed because she has only ever earned enough to cover indexation increases.
“I have worked a series of low-wage jobs, I’m currently in contract work, I have just paid off the indexation every year,” she said.
“I think we got the classic ‘indexation isn’t interest, it wasn’t bad debt, it was good debt’.”
Izabella Antoniou has been paying down the debt but the principal has not changed because she has only ever earned enough to cover indexation increases.Credit: Wolter Peeters
Yasmine Johnson, 23, who is studying a Bachelor of Science majoring in biology at the University of Sydney said: “I don’t think the cost of the degree should be increasing in line with inflation when I am not going to earn wages which are increasing in line with inflation.”
Greens education spokeswoman Mehreen Faruqi said indexation meant young people were often shackled with student debt for years after graduation and inhibited from securing bank loans.
National Union of Students president Bailey Riley said the government should examine whether student loans should be tied to a different benchmark such as average wages, which have grown less than inflation in recent years.
Universities Australia chief executive Catriona Jackson stressed that students would not pay more immediately because repayments were capped as a proportion of a person’s income.
Yasmine Johnson: “I don’t think the cost of the degree should be increasing in line with inflation when I am not going to earn wages which are increasing in line with inflation.”Credit: Wolter Peeters
However, the growth in the gross value of a loan meant the amount would take longer to pay off.
“We know the price of everyday living is rising – energy and grocery bills are going up, mortgage and car repayments are increasing, but HELP repayments are different,” she said in a statement.
“There has been considerable confusion around this.”
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