‘Not right’: Hope for millions of Aussies

A change to how student debt is calculated is being considered after the balances of millions of Australians soared overnight.

The debt, known as HECS-HELP, is indexed in line with the inflation rate each year, meaning loans rose by 7.1 per cent on Thursday morning.

It’s the largest increase experienced in 30 years and caused many Australians to rush to pay off their loans before June 1.

But the federal government is now under pressure to explain why indexation is applied to the starting amount rather than the balance on June 1.

Education Minister Jason Clare said he’d ordered the Education Department to review the issue.

“That strikes me as not right,” he told reporters in Canberra.

Appearing before a senate estimates hearing on Friday, department secretary Tony Cook said his team was working with the Australian Taxation Office on the issue.

“Part of the work that we need to unpack on this issue is just in terms of unintended consequences,” Mr Cook said.

“There’s a slight risk that if you do it throughout the year students will be overpaying because they’ll actually be paying more than their compulsory entitlement is because you won’t know what their final income tax is.

“So in terms of the impact on their immediate costs … they actually may be paying out more than they actually have to in terms of compulsory (repayments).”

Opposition education spokeswomen Sarah Henderson questioned the Education Department about why it took until the day of the increase to raise the issue.

But Mr Cook said it was just part of the Universities Accord process unveiled by the government last year to overhaul the sector.

An interim report is due to the minister next month, but the department could not say if it would be made public.

More than three million Australians have a HECS-HELP loan. The department on Friday told the estimates hearing that around 40 per cent of those people were making no compulsory repayments.

Mr Cook said he anticipated that number to rise in the next year as the threshold for repayments increased from around $48,000 to $51,000.

Assistant Minister Anthony Chisholm was also asked about whether the length of time to repay a loan was reasonable.

It comes after a report from the National Tertiary Education Union suggested it could soon take a humanities graduate 40 years to pay off their debt.

“Surely the HECS loan system was not originally designed to end up like this,” Greens senator Mehreen Faruqi asked.

Senator Chisholm said it was his understanding the union report “set out some extreme examples”.

“We want as many people to be able to go to university and we don’t want the price to be a barrier to do that,” he said.

Mr Cook told the hearing the average time to repay a loan was 9.5 years.