Your HECS Debt is About to Get Bigger—Here’s Why

Oh, HEC no 🙅

For most people, their HECS-HELP debt is just something laying dormant in their myGov account, gathering dust and incrementally piling up each year with inflation.

But you may have to sit up and pay attention on 1 June, because your HECS-HELP loan will be indexed more than it has been in over a decade.

Why is my HECS going up?

Okay, hold up. If you need a refresher on what HECS-HELP is, the difference between other types of uni loans, and how to pay it all off, check out our comprehensive article right here.

For a quick recap, your HECS-HELP loan doesn’t accrue interest the same way a credit card does. Instead, it is adjusted every year on 1 June to account for inflation.

The existing rate is 0.6%. In a couple of weeks, that’s jumping to 3.9%. This accounts for rising inflation rates—because as you may have noticed, everything seems to be going up, up, up.

Now for the cold, hard numbers. The average Australian has $23,685 of HECS-HELP loans. A 3.9% indexation rate will add approximately $1,013.72 to the grand total. Yikes.

What can I do about my HECS?

You know the compulsory repayments that come out of your earnings every year? Thankfully, the indexation rate won’t impact this amount. So you won’t have more taken out against your will.

Still, you might want to dodge the grand that could be added to your sum of loans so that you won’t have to pay it off over time.

This doesn’t mean paying off your whole debt before 1 June. It might look like making a voluntary contribution to get a good chunk of it outta the way.

Financial adviser and co-founder of Fox and Hare Wealth, Glen Hare, told Money Mag “as a general rule…(HECS) is not usually a number one priority.

"Yes, HECS is going up by indexation, but it needs to be considered with regards to the opportunity cost of paying it off faster."

For example, your money might be better sunk into long-term investments which will benefit you more in the long-term than the immediate short-term effect of dodging your HECS indexation increase. It’s up to you to weigh up.

Meanwhile, towards the start of the 2022 Australian election campaign, Greens leader Adam Bandt criticised increasing HECS-HELP indexation and promised on behalf of the party to wipe student debt completely.

It’s a slippery subject with a lot of complexity, but staying informed means more power to you.